- Consolidated GAAP earnings per share
up — $3.31 per share vs. $2.62 per share; Record GAAP earnings of
$167.6 million
- Non-GAAP operating earnings per
share up — $3.27 per share vs. $3.16 per share; Record operating
earnings of $165.1 million
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 fiscal
year ended September 30, 2016, of $167.6 million, or $3.31 per
share, an improvement of $36.3 million, or $0.69 per share, over
net income applicable to common stock of $131.3 million, or $2.62
per share, reported for the fiscal year ended September 30,
2015.
For the quarter ended September 30, 2016, net loss
applicable to common stock was $(8.9) million, or $(0.17) per
share, compared to net income applicable to common stock of $1.6
million, or $0.03 per share, for the same period of the prior
fiscal year.
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 we believe 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 fiscal year ended September 30, 2016, operating
earnings were $165.1 million, or $3.27 per share, an improvement of
$6.9 million, or $0.11 per share, over operating earnings of $158.2
million, or $3.16 per share, for the prior fiscal year. For the
quarter ended September 30, 2016, we had an operating loss of
$(0.6) million, or $(0.01) per share, compared to an operating loss
of $(11.5) million, or $(0.23) per share, for the same period of
the prior fiscal year.
Results by Business
Segment
Regulated Utility
Three Months EndedSeptember 30,
Increase/
Fiscal Year EndedSeptember 30,
Increase/ (In millions)
2016
2015 (Decrease)
2016 2015
(Decrease) EBIT
$ (14.9 ) $ (14.7 ) $ (0.2 )
$ 228.2 $ 224.0 $ 4.2 Adjusted EBIT
$ (21.2 ) $ (19.8 ) $ (1.4 )
$ 224.3 $ 235.7 $ (11.4 )
For the three months ended September 30, 2016, both the
EBIT and adjusted EBIT comparisons reflect: (i) customer growth;
(ii) higher rate recovery related to our accelerated pipe
replacement programs and (iii) higher realized margins associated
with our asset optimization program. These favorable variances were
more than offset by: (i) higher depreciation expense related to the
growth in our utility plant and (ii) higher operation and
maintenance expenses.
For the fiscal year ended September 30, 2016, the increase
in EBIT reflects higher unrealized mark-to-market valuations on
energy-related derivatives, partially offset by the effects of
warmer than normal weather patterns. Additionally, the comparisons
of both EBIT and adjusted EBIT reflect favorable variances for: (i)
customer growth and (ii) higher rate recovery related to our
accelerated pipe replacement programs. These favorable variances
were more than offset by: (i) negative effects of certain natural
gas consumption patterns in the District of Columbia; (ii) a
decrease in the recovery of carrying costs due to lower average
storage gas inventory balances; (iii) lower realized margins
associated with our asset optimization program; (iv) higher
depreciation expense related to the growth in our utility plant and
(v) increases in operation and maintenance expenses and general
taxes.
Retail Energy-Marketing
Three Months EndedSeptember 30,
Increase/
Fiscal Year EndedSeptember 30,
Increase/ (In millions)
2016
2015 (Decrease)
2016
2015 (Decrease) EBIT
$ 12.9 $ 7.4 $ 5.5
$ 65.0 $ 46.6 $ 18.4 Adjusted EBIT
$ 24.3 $ 13.8 $ 10.5
$
54.2 $ 68.5 $ (14.3 )
For the three months ended September 30, 2016, the
comparisons in EBIT and adjusted EBIT reflect higher realized
natural gas margins primarily due to favorable volumetric
reconciliations and higher realized electric margins due to lower
capacity charges from the regional power grid operator (PJM), when
compared to the same period in the prior fiscal year.
For the fiscal year ended September 30, 2016, the EBIT
comparison reflects higher unrealized mark-to-market valuations on
energy-related derivatives. Both comparisons of EBIT and adjusted
EBIT reflect lower realized natural gas margins due to a decrease
in portfolio optimization activity and higher commercial broker
fees. Realized electric margins were relatively unchanged when
compared to the prior fiscal year.
Commercial Energy Systems
Three Months EndedSeptember 30,
Increase/
Fiscal Year EndedSeptember 30,
Increase/ (In millions)
2016 2015
(Decrease)
2016 2015 (Decrease)
EBIT
$ 11.7 $ 5.0 $ 6.7
$ 22.0 $ 9.7 $
12.3 Adjusted EBIT
$ 13.1 $ 6.1
$ 7.0
$ 27.3 $ 16.8 $
10.5
For both the three months and fiscal year ended
September 30, 2016, the improvements in EBIT and adjusted EBIT
reflect: (i) increased activity and higher margins from the
energy-efficiency contracting business; (ii) growth in distributed
generation assets in service, including increased solar renewable
energy credit sales and (iii) higher equity earnings from
alternative energy investments. These improvements were partially
offset by higher expenses reflecting an impairment related to our
investment in thermal solar projects and other operating
expenses.
