- Consolidated GAAP earnings per share
up — $0.04 per share vs. $(0.32) per share
- Third quarter non-GAAP operating
earnings per share up — $0.33 per share vs. $0.22 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 June 30, 2016, of $2.0 million, or $0.04 per share, an
improvement of $17.7 million, or $0.36 per share, over a net loss
applicable to common stock of $(15.7) million, or $(0.32) per
share, reported for the quarter ended June 30, 2015.
For the nine months ended June 30, 2016, net income
applicable to common stock was $176.5 million, or $3.50 per share,
an improvement of $46.8 million, or $0.91 per share, over net
income applicable to common stock of $129.7 million, or $2.59 per
share, for the same period of the prior fiscal year. Our operations
are seasonable and accordingly, our operating results for the three
and nine months ended June 30, 2016, may not be indicative of
the results expected for the 12 months ending September 30,
2016.
On a consolidated basis, WGL also uses non-GAAP operating
earnings (loss) to evaluate overall financial performance, and
evaluates segment financial performance based on earnings before
interest and taxes (EBIT) and adjusted EBIT. 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. Both non-GAAP
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. 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, 2016, operating earnings
were $17.0 million, or $0.33 per share, compared to operating
earnings of $10.7 million, or $0.22 per share, for the same quarter
of the prior fiscal year. For the nine months ended June 30,
2016, operating earnings were $165.7 million, or $3.29 per share,
compared to operating earnings of $169.8 million, or $3.39 per
share, for the same period of the prior fiscal year.
Results by Business
Segment
Regulated Utility
Three
Months Ended June 30, Increase/ Nine Months Ended June 30,
Increase/ (In millions)
2016 2015
(Decrease)
2016 2015 (Decrease) EBIT
$ (20.5 ) $ (6.3 ) $ (14.2 )
$
243.1 $ 238.6 $ 4.5 Adjusted EBIT
$
4.9 $ 6.5 $ (1.6 )
$ 245.5 $ 255.5 $ (10.0 )
For the three months ended June 30, 2016, EBIT reflects
lower unrealized mark-to-market valuations on energy-related
derivatives, partially offset by the effects of colder than normal
weather patterns. For the nine months ended June 30, 2016,
EBIT reflects higher unrealized mark-to-market valuations on
energy-related derivatives, partially offset by the effects of
warmer than normal weather patterns.
For both the three and nine months ended June 30, 2016, the
comparisons in EBIT and adjusted EBIT reflect: (i) lower realized
margins associated with our asset optimization program; (ii)
negative effects of certain natural gas consumption patterns in the
District of Columbia; (iii) higher depreciation expense related to
the growth in our utility plant; (iv) increases in general taxes
and (v) a decrease in the recovery of carrying costs due to lower
average storage gas inventory balances. These unfavorable variances
were partially offset by: (i) customer growth and (ii) higher rate
recovery related to our accelerated pipe replacement programs.
Retail Energy-Marketing
Three
Months Ended June 30, Increase/ Nine Months Ended June 30,
Increase/ (In millions)
2016 2015
(Decrease)
2016 2015 (Decrease) EBIT
$ 49.5 $ 16.7 $ 32.8
$ 52.1
$ 39.2 $ 12.9 Adjusted EBIT
$ 16.3
$ 18.7 $ (2.4 )
$
29.9 $ 54.6 $ (24.7 )
For the three and nine months ended June 30. 2016, the EBIT
comparisons reflect higher unrealized mark-to-market valuations on
energy-related derivatives.
Additionally, for both the three and nine months ended
June 30, 2016, the comparisons in EBIT and adjusted EBIT
reflect lower realized natural gas margins due to a decrease in
portfolio optimization activity and lower realized electric margins
due to higher capacity charges from the regional power grid
operator (PJM) when compared to the same periods in the prior
fiscal year. Further contributing to these unfavorable variances
were higher operating expenses primarily due to commercial broker
fees. Partially offsetting these variances were higher wholesale
and large commercial and government volumes due to increased
growth.
