- Consolidated GAAP earnings per share
up — $1.63 per share vs. $1.18 per share
- Second quarter operating earnings
per share up — $2.02 per share vs. $1.84 per share
- Year-to-date operating earnings per
share up — $3.18 per share vs. $2.83 per share
- Operating earnings guidance for
fiscal year 2015 — affirming a range of $2.70 per share to $2.90
per share
WGL Holdings, Inc. (NYSE: WGL):
Consolidated Results
WGL Holdings, Inc. (NYSE: WGL), the parent company of Washington
Gas Light Company (Washington Gas) and other energy-related
subsidiaries, today reported net income applicable to common stock
determined in accordance with generally accepted accounting
principles in the United States of America (GAAP) for the quarter
ended March 31, 2015, of $81.5 million, or $1.63 per share,
compared to net income applicable to common stock of $61.2 million,
or $1.18 per share, reported for the quarter ended March 31,
2014.
For the six months ended March 31, 2015, net income
applicable to common stock was $145.3 million, or $2.90 per share,
an improvement of $65.5 million, or $1.36 per share, over net
income applicable to common stock of $79.8 million, or $1.54 per
share, for the same period of the prior fiscal year.
On a consolidated basis, WGL uses operating earnings (loss) to
evaluate overall financial performance, and evaluates segment
financial performance based on earnings before interest and taxes,
as adjusted (adjusted EBIT). Both operating earnings (loss) and
adjusted EBIT adjust for the accounting recognition of certain
transactions that are not representative of the ongoing earnings of
the company. Additionally, we believe that adjusted EBIT enhances
the ability to evaluate segment performance because it excludes
interest and income tax expense, which are affected by
corporate-wide strategies such as capital financing and tax sharing
allocations. Operating earnings (loss) and adjusted EBIT are
non-GAAP financial measures, which are not recognized in accordance
with GAAP and should not be viewed as alternatives to GAAP measures
of performance. Refer to “Reconciliation of Non-GAAP Financial
Measures,” attached to this news release, for a detailed discussion
of management’s use of these measures and for reconciliations to
GAAP financial measures.
For the quarter ended March 31, 2015, operating earnings
were $101.0 million, or $2.02 per share, an improvement of $5.5
million, or $0.18 per share, over operating earnings of $95.5
million, or $1.84 per share, for the same quarter of the prior
fiscal year. For the six months ended March 31, 2015,
operating earnings were $159.0 million, or $3.18 per share, an
improvement of $12.1 million, or $0.35 per share, over operating
earnings of $146.9 million, or $2.83 per share, for the same period
of the prior fiscal year.
“I am pleased to announce another solid quarter of earnings at
WGL Holdings, with second quarter non-GAAP EPS of $2.02 growing 10%
over 2014 results,” said Terry McCallister, Chairman and Chief
Executive Officer. “This growth is impressive given our strong
results in the second quarter of 2014, and it demonstrates progress
on our commitment to deliver exceptional levels of earnings growth
for our shareholders. The majority of this growth was realized in
our Retail Energy-Marketing segment as it returns toward historical
earnings levels, but, in general, all of our businesses are
delivering solid results consistent with our long-term
expectations. We remain on track to deliver full year non-GAAP
earnings in the high end of a range of $2.70 to $2.90 per
share.”
Second Quarter Results by Business
Segment
Regulated Utility
For the three months ended March 31, 2015, the regulated
utility segment reported adjusted EBIT of $152.4 million, compared
to adjusted EBIT of $160.7 million for the same quarter of the
prior fiscal year. For the six months ended March 31, 2015,
the regulated utility segment reported adjusted EBIT of $249.0
million, compared to adjusted EBIT of $251.6 million for the same
period of the prior fiscal year.
