- Third quarter consolidated GAAP
earnings per share — $(0.32) per share vs. $(0.23) per
share
- Year-to-date consolidated GAAP
earnings up — $2.59 per share vs. $1.31 per share
- Third quarter operating earnings per
share up — $0.22 per share vs. $0.02 per share
- Year-to-date operating earnings per
share up — $3.39 per share vs. $2.85 per share
- Operating earnings guidance for
fiscal year 2015 — raised to a range of $2.90 per share to $3.10
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 a net loss applicable to common stock
determined in accordance with generally accepted accounting
principles in the United States of America (GAAP) for the quarter
ended June 30, 2015, of $(15.7) million, or $(0.32) per share,
compared to a net loss applicable to common stock of $(11.9)
million, or $(0.23) per share, reported for the quarter ended
June 30, 2014.
For the nine months ended June 30, 2015, net income
applicable to common stock was $129.7 million, or $2.59 per share,
an improvement of $61.8 million, or $1.28 per share, over net
income applicable to common stock of $67.9 million, or $1.31 per
share, for the same period of the prior fiscal year. Our operations
are seasonal and, accordingly, our operating results for the three
and nine months ended June 30, 2015, are not indicative of the
results expected for the 12 months ending September 30,
2015.
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 more detailed
discussion of management’s use of these measures and for
reconciliations to GAAP financial measures.
For the quarter ended June 30, 2015, operating earnings
were $10.7 million, or $0.22 per share, an improvement of $9.9
million, or $0.20 per share, over operating earnings of $0.8
million, or $0.02 per share, for the same quarter of the prior
fiscal year. For the nine months ended June 30, 2015,
operating earnings were $169.8 million, or $3.39 per share, an
improvement of $22.0 million, or $0.54 per share, over operating
earnings of $147.8 million, or $2.85 per share, for the same period
of the prior fiscal year.
“I am pleased to announce record third quarter results which put
us on track to also achieve record full year non-GAAP earnings in
2015,” said Terry D. McCallister, Chairman and Chief Executive
Officer. “Earnings growth for the quarter was led by our Retail
Energy-Marketing business, which has now seen four consecutive
quarters of strong improvement in adjusted EBIT over prior year
results. We also saw increases in adjusted EBIT in our Commercial
Energy Systems and Midstream Energy Solutions segments, as well as
robust results in our core regulated utility. I believe this
balanced performance attests to our ability to deliver energy
answers that are valued by our customers through a carefully chosen
portfolio of businesses.
“Given these strong third quarter results and our revised
expectations for the fourth quarter, we are increasing our guidance
for non-GAAP earnings by $0.20 to a range of $2.90 to $3.10 per
share.”
Third Quarter Results by Business
Segment
Regulated Utility
For the three months ended June 30, 2015, the regulated
utility segment reported adjusted EBIT of $6.5 million, compared to
adjusted EBIT of $8.0 million for the same quarter of the prior
fiscal year. For the nine months ended June 30, 2015, the
regulated utility segment reported adjusted EBIT of $255.5 million,
compared to adjusted EBIT of $259.6 million for the same period of
the prior fiscal year.
For both the three and nine months ended June 30, 2015, the
decline in adjusted EBIT primarily reflects higher operating
expenses associated with: (i) labor and employee incentives; (ii)
business-development related activities and (iii) the growth in our
utility plant. Partially offsetting these unfavorable variances
were higher revenues from: (i) rate recovery related to our
accelerated pipe replacement programs; (ii) realized margins
associated with our asset optimization program and (iii) lower
employee benefit costs. Additionally, for the nine month period,
the regulated utility segment earned higher revenues from:
(i) customer growth; (ii) favorable effects of changes in
natural gas consumption patterns in the District of Columbia and
(iii) new base rates in Maryland.
Retail Energy-Marketing
For the three months ended June 30, 2015, the retail
energy-marketing segment reported adjusted EBIT of $18.7 million,
an increase of $13.7 million, over adjusted EBIT of $5.0 million
for the same quarter of the prior fiscal year. For the nine months
ended June 30, 2015, the retail energy-marketing segment
reported adjusted EBIT of $54.6 million, an increase of $56.1
million, over adjusted EBIT of $(1.5) million for the same period
of the prior fiscal year.