Commercial Energy Systems
Three
Months Ended June 30, Increase/ Nine Months Ended June 30,
Increase/ (In millions)
2016 2015
(Decrease)
2016 2015 (Decrease) EBIT
$ 8.3 $ 3.8 $ 4.5
$ 10.3
$ 4.7 $ 5.6 Adjusted EBIT
$ 9.7
$ 7.8 $ 1.9
$ 14.2
$ 10.7 $ 3.5
For both the three and nine months ended June 30, 2016, the
improvements in EBIT and adjusted EBIT reflect: (i) higher margins
from the energy-efficiency contracting business; (ii) the growth in
distributed generation assets in service, including increased solar
renewable energy credit sales and (iii) improved results from our
investment solar businesses. During the nine month period only,
these improvements were partially offset by an impairment related
to our investment in thermal solar projects and higher operating
and depreciation expenses.
Additionally, the improvements in EBIT for both the three and
nine months ended June 30, 2016, reflect prior period losses
associated with unrecovered government contracting costs. The
period-to-period comparisons of adjusted EBIT, for both the three
and nine month periods, reflect an increase in investment tax
credits related to our distributed generation assets.
Midstream Energy Services
Three
Months Ended June 30, Increase/ Nine Months Ended June 30,
Increase/ (In millions)
2016 2015
(Decrease)
2016 2015 (Decrease) EBIT
$ (16.9 ) $ (26.6 ) $ 9.7
$
17.6 $ (23.3 ) $ 40.9 Adjusted EBIT
$
14.4 $ (1.4 ) $ 15.8
$ 19.2 $ (1.9 ) $ 21.1
For the three and nine months ended June 30, 2016, the
improvements in EBIT primarily reflect: (i) higher valuations on
our derivative contracts associated with our long-term
transportation strategies; (ii) lower pipeline project development
expenses and (iii) higher income related to our pipeline
investments. Partially offsetting these improvements are lower
valuations and realized margins related to storage inventory and
the associated economic hedging transactions and lower realized
margins on our transportation strategies, primarily as a result of
losses associated with the index price used in certain gas
purchases from Antero Resources Corporation, which is the subject
of an arbitration proceeding. Losses realized during the current
period were $5.0 million and $8.8 million for the three and nine
months ended June 30, 2016, respectively. While these losses may
continue in the near term, and are estimated to be approximately
$13.5 million for the full fiscal year, we do anticipate that they
will reverse in future periods upon completion of the arbitration
proceeding.
The improvements in adjusted EBIT for the three and nine months
ended June 30, 2016, primarily reflect favorable storage
spreads when compared to the same periods in the prior fiscal
year.
Other Activities
Three
Months Ended June 30, Increase/ Nine Months Ended June 30,
Increase/ (In millions)
2016 2015
(Decrease)
2016 2015 (Decrease) EBIT
$ (0.5 ) $ (1.0 ) $ 0.5
$
(2.8 ) $ (8.9 ) $ 6.1 Adjusted EBIT
$ (0.5 ) $ (1.0 ) $ 0.5
$ (2.8 ) $ (3.3 ) $ 0.5
Administrative and business development activity costs
associated with WGL and Washington Gas Resources and 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, are aggregated as “Other
Activities” and included as part of non-utility operations. For
both the three and nine months ended June 30, 2016, the
comparisons in EBIT and adjusted EBIT reflect lower operating
expenses in the current period. Additionally, for the nine months
ended June 30, 2016, the comparisons in EBIT and adjusted EBIT
reflect an impairment related to American Solar Direct Holdings
Inc. (ASDHI) recorded in the prior period.