For both the three and six months ended March 31, 2015, the
decline in adjusted EBIT primarily reflects higher expenses
associated with: (i) labor and employee incentives; (ii)
business-development related activities; (iii) maintenance of our
distribution system and (iv) depreciation related to the growth in
our utility plant. Additionally, for the three months ended
March 31, 2015, lower realized margins associated with our
asset optimization program also contributed to the decrease in
adjusted EBIT. Partially offsetting these unfavorable variances are
higher revenues from: (i) customer growth; (ii) favorable
effects of changes in natural gas consumption patterns in the
District of Columbia; (iii) rate recovery related to our
accelerated pipe replacement programs; (iv) lower employee
benefit costs and (v) for the six month period only, higher
revenues from new base rates in Maryland and higher realized
margins associated with our asset optimization program.
Retail Energy-Marketing
For the three months ended March 31, 2015, the retail
energy-marketing segment reported adjusted EBIT of $27.0 million,
an increase of $34.8 million, over adjusted EBIT of $(7.8) million
for the same quarter of the prior fiscal year. For the six months
ended March 31, 2015, the retail energy-marketing segment
reported adjusted EBIT of $36.0 million, an increase of $42.4
million, over adjusted EBIT of $(6.4) million for the same period
of the prior fiscal year.
For both the three and six months ended March 31, 2015, the
improvement in adjusted EBIT primarily reflects higher electricity
margins due to lower capacity and ancillary service charges from
the regional power grid operator (PJM) associated with fixed price
retail contracts. Additionally, prior year electricity margins
reflected extreme price movements on commodity prices as a result
of colder than normal weather that occurred throughout January
2014. Partially offsetting this favorable variance were lower
natural gas margins as benefits realized last year related to
weather hedges did not recur. Natural gas margins from commercial
optimization and wholesale transactions were higher in the current
year which helped to reduce the decrease related to weather
hedges.
Commercial Energy Systems
For the three months ended March 31, 2015, the commercial
energy systems segment reported adjusted EBIT of $1.7 million,
compared to adjusted EBIT of $2.2 million for the same quarter of
the prior fiscal year. This decline reflects credits to expense in
the comparative quarterly period for certain project expenses which
did not recur in the current period. Additionally, the sustained
winter weather in the eastern part of the U.S. impacted generation
from our solar assets in the current period.
For the six months ended March 31, 2015, the commercial
energy systems segment reported adjusted EBIT of $2.9 million, an
increase of $0.7 million, over adjusted EBIT of $2.2 million, for
the same period of the prior fiscal year. The improvement in
adjusted EBIT reflects the growth in the federal contracting
business due to improved contract margins. Partially offsetting
this favorable variance were higher project expenses in the
distributed generation and investment solar divisions.
Midstream Energy Services
For the three months ended March 31, 2015, the midstream
energy services segment reported adjusted EBIT of $(3.1) million,
compared to adjusted EBIT of $10.9 million for the same quarter of
the prior fiscal year. For the six months ended March 31,
2015, the midstream energy services segment reported adjusted EBIT
of $(0.5) million, compared to $12.8 million for the same period of
the prior fiscal year. For both the three and six months ended
March 31, 2015, the decline in adjusted EBIT primarily
reflects lower storage and transportation spreads in the current
year, partially offset by lower investment development
expenses.
Interest Expense
For the quarter ended March 31, 2015, interest expense was
$13.3 million, compared to interest expense of $9.5 million for the
same period of the prior fiscal year. For the six months ended
March 31, 2015, interest expense was $25.6 million, compared
to interest expense of $18.5 million for the same period of the
prior fiscal year. For both the three and the six months ended
March 31, 2015, the increase reflects the issuance of
unsecured medium term notes and private placement notes issued by
Washington Gas and senior notes issued by WGL.
Earnings Outlook
We are affirming our consolidated non-GAAP operating earnings
estimate for fiscal year 2015 in a range of $2.70 per share to
$2.90 per share. In providing fiscal year 2015 earnings guidance,
management is aware that there could be differences between what is
reported GAAP earnings and estimated operating earnings for matters
such as, but not limited to, unrealized mark-to-market positions
for our energy-related derivatives. At this time, WGL management is
not able to reasonably estimate the aggregate impact of these items
on reported earnings and therefore is not able to provide a
corresponding GAAP equivalent for its operating earnings
guidance.