For the three months ended June 30, 2015, the increase in
adjusted EBIT resulted from an increase in both electricity and
natural gas margins. Electricity margins increased due to lower
capacity charges from the regional power grid operator (PJM)
associated with fixed-price retail contracts. In addition, sales
volumes were higher based on warmer weather and recent large
commercial customer growth at lower unit margins. These positive
benefits were slightly offset by increased PJM capacity costs
implemented June 2015, which impact the timing of margin
recognition for fixed-price retail contracts. The improvement in
natural gas margins reflect lower natural gas purchase costs and
favorable gas supply and pricing opportunities in the current
period compared to the same period of the prior fiscal year.
Improved results for the nine months ended June 30, 2015,
primarily reflect higher electricity margins due to lower PJM
capacity charges. Additionally, prior year electricity margins were
much lower, reflecting extreme price movements during the colder
than normal weather which occurred January through March of 2014.
These improved electric margins were slightly offset by lower sales
volumes due to lower customer counts and lower margins on certain
large commercial sales due to competition.
Commercial Energy Systems
For the three months ended June 30, 2015, the commercial
energy systems segment reported adjusted EBIT of $7.8 million, an
increase of $2.1 million, over adjusted EBIT of $5.7 million for
the same quarter of the prior fiscal year. For the nine months
ended June 30, 2015, the commercial energy systems segment
reported adjusted EBIT of $10.7 million, an increase of $2.7
million, over adjusted EBIT of $8.0 million, for the same period of
the prior fiscal year. The increase in adjusted EBIT reflects: (i)
the growth in income producing distributed generation assets in
service; (ii) higher income from state rebate programs for certain
distributed generation projects and (iii) higher earnings from the
federal contracting business due to higher contract margins. These
favorable variances are partially offset by higher operating
expenses due to additional in-service distributed generation
assets.
Midstream Energy Services
For the three months ended June 30, 2015, the midstream
energy services segment reported adjusted EBIT of $(1.4) million,
an increase of $2.6 million, over adjusted EBIT of $(4.0) million
for the same quarter of the prior fiscal year. The increase in
adjusted EBIT primarily reflects favorable storage and
transportation spreads this quarter compared to the same quarter of
the prior fiscal year.
For the nine months ended June 30, 2015, the midstream
energy services segment reported adjusted EBIT of $(1.9) million,
compared to $8.8 million for the same period of the prior fiscal
year. This comparison primarily reflects lower storage and
transportation spreads in the current year, partially offset by
lower investment development expenses and higher income related to
our pipeline investments.
Consolidated Interest
Expense
For the quarter ended June 30, 2015, interest expense was
$13.1 million, compared to interest expense of $9.5 million for the
same period of the prior fiscal year. For the nine months ended
June 30, 2015, interest expense was $38.7 million, compared to
interest expense of $28.0 million for the same period of the prior
fiscal year. For both the three and the nine months ended
June 30, 2015, the increase reflects increased long-term
borrowings at Washington Gas and WGL.
Earnings Outlook
We are raising our consolidated non-GAAP operating earnings
estimate for fiscal year 2015 in a range of $2.90 per share to
$3.10 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
August 6, 2015, to discuss our third 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 at least September 4, 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)
June 30, 2015
September 30, 2014
ASSETS
Property, Plant and Equipment At original cost
$ 4,822,149 $ 4,582,764 Accumulated depreciation and
amortization
(1,295,069 )
(1,268,319 ) Net property, plant and equipment
3,527,080
3,314,445
Current Assets Cash and cash equivalents
66,051 8,811 Accounts receivable, net
371,410 298,978
Storage gas
147,506 333,602 Derivatives and other
163,460 194,124
Total current assets
748,427
835,515
Deferred Charges and
Other Assets 732,958
706,539
Total Assets
$ 5,008,465 $ 4,856,499
CAPITALIZATION AND LIABILITIES Capitalization Common
shareholders’ equity
$ 1,266,373 $ 1,246,576
Washington Gas Light Company preferred stock
28,173 28,173
Long-term debt
950,494
679,228 Total capitalization
2,245,040 1,953,977
Current Liabilities Notes payable and current
maturities of long-term debt
201,000 473,500 Accounts
payable and other accrued liabilities
275,615 313,221
Derivatives and other
299,699
233,564 Total current liabilities
776,314
1,020,285
Deferred Credits
1,987,111 1,882,237
Total Capitalization and Liabilities $
5,008,465 $ 4,856,499
WGL Holdings, Inc.