Earnings Outlook
We provide earnings guidance for consolidated non-GAAP operating
earnings. In providing fiscal year 2016 guidance, we note that
there will likely be differences between our reported GAAP earnings
and our non-GAAP operating earnings due to matters such as, but not
limited to, unrealized mark-to-market positions for our
energy-related derivatives and changes in the measured value of our
trading inventory for WGL Midstream. On a year-to-date basis,
non-GAAP operating earnings are lower than GAAP earnings due to
$10.8 million of after-tax non-GAAP adjustments. Non-GAAP
adjustments could change significantly and are subject to swings
from period to period. As a result, WGL management is not able to
reasonably estimate the aggregate impact of these items to derive
GAAP earnings guidance and therefore is not able to provide a
corresponding GAAP equivalent for its non-GAAP operating earnings
guidance.
We are affirming our consolidated non-GAAP operating earnings
estimate for fiscal year 2016 in a range of $3.00 per share to
$3.20 per share and guiding to the high end of the range, after
adjusting for losses relating to the Antero contract.
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.wglholdings.com.
Other Information
We will hold a conference call at 10:30 a.m., Eastern Time on
August 4, 2016, to discuss our third quarter fiscal year 2016
financial results. The live conference call will be available to
the public via a link located on WGL’s website, www.wglholdings.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, 2016.
WGL, headquartered in Washington, D.C., is a leading source for
clean, efficient and diverse energy solutions. With activities and
assets across the U.S., WGL consists of Washington Gas, WGL Energy,
WGL Midstream and Hampshire Gas. WGL provides 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.wglholdings.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, dividends and other future
financial business performance, strategies, the outcome of the
arbitration proceeding affecting our midstream energy services
segment, legal developments relating to the Constitution Pipeline
and other 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.
Condensed Consolidated Balance
Sheets
(Unaudited)
(In thousands)
June
30, 2016 September 30, 2015
ASSETS
Property, Plant and Equipment At original cost
$
5,335,684 $ 5,003,910 Accumulated depreciation and
amortization
(1,385,486 ) (1,331,182 )
Net property, plant and equipment
3,950,198
3,672,728
Current Assets Cash and cash
equivalents
16,534 6,733 Accounts receivable, net
457,388 358,491 Storage gas
172,718 211,443
Derivatives and other
173,914 171,874
Total current assets
820,554
748,541
Deferred Charges and Other Assets
972,061 840,090
Total Assets
$ 5,742,813 $ 5,261,359
CAPITALIZATION AND LIABILITIES Capitalization Common
shareholders’ equity
$ 1,411,081 $ 1,243,247
Washington Gas Light Company preferred stock
28,173 28,173
Long-term debt
1,194,275 944,201
Total capitalization
2,633,529
2,215,621
Current Liabilities Notes payable and
current maturities of long-term debt
358,342 357,000
Accounts payable and other accrued liabilities
333,160
325,146 Derivatives and other
303,421
300,768 Total current liabilities
994,923
982,914
Deferred Credits
2,114,361 2,062,824
Total
Capitalization and Liabilities $ 5,742,813
$ 5,261,359
WGL Holdings, Inc.
Condensed Consolidated Statements of
Income
(Unaudited)
Three Months Ended
June 30,
Nine Months Ended
June 30,
(In thousands, except per share data)
2016
2015
2016 2015
OPERATING REVENUES
Utility
$ 181,622 $
185,179
$ 912,612 $ 1,173,396 Non-utility
258,965 255,994
977,048
1,018,747
Total Operating Revenues
440,587 441,173
1,889,660 2,192,143
OPERATING
EXPENSES Utility cost of gas
65,739 59,286
236,819 499,128 Non-utility cost of energy-related sales
197,880 240,808
832,087 933,911 Operation and
maintenance
97,461 98,642
296,813 295,309
Depreciation and amortization
33,786 30,696
98,368
90,159 General taxes and other assessments
32,038
29,308
119,970
126,475
Total Operating Expenses
426,904 458,740
1,584,057
1,944,982
OPERATING INCOME (LOSS)
13,683 (17,567 )
305,603 247,161 Equity in earnings
of unconsolidated affiliates
4,527 1,262
10,558 4,238
Other income (expenses) — net
1,915 2,329
3,689
(1,688 ) Interest expense
12,998 13,140
38,757 38,704
INCOME
(LOSS) BEFORE TAXES 7,127 (27,116 )
281,093
211,007
INCOME TAX EXPENSE (BENEFIT) 4,772
(11,756 )
103,619 80,364
NET INCOME (LOSS) $ 2,355 $ (15,360 )
$ 177,474 $ 130,643 Dividends on Washington Gas Light
Company preferred stock
330 330
990 990
NET INCOME (LOSS)
APPLICABLE TO COMMON STOCK $ 2,025
$ (15,690 )
$ 176,484 $
129,653
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic
50,622 49,729
50,158 49,814 Diluted
50,905 49,729
50,418
50,056
EARNINGS (LOSS) PER AVERAGE COMMON
SHARE Basic
$ 0.04 $ (0.32 )
$ 3.52
$ 2.60 Diluted
$ 0.04 $ (0.32 )
$ 3.50 $ 2.59 The
following table reconciles EBIT by operating segment to net income
(loss) applicable to common stock.