We assume no obligation to update this guidance. The absence of
any statement by us in the future should not be presumed to
represent an affirmation of this earnings guidance. For the
assumptions underlying this guidance, please refer to the slides
accompanying our webcast that will be posted to WGL’s website,
www.wgl.com.
Other Information
We will hold a conference call at 10:30 a.m., Eastern Time on
May 7, 2015, to discuss our second quarter fiscal year 2015
financial results. The live conference call will be available to
the public via a link located on WGL’s website, www.wgl.com. To hear the live webcast,
click on “Investor Relations” then “Events & Webcasts.”
The webcast and related slides will be archived on WGL’s website
through Friday, June 5, 2015.
WGL, headquartered in Washington, D.C., is a leading source for
clean, efficient and diverse energy solutions. With activities
across the U.S., WGL consists of Washington Gas, WGL Energy, WGL
Midstream and Hampshire Gas. WGL Energy delivers a full ecosystem
of energy offerings including natural gas, electricity, green
power, carbon reduction, distributed generation and energy
efficiency provided by WGL Energy Services, Inc. (formerly
Washington Gas Energy Services, Inc.), WGL Energy Systems, Inc.
(formerly Washington Gas Energy Systems, Inc.) and WGSW, Inc. WGL
provides options for natural gas, electricity, green power and
energy services, including generation, storage, transportation,
distribution, supply and efficiency. Our calling as a company is to
make energy surprisingly easy for our employees, our community and
all our customers. Whether you are a homeowner or renter, small
business or multinational corporation, state and local or federal
agency, WGL is here to provide Energy Answers. Ask Us. For more
information, visit us at www.wgl.com.
Unless otherwise noted, earnings per share amounts are presented
on a diluted basis, and are based on weighted average common and
common equivalent shares outstanding.
Please see the attached comparative statements for additional
information on our operating results. Also attached to this news
release are reconciliations of non-GAAP financial measures.
Forward-Looking
Statements
This news release and other statements by us include
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 with respect to the
outlook for earnings, revenues and other future financial business
performance or strategies and expectations. Forward-looking
statements are typically identified by words such as, but not
limited to, “estimates,” “expects,” “anticipates,” “intends,”
“believes,” “plans,” and similar expressions, or future or
conditional verbs such as “will,” “should,” “would,” and “could.”
Although we believe such forward-looking statements are based on
reasonable assumptions, we cannot give assurance that every
objective will be achieved. Forward-looking statements speak only
as of today, and we assume no duty to update them. Factors that
could cause actual results to differ materially from those
expressed or implied include, but are not limited to, general
economic conditions and the factors discussed under the “Risk
Factors” heading in our most recent annual report on Form 10-K and
other documents that we have filed with, or furnished to, the U.S.
Securities and Exchange Commission.
WGL Holdings, Inc. Consolidated Balance
Sheets
(Unaudited)
(In thousands)
March
31, 2015 September 30, 2014
ASSETS Property,
Plant and Equipment At original cost
$ 4,727,512
$ 4,582,764 Accumulated depreciation and amortization
(1,275,721 ) (1,268,319 ) Net property, plant
and equipment
3,451,791 3,314,445
Current Assets Cash and cash equivalents
9,287
8,811 Accounts receivable, net
674,970 298,978 Storage gas
96,123 333,602 Derivatives and other
143,950
194,124 Total current assets
924,330 835,515
Deferred Charges and
Other Assets 774,242 706,539
Total Assets $ 5,150,363
$ 4,856,499
CAPITALIZATION AND LIABILITIES
Capitalization Common shareholders’ equity
$
1,303,684 $ 1,246,576 Washington Gas Light Company preferred
stock