Consolidated Statements of
Income
(Unaudited)
Three Months Ended June
30, Nine Months Ended June 30, (In
thousands, except per share data)
2015
2014
2015 2014
OPERATING REVENUES
Utility
$ 185,179 $ 194,901
$
1,173,396 $ 1,283,697 Non-utility
255,994 272,599
1,018,747
1,038,350
Total Operating Revenues
441,173 467,500
2,192,143
2,322,047
OPERATING EXPENSES Utility cost of gas
59,286 64,448
499,128 710,436 Non-utility cost of
energy-related sales
240,808 266,321
933,911 997,958
Operation and maintenance
98,642 89,964
295,309
277,805 Depreciation and amortization
30,696 27,622
90,159 81,516 General taxes and other assessments
29,308 28,634
126,475
126,376
Total Operating Expenses
458,740 476,989
1,944,982
2,194,091
OPERATING INCOME (LOSS) (17,567 )
(9,489 )
247,161 127,956 Equity in earnings of
unconsolidated affiliates
1,262 818
4,238 1,851 Other
income (expenses) — net
2,329 (304 )
(1,688
)
257 Interest expense
13,140
9,503
38,704 28,020
INCOME (LOSS)
BEFORE TAXES (27,116 ) (18,478 )
211,007
102,044
INCOME TAX EXPENSE (BENEFIT)
(11,756 ) (6,868 )
80,364 33,152
NET
INCOME (LOSS) (15,360 ) (11,610 )
130,643
68,892
Dividends on Washington Gas Light Company
preferred stock
330 330
990
990
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK
$ (15,690 ) $ (11,940 )
$ 129,653 $ 67,902
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic
49,729 51,921
49,814 51,871 Diluted
49,729 51,921
50,056
51,885
EARNINGS (LOSS) PER AVERAGE COMMON SHARE Basic
$ (0.32 ) $ (0.23 )
$ 2.60 $
1.31 Diluted
$ (0.32 )
$ (0.23 )
$ 2.59
$ 1.31
WGL Holdings, Inc.
Consolidated Financial and Operating
Statistics
(Unaudited)
FINANCIAL STATISTICS
Twelve Months Ended
June 30,
2015 2014
Closing Market Price — end of period
$54.29 $43.10 52-Week Market Price Range
$59.08 - $37.77
$46.80 - $35.88
Price Earnings Ratio
16.3 139.0 Annualized Dividends Per
Share
$1.85 $1.76 Dividend Yield
3.4% 4.1% Return on
Average Common Equity
13.1% 1.2% Total Interest Coverage
(times)
6.4 1.5 Book Value Per Share — end of period
$25.47 $24.76 Common Shares Outstanding — end of period
(thousands)
49,729
51,940
UTILITY GAS STATISTICS
Three Months
EndedJune 30, Nine Months
EndedJune 30, Twelve Months Ended
June 30,
(In thousands)
2015 2014
2015 2014
2015
2014
Operating Revenues Gas Sold and Delivered
Residential — Firm
$ 99,905 $ 105,915
$
755,025 $ 824,179
$ 821,925 $ 885,188
Commercial and Industrial — Firm
23,723 27,284
172,177 196,523
189,440 213,589 Commercial and
Industrial — Interruptible
387 328
2,361 2,070
2,558 2,501 Electric Generation
275 275
825 825
1,100 1,100
124,290
133,802
930,388
1,023,597
1,015,023 1,102,378 Gas
Delivered for Others Firm
42,562 38,697
176,502
172,658
202,924 197,364 Interruptible
9,616 10,598
44,209 51,136
52,401 59,168 Electric Generation
125 118
364
365
515
540
52,303
49,413
221,075 224,159
255,840 257,072
176,593 183,215
1,151,463 1,247,756
1,270,863 1,359,450 Other
8,586
11,686
21,933 35,941
35,787 46,572
Total $ 185,179
$ 194,901
$
1,173,396 $ 1,283,697
$ 1,306,650 $ 1,406,022
Three
Months EndedJune 30, Nine Months
EndedJune 30, Twelve Months
EndedJune 30, (In thousands of therms)