Three Months Ended
June 30,
Nine Months Ended
June 30,
(In thousands)
2016 2015
2016
2015 EBIT: Regulated utility
$ (20,458
) $ (6,262 )
$ 243,102 $ 238,645 Retail
energy-marketing
49,544 16,654
52,055 39,185
Commercial energy systems
8,286 3,750
10,251 4,731
Midstream energy services
(16,908 ) (26,607 )
17,631 (23,343 ) Other activities
(517 ) (970
)
(2,773 ) (8,915 ) Intersegment eliminations
178 (541 )
(416 )
(592 ) Total
$ 20,125 $ (13,976 )
$
319,850 $ 249,711 Interest expense
12,998
13,140
38,757
38,704 Income (loss) before income taxes
$
7,127 $ (27,116 )
$
281,093 $ 211,007 Income tax expense
(benefit)
4,772 (11,756 )
103,619 80,364 Dividends on
Washington Gas preferred stock
330 330
990 990 Net income (loss)
applicable to common stock
$ 2,025
$ (15,690 )
$ 176,484 $
129,653
WGL Holdings, Inc.
Consolidated Financial and Operating Statistics
(Unaudited)
FINANCIAL STATISTICS
Twelve Months Ended
June 30,
2016 2015 Closing Market Price — end of
period
$70.79 $54.29 52-Week Market Price
Range
$74.10 - $51.86 $59.08 - $37.77 Price Earnings Ratio
19.9 16.3 Annualized Dividends Per Share
$1.95 $1.85
Dividend Yield
2.8% 3.4% Return on Average Common Equity
13.3% 13.1% Total Interest Coverage (times)
6.4 6.4
Book Value Per Share — end of period
$27.64 $25.47 Common
Shares Outstanding — end of period (thousands)
51,058
49,729
UTILITY GAS STATISTICS
Three Months EndedJune
30,
Nine Months Ended
June 30,
Twelve Months EndedJune
30,
(In thousands)
2016 2015
2016 2015
2016
2015
Operating Revenues
Gas Sold and Delivered Residential — Firm
$ 102,179 $ 99,905
$ 549,840 $ 755,025
$ 611,481 $ 821,925 Commercial and Industrial — Firm
24,065 23,723
120,353 172,177
136,114 189,440
Commercial and Industrial — Interruptible
257 387
1,864 2,361
2,080 2,558 Electric Generation
275 275
825
825
1,100
1,100
126,776 124,290
672,882 930,388
750,775 1,015,023
Gas Delivered for Others Firm
35,416 42,562
177,811
176,502
206,513 202,924 Interruptible
9,783 9,616
38,118 44,209
46,386 52,401 Electric Generation
205 125
586 364
775
515
45,404 52,303
216,515 221,075
253,674 255,840
172,180 176,593
889,397 1,151,463
1,004,449
1,270,863 Other
9,442
8,586
23,215
21,933
37,811
35,787
Total $ 181,622
$ 185,179
$
912,612 $ 1,173,396
$ 1,042,260 $
1,306,650
Three Months EndedJune
30,
Nine Months Ended
June 30,
Twelve Months EndedJune
30,
(In thousands of therms)
2016
2015
2016 2015
2016 2015
Gas Sales and
Deliveries Gas Sold and Delivered Residential — Firm
82,186 74,454
556,876 702,214
589,536 738,620
Commercial and Industrial — Firm
28,392 23,710
153,101 181,617
169,027 198,852 Commercial and
Industrial — Interruptible
295
341
2,346
1,786
2,632 2,214
110,873
98,505
712,323
885,617
761,195
939,686 Gas Delivered for Others Firm
89,059 67,054
441,029 506,193
492,961 556,371