28,173 28,173 Long-term debt
950,469
679,228 Total capitalization
2,282,326 1,953,977
Current
Liabilities Notes payable and current maturities of long-term
debt
220,000 473,500 Accounts payable and other accrued
liabilities
324,046 313,221 Derivatives and other
357,026 233,564 Total current
liabilities
901,072 1,020,285
Deferred Credits 1,966,965
1,882,237
Total Capitalization and Liabilities
$ 5,150,363 $ 4,856,499
WGL Holdings, Inc. Consolidated Statements of
Income
(Unaudited)
Three Months EndedMarch
31,
Six Months EndedMarch
31,
(In thousands, except per share data)
2015
2014
2015 2014
OPERATING REVENUES
Utility
$ 606,505 $ 702,255
$
988,217 $ 1,088,796 Non-utility
395,228
471,995
762,753 765,751
Total Operating Revenues 1,001,733
1,174,250
1,750,970
1,854,547
OPERATING EXPENSES Utility cost of
gas
310,138 459,107
439,842 645,988 Non-utility cost
of energy-related sales
356,535 426,286
693,103
731,637 Operation and maintenance
104,287 99,699
196,667 187,841 Depreciation and amortization
30,103
27,304
59,463 53,894 General taxes and other assessments
57,784 57,121
97,167 97,742
Total Operating
Expenses 858,847 1,069,517
1,486,242 1,717,102
OPERATING
INCOME 142,886 104,733
264,728 137,445 Equity in
earnings of unconsolidated affiliates
1,832 543
2,976
1,033 Other income (expenses) — net
338 342
(4,017
) 561 Interest expense
13,254
9,525
25,564 18,517
INCOME BEFORE TAXES 131,802
96,093
238,123 120,522
INCOME TAX EXPENSE 50,017 34,550
92,120 40,020
NET
INCOME 81,785 61,543
146,003 80,502
Dividends on
Washington Gas Light Company preferred stock 330
330
660 660
NET INCOME APPLICABLE TO COMMON STOCK $
81,455 $ 61,213
$
145,343 $ 79,842
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING Basic
49,720 51,875
49,851 51,846 Diluted
49,983
51,899
50,055 51,864
EARNINGS PER AVERAGE COMMON SHARE Basic
$ 1.64
$ 1.18
$ 2.92 $ 1.54 Diluted
$
1.63 $ 1.18
$ 2.90
$ 1.54
WGL Holdings, Inc.
Consolidated Financial and Operating Statistics
(Unaudited)
FINANCIAL STATISTICS
Twelve Months Ended
March 31,
2015 2014 Closing Market Price — end of
period
$56.40 $40.06 52-Week Market Price Range
$59.08-$37.77 $46.96-$35.35 Price Earnings Ratio
16.7
114.5 Annualized Dividends Per Share
$1.85 $1.68 Dividend
Yield
3.3% 4.2% Return on Average Common Equity
13.4%
1.4% Total Interest Coverage (times)
7.1 1.5 Book Value Per
Share — end of period
$26.22 $25.32 Common Shares
Outstanding — end of period (thousands)
49,729
51,901
UTILITY GAS STATISTICS
Three Months EndedMarch 31, Six Months
EndedMarch 31, Twelve Months Ended
March 31,
(In thousands)
2015 2014
2015 2014
2015 2014
Operating Revenues Gas Sold and
Delivered Residential — Firm
$ 411,386 $ 473,343
$ 655,120 $ 718,264
$ 827,935 $ 879,286
Commercial and Industrial — Firm
92,036 109,022
148,454 169,240
193,001 211,242 Commercial and
Industrial — Interruptible
1,256 1,221
1,974 1,742
2,499 2,655 Electric Generation
275
275
550
550
1,100
1,100
504,953
583,861
806,098
889,796
1,024,535
1,094,283 Gas Delivered for Others Firm
77,819 77,739
133,940 133,961
199,059 192,595
Interruptible
20,857 27,513
34,593 40,538
53,383 58,515 Electric Generation
107
132
239
246
508
620
98,783
105,384
168,772
174,745
252,950
251,730
603,736 689,245
974,870
1,064,541
1,277,485 1,346,013 Other
2,769 13,010
13,347 24,255
38,887 42,400
Total
$ 606,505 $ 702,255
$ 988,217 $ 1,088,796
$ 1,316,372 $ 1,388,413
Three Months
EndedMarch 31, Six Months EndedMarch
31, Twelve Months EndedMarch 31, (In
thousands of therms)
2015
2014
2015 2014
2015 2014
Gas Sales and Deliveries Gas Sold and Delivered Residential
— Firm
410,701 405,619
627,760 631,686
735,038
740,061 Commercial and Industrial — Firm
98,729 97,407
157,907 160,577
197,483 200,644 Commercial and
Industrial — Interruptible
390
897
1,445
1,461
2,177 2,287
509,820
503,923
787,112
793,724
934,698
942,992 Gas Delivered for Others Firm
279,133 250,319
439,139 408,960
565,683 534,053 Interruptible
93,488 92,072
171,147 169,769
269,082 263,591
Electric Generation
28,955
22,011
55,210
59,129
140,484
171,091
401,576
364,402
665,496
637,858
975,249
968,735