2015 2014
2015
2014
2015 2014
Gas
Sales and Deliveries Gas Sold and Delivered Residential — Firm
74,454 70,872
702,214 702,558
738,620 737,624
Commercial and Industrial — Firm
23,710 22,341
181,617 182,918
198,852 199,913 Commercial and
Industrial — Interruptible
341
304
1,786
1,765
2,214 2,192
98,505 93,517
885,617
887,241
939,686
939,729 Gas Delivered for Others Firm
67,054 76,366
506,193 485,326
556,371 536,093
Interruptible
46,665 52,704
217,812 222,473
263,043 265,896 Electric Generation
57,862 33,906
113,072 93,035
164,440
149,714
171,581
162,976
837,077 800,834
983,854 951,703
Total 270,086
256,493
1,722,694 1,688,075
1,923,540
1,891,432
WGL ENERGY SERVICES Natural Gas
Sales Therm Sales (thousands of therms)
112,400 116,200
628,000 635,800
710,300 707,700 Number of Customers
(end of period)
147,100
161,300
147,100
161,300
147,100 161,300
Electricity Sales Electricity Sales (thousands of kWhs)
2,893,100 2,790,300
8,549,900 8,670,900
11,571,400 11,942,300 Number of Accounts (end of period)
141,200
169,600
141,200
169,600
141,200
169,600
UTILITY GAS PURCHASED
EXPENSE (excluding asset optimization)
52.84
¢
65.72
¢
56.21
¢
68.63
¢
55.96
¢
67.73
¢
HEATING DEGREE DAYS Actual
203 277
3,929 4,111
3,929 4,120 Normal
296 295
3,746 3,738
3,759 3,751 Percent Colder (Warmer) than Normal
(31.4 )% (6.1 )%
4.9 % 10.0
%
4.5 % 9.8
%
Average Active Customer Meters
1,132,904 1,119,953
1,129,159
1,116,530
1,126,300
1,113,893
WGL Holdings, Inc.
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)
The tables below reconcile adjusted EBIT on a segment basis
to GAAP net income (loss) applicable to common stock and operating
earnings (loss) to GAAP net income (loss) applicable to common
stock on a consolidated basis. Management believes that adjusted
EBIT and operating earnings (loss) provide a more meaningful
representation of our earnings from ongoing operations on a segment
and consolidated 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 adjusted EBIT and operating earnings (loss) to
analyze our segment and consolidated 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 adjusted EBIT and operating earnings (loss) 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 June
30, Nine Months Ended June 30, (In
thousands)
2015 2014
2015 2014 Adjusted EBIT:
Regulated utility
$ 6,549 $ 7,968
$ 255,500 $ 259,557
Retail energy-marketing
18,655 4,963
54,641 (1,461 )
Commercial energy systems
7,812 5,747
10,663 7,950
Midstream energy services
(1,399 ) (3,980 )
(1,895 ) 8,808
Other activities(*)
(970 ) (1,920 )
(3,290 ) (6,657 )
Eliminations
(541 )
(532 )
(592 )
110 Total
$
30,106 $ 12,246
$ 315,027 $ 268,307
Non-GAAP adjustments(1)
(44,082 ) (21,221 )
(65,316 ) (138,243 ) Interest expense
13,140 9,503
38,704
28,020 Income (loss) before income taxes
$ (27,116 ) $ (18,478 )
$ 211,007 $ 102,044
Income tax expense (benefit)
(11,756 ) (6,868
)
80,364 33,152 Dividends on Washington Gas preferred stock
330 330
990
990 Net income (loss) applicable to common stock
$ (15,690 ) $ (11,940 )
$ 129,653 $ 67,902
(*) 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 10,734
$ 169,772 Non-GAAP adjustments(1)