Interruptible
49,396 46,665
194,930 217,812
237,382 263,043 Electric Generation
65,905
57,862
168,284
113,072
234,273
164,440
204,360 171,581
804,243 837,077
964,616 983,854
Total 315,233
270,086
1,516,566
1,722,694
1,725,811
1,923,540
Utility Gas Purchase Expense
(excluding asset optimization) 38.21
¢ 52.84 ¢
35.35 ¢ 56.21 ¢
35.92 ¢ 55.96 ¢
HEATING DEGREE
DAYS Actual
388 203
3,340 3,929
3,340
3,929 Normal
290 296
3,719 3,746
3,731 3,759
Percent Colder (Warmer) than Normal
33.8 %
(31.4 )%
(10.2 )%
4.9 %
(10.5 )%
4.5 %
Average Active Customer Meters
1,144,974 1,132,904
1,141,249 1,129,159
1,138,596
1,126,300
WGL ENERGY SERVICES
Natural
Gas Sales Therm Sales (thousands of therms)
144,300
112,400
649,800 628,000
734,800 710,300 Number of
Customers (end of period)
136,500
147,100
136,500
147,100
136,500
147,100
Electricity Sales
Electricity Sales (thousands of kWhs)
3,201,900 2,893,100
9,321,100 8,549,900
12,828,200 11,571,400 Number of
Accounts (end of period)
130,200
141,200
130,200
141,200
130,200
141,200
WGL ENERGY SYSTEMS Megawatts in
service
137 98
137 98
137 98 Megawatt hours
generated
66,068 45,862
143,014 98,632
191,445 129,894
WGL Holdings, Inc.Reconciliation of
Non-GAAP Financial Measures(Unaudited)
The tables below reconcile operating earnings (loss) on a
consolidated basis to GAAP net income (loss) applicable to common
stock and adjusted EBIT on a segment basis to EBIT. Management
believes that operating earnings (loss) and adjusted EBIT provide a
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; andiii. 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 than 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 tables represent the reconciliation of non-GAAP
operating earnings to GAAP net income (loss) applicable to common
stock (consolidated by quarter):
Fiscal Year 2016 Quarterly Period
Ended* (In thousands, except per share data) Dec. 31
Mar. 31 Jun. 30 Sept. 30 Fiscal Year Operating
earnings
$ 59,205 $
89,490 $ 17,009 $
165,704 Non-GAAP adjustments**
13,312 25,815
(24,881 ) 14,246 Income tax effect of non-GAAP
adjustments***
(4,346 ) (9,017
) 9,897
(3,466 ) Net income applicable to common stock
$ 68,171 $ 106,288
$ 2,025 $
176,484 Diluted average common shares outstanding
50,030 50,282
50,905 50,418
Operating earnings per share
$ 1.18 $
1.78 $ 0.33 $ 3.29 Per share
effect of non-GAAP adjustments
0.18
0.33 (0.29 )
0.21 Diluted earnings per average common share
$ 1.36 $ 2.11
$ 0.04
$ 3.50 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** 10,892 (32,126 ) (44,082 ) (65,316 )
Income tax effect of 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
* 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.
** Refer to the reconciliations of
adjusted EBIT to EBIT below for further details on our non-GAAP
adjustments.