Total
911,396 868,325
1,452,608 1,431,582
1,909,947 1,911,727
WGL ENERGY SERVICES Natural Gas Sales Therm Sales
(thousands of therms)
314,500 309,000
515,600 519,500
714,100 691,000 Number of Customers (end of period)
150,000 165,000
150,000 165,000
150,000 165,000
Electricity Sales Electricity Sales (thousands of kWhs)
2,988,200 3,052,200
5,656,700 5,880,600
11,468,500 12,165,000 Number of Accounts (end of period)
150,100 181,000
150,100 181,000
150,100 181,000
UTILITY GAS PURCHASED EXPENSE (excluding asset
optimization)
56.88
¢
76.23
¢
56.63
¢
68.97
¢
57.26
¢
66.34
¢
HEATING DEGREE DAYS Actual
2,471 2,440
3,726
3,834
4,003 4,143 Normal
2,107 2,099
3,450
3,443
3,758 3,755 Percent Colder (Warmer) than Normal
17.3 % 16.2 %
8 % 11.4 %
6.5
% 10.3 %
Average Active Customer Meters
1,132,836 1,119,993
1,127,843
1,115,361
1,123,632
1,111,271
WGL HOLDINGS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
(Unaudited)
The tables below reconcile operating earnings (loss) to GAAP
net income (loss) applicable to common stock on a consolidated
basis and adjusted EBIT on a segment basis to GAAP net income
(loss) applicable to common stock. Management believes operating
earnings (loss) and adjusted EBIT provide a more meaningful
representation of our earnings from ongoing operations on a
consolidated and segment basis, respectively. These measures
facilitate analysis by providing consistent and comparable measures
to help management, investors and analysts better understand and
evaluate our operating results and performance trends, and assist
in analyzing period-to-period comparisons. Additionally, we use
these non-GAAP measures to report to the board of directors and to
evaluate management’s performance. To derive our non-GAAP
measures, we adjust for the accounting recognition of certain
transactions (non-GAAP adjustments) based on at least one of the
following criteria:
•
To better match the accounting recognition
of transactions with their economics;
•
To better align with regulatory
view/recognition;
•
To eliminate the effects of:
i. Significant out of period adjustments; ii. Other significant
items that may obscure historical earnings comparisons and are not
indicative of performance trends; and iii. For adjusted EBIT, other
items which may obscure segment comparisons. There are
limits in using operating earnings (loss) and adjusted EBIT to
analyze our consolidated and segment results, respectively, as they
are not prepared in accordance with GAAP and may be different from
non-GAAP financial measures used by other companies. In addition,
using operating earnings (loss) and adjusted EBIT to analyze our
results may have limited value as they exclude certain items that
may have a material impact on our reported financial results. We
compensate for these limitations by providing investors with the
attached reconciliations to the most directly comparable GAAP
financial measures. The following table summarizes the
reconciliations of adjusted EBIT by segment to its most comparable
GAAP financial measure, income before income taxes:
Three Months Ended March
31, Six Months Ended March 31, (In thousands)
2015 2014
2015 2014
Adjusted EBIT: Regulated utility
$ 152,395 $ 160,734
$ 248,951 $ 251,589
Retail energy-marketing
27,031 (7,782 )
35,986 (6,424
) Commercial energy systems
1,683 2,226
2,851 2,203
Midstream energy services
(3,062 ) 10,948
(496
) 12,788 Other activities(*)
(846 ) (2,827 )
(2,320 ) (4,737 ) Eliminations
(19
) 498
(51 ) 642
Total
177,182 163,797
284,921 256,061 Non-GAAP
adjustments(1)
(32,126 ) (58,179 )
(21,234
) (117,022 ) Interest expense
13,254
9,525
25,564 18,517
Income before income taxes
131,802
96,093
238,123 120,522
Income tax expense
50,017 34,550
92,120 40,020
Dividends on Washington Gas preferred stock
330
330
660 660
Net income applicable to common stock
$ 81,455
$ 61,213
$ 145,343
$ 79,842
(*)
Activities and transactions that are not significant enough on a
stand-alone basis to warrant treatment as an operating segment and
that do not fit into one of our four operating segments.