10,892 (32,126 ) (44,082 )
(65,316 ) Income tax expense (benefit) on non-GAAP
adjustments
(5,008 )
12,547
17,658
25,197 Net income (loss) applicable to common stock
$ 63,888 $
81,455 $ (15,690 )
$ 129,653
Diluted average common shares outstanding
50,091 49,983
49,729
50,056 Operating earnings per
share
$ 1.16 $ 2.02 0.22
$ 3.39 Per share effect of non-GAAP adjustments
0.12
(0.39 ) (0.54 )
(0.80 )
Diluted earnings (loss) per average common share
$ 1.28 $ 1.63
$ (0.32 )
$ 2.59 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 $ 95,526 827 $ 147,751 Non-GAAP
adjustments(1) (58,843 ) (58,179 ) (21,221 ) (138,243 ) Income tax
expense on non-GAAP adjustments 22,453 23,866 8,454 54,773
Regulatory asset - tax effect Medicare Part D (***)
3,621 —
— 3,621
Net income (loss) applicable to common stock $
18,629 $ 61,213 $ (11,940
) $ 67,902 Diluted
average common shares outstanding 51,827
51,899
51,921 51,885
Operating earnings per share $ 0.99 $ 1.84 0.02 $ 2.85 Per
share effect of non-GAAP adjustments (0.63 )
(0.66 ) (0.25 )
(1.54 ) Diluted earnings (loss)
per average common share $ 0.36
$ 1.18 $ (0.23 )
$ 1.31 (**) 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 June 30, 2015 (In
thousands) Regulated
Utility
Retail-
Energy
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities
Intersegment
Eliminations
Total Adjusted EBIT
$
6,549 $ 18,655
$ 7,812 $
(1,399 ) $ (970 )
$ (541 ) $
30,106 Non-GAAP adjustments:
Unrealized mark-to-market valuations on
energy-related derivatives(a)
(10,426 ) (2,001
) — (21,840 ) — —
(34,267 ) Storage optimization program(b)
(644
) — — — — — (644
) DC weather impact(c)
(1,276 ) —
— — — — (1,276 )
Distributed generation asset related investment tax credits(d)
— — (1,081 ) — — —
(1,081 ) Change in measured value of inventory(e)
— — — (3,368 ) — —
(3,368 ) Impairment loss on Springfield Operations
Center(g)
(465
)
—
—
—
—
—
(465 )
Unrecovered government contracting
costs(h)
— —
(2,981 )
— —
— (2,981
) Total non-GAAP adjustments
$
(12,811 ) $ (2,001
) $ (4,062 )
$ (25,208 ) $
— $ —
$ (44,082 ) EBIT
$
(6,262 ) $ 16,654
$ 3,750 $
(26,607 ) $ (970 )
$ (541 ) $
(13,976 )
Three Months Ended June 30, 2014 (In
thousands) Regulated
Utility
Retail-
Energy
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities
Intersegment
Eliminations
Total Adjusted EBIT $ 7,968
$ 4,963 $ 5,747
$ (3,980 ) $ (1,920 ) $ (532 )
$ 12,246 Non-GAAP adjustments:
Unrealized mark-to-market valuations on energy-related
derivatives(a) (1,224 ) (3,677 ) — (13,785 ) — — (18,686 ) Storage
optimization program (b) 88 — — — — — 88 DC weather impact(c) (507
) — — — — — (507 ) Distributed generation asset related investment
tax credits(d) — — (735 ) — — — (735 ) Change in measured value of
inventory(e) — — — 959 — — 959 Incremental professional service
fees (j) —
—
— — (471 ) — (471 ) Impairment loss on proposed Chillum liquefied
natural gas facility(k) (1,869 )
—
—
—
—
—
(1,869 ) Total non-GAAP adjustments $
(3,512 ) $ (3,677 ) $ (735 )
$ (12,826 ) $ (471 ) $ —
$ (21,221 ) EBIT $ 4,456
$ 1,286 $ 5,012 $
(16,806 ) $ (2,391 ) $ (532 )
$ (8,975 )
WGL Holdings, Inc.