*** Non-GAAP adjustments are presented on
a gross basis and the income tax effects of those adjustments are
presented separately. The income tax effects of non-GAAP
adjustments, both current and deferred, are calculated at the
individual company level based on the applicable composite tax rate
for each period presented, with the exception of transactions not
subject to income taxes. Additionally, the income tax effect of
non-GAAP adjustments includes investment tax credits related to
distributed generation assets.
WGL Holdings, Inc.
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)
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, 2016 (In thousands)
Regulated
Utility
RetailEnergy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(j)
Eliminations
Total Adjusted EBIT
$ 4,947
$ 16,316 $ 9,657
$ 14,425 $
(517 ) $ 178
$ 45,006 Non-GAAP adjustments:
Unrealized mark-to-market
valuations on energy-related derivatives(a)
(25,182 )
33,228 — 8,085 — — 16,131
Storage optimization program(b)
(688 ) —
— — — — (688 ) DC weather
impact(c)
465 — — — — —
465 Distributed generation asset related investment tax
credits(d)
— — (1,371 ) —
— — (1,371 ) Change in measured value
of inventory(e)
— — — (30,646 )
— — (30,646 ) Losses associated with
Antero contract(f) — — —
(8,772 ) — —
(8,772 ) Total non-GAAP adjustments
$ (25,405 ) $ 33,228
$ (1,371 ) $
(31,333 ) $ —
$ — $ (24,881 )
EBIT
$ (20,458 ) $
49,544 $ 8,286
$ (16,908 ) $ (517
) $ 178 $
20,125
Three Months Ended June 30, 2015 (In thousands)
Regulated
Utility
RetailEnergy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(j)
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
)
WGL Holdings, Inc. Reconciliation of
Non-GAAP Financial Measures
(Unaudited)
Nine Months Ended June 30, 2016 (In thousands)
Regulated
Utility
RetailEnergy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(j)
Eliminations
Total Adjusted EBIT
$ 245,485
$ 29,937 $ 14,190
$ 19,181 $
(2,773 ) $ (416 )
$ 305,604 Non-GAAP adjustments:
Unrealized mark-to-market
valuations on energy-related derivatives(a)
7,934
22,118 — 30,407 — —
60,459 Storage optimization program(b)
(1,039
) — — — — — (1,039
) DC weather impact(c)
(9,278 ) —
— — — — (9,278 )
Distributed generation asset related investment tax credits(d)
— — (3,939 ) — — —
(3,939 ) Change in measured value of inventory(e)
— — — (23,185 ) —
— (23,185 ) Losses associated with Antero
contract(f) — — —
(8,772 ) — —
(8,772 ) Total non-GAAP adjustments
$
(2,383 ) $ 22,118
$ (3,939 ) $ (1,550
) $ — $ —
$ 14,246 EBIT
$
243,102 $ 52,055
$ 10,251 $ 17,631
$ (2,773 ) $ (416
) $ 319,850
Nine Months Ended June 30, 2015 (In thousands)
Regulated
Utility
RetailEnergy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(j)
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 )
Impairment loss on Springfield Operations Center(g) (465 ) — — — —
— (465 ) Unrecovered government contracting costs(h) — — (2,981 ) —
— — (2,981 ) Investment impairment(i) — —
— — (5,625 ) —
(5,625 ) 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
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 in footnote (b)
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 because 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. 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 the segment's 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.
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.
Additionally, this adjustment also includes the net effect of
certain sharing mechanisms on the difference between the changes in
our non-GAAP storage inventory valuations and the unrealized gains
and losses on derivatives not subject to non-GAAP adjustments.
(f)
Adjustment to eliminate losses associated
with the index price used in certain gas purchases from Antero,
which are the subject of arbitration. These losses are expected to
reverse in future periods upon completion of the arbitration
proceedings.
(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 WGL has exited its participation in this
program.
(i)
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.
(j)
Activities and transactions that are not
significant enough on a standalone basis to warrant treatment as an
operating segment and that do not fit into one of our four
operating segments.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160803006786/en/
WGL Holdings, Inc.News MediaJim
Monroe, 202-624-6620orFinancial
CommunityDouglas Bonawitz, 202-624-6129
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