WGL HOLDINGS, INC. (Consolidated by
Quarter)
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
(Unaudited)
The following tables represent the reconciliation of
operating earnings to its most comparable GAAP financial measure,
net income applicable to common stock (consolidated by quarter):
Fiscal Year 2015 Quarterly Period
Ended(**) (In thousands, except per share data) Dec. 31
Mar. 31 Jun. 30 Sept. 30 Fiscal Year
Operating earnings
$ 58,004 $
101,034 $ 159,038
Non-GAAP adjustments(1)
10,892 (32,126 )
(21,234 ) Income tax expense (benefit) on non-GAAP
adjustments
(5,008 ) 12,547
7,539 Net
income applicable to common stock
$ 63,888
$ 81,455
$ 145,343 Diluted average common
shares outstanding
50,091 49,983
50,055
Operating earnings per share
$ 1.16 $
2.02 $ 3.18 Per share effect of non-GAAP
adjustments
0.12 (0.39 )
(0.28 ) Diluted
earnings per average common share
$ 1.28
$ 1.63
$ 2.90 Fiscal Year 2014
Quarterly Period Ended(**) (In thousands, except per share
data) Dec. 31 Mar. 31 Jun. 30 Sept. 30
Fiscal Year Operating earnings $ 51,398 $ 95,526 $ 146,924
Non-GAAP adjustments(1) (58,843 ) (58,179 ) (117,022 ) Income tax
expense on non-GAAP adjustments 22,453 23,866 46,319 Regulatory
asset - tax effect Medicare Part D (***) 3,621
— 3,621 Net income
applicable to common stock $ 18,629 $ 61,213
$ 79,842 Diluted
average common shares outstanding 51,827
51,899 51,864
Operating earnings per share $ 0.99 $ 1.84 $ 2.83 Per share effect
of non-GAAP adjustments (0.63 ) (0.66 )
(1.29 ) Diluted earnings per average common
share $ 0.36 $ 1.18
$ 1.54 (**) Quarterly earnings
per share may not sum to year-to-date or annual earnings per share
as quarterly calculations are based on weighted average common and
common equivalent shares outstanding, which may vary for each of
those periods. (***) In March 2010, the Patient Protection and
Affordable Care Act (PPACA) eliminated future Medicare Part D (Med
D) tax benefits for Washington Gas’ tax years beginning after
September 30, 2013. On March 30, 2012, based on positions taken by
the Public Service Commission of Maryland (PSC of MD) in Washington
Gas’ rate case, Washington Gas determined that it is not probable
that the PSC of MD would permit recovery of this asset. Therefore,
the Maryland portion of the regulatory asset related to the Med D
benefit was charged to tax expense. In November of 2013, the PSC of
MD issued an order authorizing Washington Gas to establish a
regulatory asset and amortize the costs related to the change in
tax treatment of Med D.
WGL HOLDINGS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
(Unaudited)
(1) The following tables summarize
non-GAAP adjustments, by operating segment and present a
reconciliation of adjusted EBIT to EBIT. EBIT is defined as
earnings before interest and taxes from continuing operations.
Items we do not include in EBIT are interest expense, inter-company
financing activity, dividends on Washington Gas preferred stock,
and income taxes.