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)
Nine Months Ended June 30, 2015 (In thousands)
Regulated
Utility
Retail-
Energy
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities
Intersegment
Eliminations
Total Adjusted EBIT
$
255,500 $ 54,641
$ 10,663 $
(1,895 ) $ (3,290
) $ (592 )
$ 315,027 Non-GAAP adjustments:
Unrealized mark-to-market valuations on
energy-related derivatives(a)
(13,328 )
(15,456 ) — (20,989 ) —
— (49,773 ) Storage optimization program(b)
(3,243 ) — — — — —
(3,243 ) DC weather impact(c)
181 —
— — — — 181 Distributed
generation asset related investment tax credits(d)
—
— (2,951 ) — — —
(2,951 ) Change in measured value of inventory(e)
—
—
— (459 ) — — (459
) Investment impairment(f)
— — —
— (5,625 ) — (5,625 )
Impairment loss on Springfield Operations
Center(g)
(465
)
—
—
—
—
—
(465 )
Unrecovered government contracting
costs(h)
— —
(2,981 )
— —
— (2,981
) Total non-GAAP adjustments
$
(16,855 ) $ (15,456
) $ (5,932 )
$ (21,448 ) $
(5,625 ) $ —
$ (65,316 ) EBIT
$ 238,645 $ 39,185
$ 4,731
$ (23,343 ) $
(8,915 ) $ (592 )
$ 249,711
Nine Months Ended June
30, 2014 (In thousands) Regulated
Utility
Retail-
Energy
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities
Intersegment
Eliminations
Total Adjusted EBIT $ 259,557
$ (1,461 ) $ 7,950
$ 8,808 $ (6,657 ) $ 110
$ 268,307 Non-GAAP adjustments: Unrealized
mark-to-market valuations on energy-related derivatives(a) (105,280
) 6,647 — (38,130 ) — — (136,763 ) Storage optimization program(b)
4,106 — — — — — 4,106 DC weather impact(c) 2,212 — — — — — 2,212
Distributed generation asset related investment tax credits(d) — —
(1,989 ) — — — (1,989 ) Change in measured value of inventory(e) —
— — (88 ) — — (88 ) Competitive service provider imbalance cash
settlement(i) 488 — — — — — 488 Incremental professional services
fees(j) — — — — (3,570 ) — (3,570 ) Impairment loss on Springfield
Operations Center(g) (770 ) — — — — — (770 ) Impairment loss on
proposed Chillum liquefied natural gas facility(k)
(1,869 ) —
— — —
— (1,869 )
Total non-GAAP adjustments $ (101,113 )
$ 6,647 $ (1,989 ) $ (38,218 )
$ (3,570 ) $ — $
(138,243 ) EBIT $ 158,444 $
5,186 $ 5,961 $ (29,410 )
$ (10,227 ) $ 110
$ 130,064
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 an impairment charge as well as
accrued selling expenses related to Washington Gas' Springfield
Operations Center.
(h)
Represents unrecovered government
contracting costs under the Small Business Administration's
Business Development 8(a) Program. We do not anticipate any further
unrecovered costs as the company exits its participation in this
program.
(i)
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.
(j)
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.
(k)
On July 7, 2014, the Virginia State
Corporation Commission (SCC of VA) disallowed full recovery of
certain costs related to a proposed Chillum liquefied natural gas
facility, therefore a portion of the associated regulatory asset
was impaired.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150805006797/en/
WGL Holdings, Inc.News
MediaJim Monroe,
202-624-6620orFinancial
CommunityDouglas Bonawitz, 202-624-6129
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