Midstream Energy Services
Three Months EndedSeptember 30,
Increase/
Fiscal Year EndedSeptember 30,
Increase/ (In millions)
2016
2015 (Decrease)
2016 2015
(Decrease) EBIT
$ (9.8 ) $ 20.6 $ (30.4
)
$ 7.8 $ (2.7 ) $ 10.5 Adjusted EBIT
$ (1.3 ) $ (1.7 ) $ 0.4
$ 17.8 $ (3.6 ) $ 21.4
For the three months ended September 30, 2016, the decrease
in EBIT primarily reflects lower valuations on our derivative
contracts associated with our long-term transportation strategies,
partially offset by: (i) higher income related to our pipeline
investments and (ii) higher valuations and realized margins related
to storage inventory and the associated economic hedging
transactions.
For the fiscal year ended September 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 were lower
valuations and realized margins related to storage inventory and
the associated economic hedging transactions.
For both periods presented, EBIT reflects 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. For the three months and fiscal year ended
September 30, 2016, losses were $6.4 million and $15.2 million,
respectively. While these losses may continue in the near term, we
do anticipate that they will reverse in future periods upon
completion of the arbitration proceeding.
The improvements in adjusted EBIT for the fiscal year ended
September 30, 2016, primarily reflect favorable storage
spreads, higher income related to our pipeline investments and
lower pipeline project development expenses when compared to the
same periods in the prior fiscal year.
Other Activities
Three Months EndedSeptember 30,
Increase/
Fiscal Year EndedSeptember 30,
Increase/ (In millions)
2016
2015 (Decrease)
2016 2015 (Decrease) EBIT
$ (0.4 ) $ (0.8 ) $ 0.4
$ (3.2
) $ (9.7 ) $ 6.5 Adjusted EBIT
$
(0.4 ) $ (0.8 ) $ 0.4
$
(3.2 ) $ (4.0 ) $ 0.8
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 months and fiscal year ended September 30,
2016, the comparisons in EBIT and adjusted EBIT reflect lower
operating expenses compared to the prior period. Additionally, for
the fiscal year ended September 30, 2016, the EBIT comparison
reflects an impairment related to a solar holding company.
Earnings Outlook
We provide earnings guidance for consolidated non-GAAP operating
earnings. In providing fiscal year 2017 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. For fiscal year 2016, non-GAAP
operating earnings were lower than GAAP earnings due to $2.5
million of after-tax non-GAAP adjustments. For fiscal year 2015,
non-GAAP operating earnings were higher than GAAP earnings due to
$27.0 million of after-tax non-GAAP adjustments. As demonstrated by
these comparisons, non-GAAP adjustments can 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 providing a consolidated non-GAAP operating earnings
estimate for fiscal year 2017 in a range of $3.30 per share to
$3.50 per share.
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 11:00 a.m., Eastern Time on
November 17, 2016, to discuss our fourth quarter and 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 December 19, 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 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, the
results of the arbitration proceeding affecting our midstream
energy services segment and the other 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)
September 30, 2016 September 30, 2015
ASSETS
Property, Plant and Equipment At original cost
$
5,542,916 $ 5,003,910 Accumulated depreciation and
amortization
(1,415,679 ) (1,331,182 )
Net property, plant and equipment
4,127,237
3,672,728
Current Assets Cash and cash
equivalents
5,573 6,733 Accounts receivable, net
491,020 358,491 Storage gas
207,132 211,443
Derivatives and other
139,749
171,874 Total current assets
843,474
748,541
Deferred Charges and Other
Assets 1,087,994 840,090
Total Assets $
6,058,705
$ 5,261,359
CAPITALIZATION AND
LIABILITIES Capitalization WGL Holdings common
shareholders’ equity
$ 1,375,561 $ 1,243,247
Non-controlling interest