Three Months Ended March 31, 2015 (In thousands)
RegulatedUtility
Retail-EnergyMarketing
CommercialEnergySystems
MidstreamEnergyServices
OtherActivities
IntersegmentEliminations
Total Adjusted EBIT
$ 152,395
$ 27,031 $ 1,683
$ (3,062 ) $
(846 ) $ (19 )
$ 177,182 Non-GAAP adjustments:
Unrealized mark-to-market
valuations on energy-related derivatives(a)
(27,979 )
11,395 — (7,478 ) — —
(24,062 ) Storage optimization program(b)
1,581 — — — — —
1,581 DC weather impact(c)
4,283 — —
— — — 4,283 Distributed generation
asset related investment tax credits(d)
— —
(961 ) — — — (961
) Change in measured value of inventory(e)
—
— —
(12,967 ) — —
(12,967 ) Total non-GAAP adjustments
$ (22,115 ) $
11,395 $ (961 )
$ (20,445 ) $ —
$ — $ (32,126
) EBIT
$ 130,280 $
38,426 $ 722
$ (23,507 ) $ (846
) $ (19 ) $
145,056
Three Months Ended March 31, 2014 (In thousands)
RegulatedUtility
Retail-EnergyMarketing
CommercialEnergySystems
MidstreamEnergyServices
OtherActivities
IntersegmentEliminations
Total Adjusted EBIT $ 160,734 $ (7,782
) $ 2,226 $ 10,948 $ (2,827 )
$ 498 $ 163,797 Non-GAAP adjustments: —
Unrealized mark-to-market valuations on energy-related
derivatives(a) (77,925 ) 6,392 — (1,784 ) — — (73,317 ) Storage
optimization program (b) 2,157 — — — — — 2,157 Change in measured
value of inventory(e) — — — 12,441 — — 12,441 Incremental
professional service fees (h) — — — — (2,348 ) — (2,348 ) DC
weather impact (c) 3,569 — — — — — 3,569 Distributed generation
asset related investment tax credits(d) — —
(681 ) — — —
(681 ) Total non-GAAP adjustments $ (72,199 )
$ 6,392 $ (681 ) $ 10,657
$ (2,348 ) $ — $ (58,179 ) EBIT $
88,535 $ (1,390 ) $ 1,545 $
21,605 $ (5,175 ) $ 498 $
105,618
WGL HOLDINGS, INC.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
(Unaudited)
Six Months Ended March
31, 2015 (In thousands)
RegulatedUtility
Retail-EnergyMarketing
CommercialEnergySystems
MidstreamEnergyServices
OtherActivities
IntersegmentEliminations
Total Adjusted EBIT
$ 248,951
$ 35,986 $ 2,851
$ (496 ) $
(2,320 ) $ (51 )
$ 284,921 Non-GAAP adjustments: Unrealized
mark-to-market valuations on energy-related derivatives(a)
(2,902 ) (13,455 ) — 851
— — (15,506 ) Storage optimization
program(b)
(2,599 ) — — —
— — (2,599 ) DC weather impact(c)
1,457 — — — — —
1,457 Distributed generation asset related investment tax
credits(d)
— — (1,870 ) —
— — (1,870 ) Change in measured value
of inventory(e)
— — — 2,909 —
— 2,909 Investment impairment(f)
—
— —
— (5,625 ) —
(5,625 ) Total non-GAAP adjustments
$ (4,044 ) $
(13,455 ) $ (1,870 )
$ 3,760 $ (5,625
) $ — $
(21,234 ) EBIT
$ 244,907
$ 22,531 $ 981
$ 3,264 $
(7,945 ) $ (51 )
$ 263,687
Six Months Ended March 31, 2014 (In thousands)
RegulatedUtility
Retail-EnergyMarketing
CommercialEnergySystems
MidstreamEnergyServices
OtherActivities
IntersegmentEliminations
Total Adjusted EBIT $ 251,589 $ (6,424
) $ 2,203 $ 12,788 $ (4,737 )
$ 642 $ 256,061 Non-GAAP adjustments:
Unrealized mark-to-market valuations on energy-related
derivatives(a) (104,056 ) 10,324 — (24,345 ) — — (118,077 ) Storage
optimization program(b) 4,018 — — — — — 4,018 DC weather impact(c)
2,719 — — — — — 2,719 Distributed generation asset related
investment tax credits(d) — — (1,254 ) — — — (1,254 ) Change in
measured value of inventory(e) — — — (1,047 ) — — (1,047 )
Competitive service provider imbalance cash settlement(g) 488 — — —
— — 488 Incremental professional services fees(h) — — — — (3,099 )
— (3,099 ) Impairment loss on Springfield Operations Center(i)
(770 ) — — —
— — (770 ) Total non-GAAP
adjustments $ (97,601 ) $ 10,324 $
(1,254 ) $ (25,392 ) $ (3,099 ) $ —
$ (117,022 ) EBIT $ 153,988 $ 3,900
$ 949 $ (12,604 ) $ (7,836 )
$ 642 $ 139,039
Footnotes:
(a)
Adjustments to eliminate unrealized
mark-to-market gains (losses) for our energy-related derivatives
for our regulated utility and retail energy-marketing operations as
well as certain derivatives related to the optimization of
transportation capacity for the midstream energy services segment.