409 — Washington Gas Light Company
preferred stock
28,173 28,173
Total equity
1,404,143 1,271,420
Long-term debt
1,444,300 944,201
Total capitalization
2,848,443
2,215,621
Current Liabilities Notes payable and
current maturities of long-term debt
331,385 357,000
Accounts payable and other accrued liabilities
405,351
325,146 Derivatives and other
290,190
300,768 Total current liabilities
1,026,926
982,914
Deferred Credits
2,183,336
2,062,824
Total Capitalization and
Liabilities $
6,058,705
$ 5,261,359
WGL Holdings,
Inc. Condensed Consolidated Statements of Income
(Unaudited)
Three Months Ended Fiscal
Year Ended September 30, September 30, (In
thousands, except per share data)
2016 2015
2016 2015
OPERATING REVENUES
Utility
$ 131,505 $ 129,648
$
1,044,117 $ 1,303,044 Non-utility
328,394
338,039
1,305,442
1,356,786
Total Operating Revenues
459,899 467,687
2,349,559
2,659,830
OPERATING EXPENSES Utility
cost of gas
8,370 11,772
245,189 510,900 Non-utility
cost of energy-related sales
290,990 284,420
1,123,077 1,218,331 Operation and maintenance
104,963
100,461
401,776 395,770 Depreciation and amortization
34,198 31,733
132,566 121,892 General taxes and other
assessments
26,685 25,689
146,655 152,164
Total Operating
Expenses 465,206 454,075
2,049,263 2,399,057
OPERATING
INCOME (LOSS) (5,307 ) 13,612
300,296
260,773 Equity in earnings of unconsolidated affiliates
3,248 1,230
13,806 5,468 Other income — net
957 2,341
4,646 653 Interest expense
13,553 11,807
52,310
50,511
INCOME (LOSS) BEFORE TAXES
(14,655 ) 5,376
266,438 216,383
INCOME TAX
EXPENSE (BENEFIT) (5,545 ) 3,440
98,074 83,804
NET
INCOME (LOSS) $ (9,110 ) $ 1,936
$
168,364 $ 132,579 Net loss attributable to non-controlling
interest
(550 ) —
(550 ) — Dividends on
Washington Gas Light Company preferred stock
330
330
1,320 1,320
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK
$ (8,890 ) $ 1,606
$ 167,594 $ 131,259
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING Basic
51,070 49,729
50,369 49,794 Diluted
51,070
50,069
50,564 50,060
EARNINGS (LOSS) PER AVERAGE COMMON SHARE Basic
$
(0.17 ) $ 0.03
$ 3.33 $ 2.64 Diluted
$ (0.17 ) $ 0.03
$ 3.31 $ 2.62
The following table reconciles EBIT by
operating segment to net income (loss) applicable to common
stock.
Three Months Ended
September 30,
Fiscal Year Ended
September 30,
(In thousands)
2016 2015
2016
2015 EBIT: Regulated utility
$
(14,883 ) $ (14,668 )
$ 228,219 $
223,977 Retail energy-marketing
12,913 7,444
64,968
46,629 Commercial energy systems
11,741 4,957
21,992
9,688 Midstream energy services
(9,824 ) 20,623
7,807 (2,720 ) Other activities
(411 ) (752 )
(3,184 ) (9,667 ) Intersegment eliminations
(88 ) (421 )
(504 )
(1,013 ) Total
$ (552 ) $ 17,183
$ 319,298 $ 266,894 Interest expense
13,553
11,807
52,310 50,511 Income tax expense (benefit)
(5,545 ) 3,440
98,074 83,804 Dividends on
Washington Gas preferred stock
330 330
1,320 1,320 Net income
(loss) applicable to common stock
$ (8,890
) $ 1,606
$ 167,594
$ 131,259
WGL Holdings,
Inc. Consolidated Financial and Operating Statistics
(Unaudited)
FINANCIAL STATISTICS
Fiscal Year Ended
September 30,
2016 2015 Closing Market Price — end of
period
$ 62.70 $ 57.67 52-Week Market Price Range
$ 74.10 - $56.90 $ 59.08 - $42.04 Price Earnings
Ratio
18.8 21.8 Annualized Dividends Per Share
$
1.95 $ 1.85 Dividend Yield
3.1 % 3.2 % Return
on Average Common Equity
12.8 % 10.5 % Total Interest
Coverage (times)
5.8 5.2 Book Value Per Share — end of
period
$ 26.93 $ 25.00 Common Shares Outstanding —
end of period (thousands)
51,081
49,729
UTILITY GAS STATISTICS
Three Months EndedSeptember 30,
Fiscal Year EndedSeptember 30, (In thousands)
2016 2015
2016
2015
Operating Revenues Gas Sold and Delivered
Residential — Firm
$ 65,542 $ 61,641
$
615,382 $ 816,666 Commercial and Industrial — Firm
16,353 15,761
136,706 187,938 Commercial and
Industrial — Interruptible
318 216
2,182 2,577
Electric Generation
275
275
1,100
1,100
82,488
77,893
755,370 1,008,281 Gas Delivered