With the exception of certain transactions related to the
optimization of system capacity assets as discussed below, when
these derivatives settle, the realized economic impact is reflected
in our non-GAAP results, as we are only removing interim unrealized
mark-to-market amounts.
(b)
Adjustments to shift the timing of storage
optimization margins for the regulated utility segment from the
periods recognized for GAAP purposes to the periods in which such
margins are recognized for regulatory sharing purposes. In
addition, lower-of-cost or market adjustments related to system and
non-system storage optimization are eliminated for non-GAAP
reporting, since the margins will be recognized for regulatory
purposes when the withdrawals are made at the unadjusted historical
cost of storage inventory.
(c)
Eliminates the estimated financial effects
of warm or cold weather in the District of Columbia, as measured
consistent with our regulatory tariff. For fiscal year 2015,
Washington Gas did not enter into weather protection products due
to the pricing environment. Washington Gas has regulatory weather
protection mechanisms in Maryland and Virginia designed to
neutralize the estimated financial effects of weather. Utilization
of normal weather is an industry standard, and it is our practice
to evaluate our rate-regulated revenues by utilizing normal weather
and to provide estimates and guidance on the basis of normal
weather.
(d)
To reclassify the amortization of deferred
investment tax credits from income taxes to operating income for
the Commercial Energy Systems segment. These credits are a key
component of the operating success of this segment and therefore
are included within adjusted EBIT to help management and investors
better assess its performance.
(e)
For our Midstream Energy Services segment,
adjustments to reflect storage inventory at market or at a value
based on the price used to value the physical forward sales
contract that is economically hedging the storage inventory. This
adjustment also includes the estimated effects of certain sharing
mechanisms on all of our non-GAAP unrealized gains and losses.
Adjusting our storage optimization inventory in this fashion better
aligns the settlement of both our physical and financial
transactions and allows investors and management to better analyze
the results of our non-utility asset optimization strategies.
(f)
Represents an impairment of an equity
investment in a solar holding company, accounted for at cost, which
occurred in the first quarter of fiscal year 2015. We do not
believe this impairment charge is indicative of our historical or
future performance trends.
(g)
Represents amounts collected by the
regulated utility segment in relation to the refund to customers
ordered by the PSC of MD in September 2011 associated with a cash
settlement of gas imbalances with competitive service
providers.
(h)
These costs include incremental legal and
consulting costs in connection with business development
activities. These costs are unpredictable and may vary greatly with
each opportunity. Management believes that excluding these costs
allows management and investors to better compare, analyze and
forecast the performance of our revenue generating
opportunities.
(i)
During the first quarter of fiscal year
2014, Washington Gas recorded an impairment charge related to its
Springfield Operations Center. Non-GAAP earnings have been adjusted
to reflect a comparable measure in analyzing period-to-period
comparisons.
WGL Holdings, Inc.News
MediaRuben Rodriguez,
703-750-4470orFinancial
CommunityDouglas Bonawitz, 202-624-6129
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