for Others Firm
28,898 28,702
206,709 205,204
Interruptible
8,182 8,268
46,300 52,477 Electric
Generation
268 189
854 553
37,348
37,159
253,863
258,234
119,836 115,052
1,009,233 1,266,515 Other
11,669
14,596
34,884 36,529
Total
$ 131,505 $ 129,648
$ 1,044,117 $
1,303,044
Three
Months EndedSeptember 30, Fiscal Year
EndedSeptember 30, (In thousands of therms)
2016 2015
2016
2015
Gas Sales and Deliveries Gas Sold and Delivered
Residential — Firm
33,749 32,660
590,625 734,874
Commercial and Industrial — Firm
14,731 15,926
167,832 197,543 Commercial and Industrial — Interruptible
425 286
2,771 2,072
48,905
48,872
761,228
934,489 Gas Delivered for Others Firm
60,001
51,932
501,030 558,125 Interruptible
44,083 42,452
239,013 260,264 Electric Generation
122,968 65,989
291,252 179,061
227,052 160,373
1,031,295
997,450
Total 275,957
209,245
1,792,523 1,931,939
Utility
Gas Purchase Expense (excluding asset optimization)
36.79
¢
44.21
¢
35.44
¢
55.58
¢
HEATING DEGREE DAYS Actual
1 —
3,341 3,929
Normal
11 12
3,730 3,758 Percent Colder (Warmer) than
Normal
(90.9 )%
(100.0 )%
(10.4 )%
4.6 %
Average Active Customer Meters
1,143,616 1,129,784
1,141,763 1,129,240
WGL ENERGY SERVICES
Natural Gas
Sales Therm Sales (thousands of therms)
100,900 85,000
750,700 713,000 Number of Customers (end of period)
133,000 143,800
133,000 143,800
Electricity Sales Electricity Sales (thousands of
kWhs)
3,769,600 3,507,100
13,090,700 12,057,000
Number of Accounts (end of period)
127,400 138,000
127,400 138,000
WGL
ENERGY SYSTEMS Megawatts in service
145 108
145
108 Megawatt hours generated
68,481
41,520
211,495 147,451
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; 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 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 (loss)
$ 59,205
$ 89,490 $ 17,009 $ (590
) $ 165,114 Non-GAAP adjustments**
13,312 25,815 (24,881 ) (14,965
) (719 ) Income tax effect of non-GAAP
adjustments***
(4,346 )
(9,017 ) 9,897
6,665 3,199 Net
income (loss) applicable to common stock
$
68,171 $ 106,288
$ 2,025 (8,890 )
$ 167,594 Diluted average common shares
outstanding
50,030
50,282 50,905
51,070 50,564
Operating earnings (loss) per share
$ 1.18 $
1.78 $ 0.33 $ (0.01 )
$ 3.27 Per share effect of non-GAAP adjustments
0.18 0.33
(0.29 ) (0.16
) 0.04 Diluted earnings (loss)
per average common share
$ 1.36
$ 2.11 $ 0.04
$ (0.17 ) $ 3.31
Fiscal Year 2015 Quarterly Period Ended* (In
thousands, except per share data) Dec. 31 Mar. 31
Jun. 30 Sept. 30 Fiscal Year Operating
earnings (loss) $ 58,004 $ 101,034 $ 10,734 (11,525 ) $ 158,247
Non-GAAP adjustments** 10,892 (32,126 ) (44,082 ) 19,861 (45,455 )
Income tax effect of non-GAAP adjustments*** (5,008 )
12,547 17,658
(6,730 ) 18,467 Net income (loss)
applicable to common stock $ 63,888 $ 81,455
$ (15,690 ) $ 1,606 $ 131,259
Diluted average common shares outstanding
50,091 49,983 49,729
50,069 50,060
Operating earnings (loss) per share $ 1.16 $ 2.02 $ 0.22 $ (0.23 )
$ 3.16 Per share effect of non-GAAP adjustments 0.12
(0.39 ) (0.54 )
0.26 (0.54 ) Diluted earnings (loss) per
average common share $ 1.28 $ 1.63
$ (0.32 ) $ 0.03 $ 2.62 *
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. (Consolidated by
Quarter)
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, less amounts
attributable to non-controlling interest. 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 September 30, 2016 (In thousands)
Regulated
Utility
RetailEnergy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(l)
Eliminations
Total Adjusted EBIT
$ (21,171 )
$ 24,282 $ 13,139
$ (1,338 ) $
(411 ) $ (88 )
$ 14,413 Non-GAAP adjustments:
Unrealized mark-to-market
valuations on energy-related derivatives(a)
4,017
(11,369 ) — (9,699 ) —
— (17,051 ) Storage optimization program(b)
663 — — — — — 663
DC weather impact(c)
(114 ) — —
— — — (114 ) Distributed
generation asset related investment tax credits(d)
—
— (1,398 ) — — —
(1,398 ) Change in measured value of inventory(e)
— — — 7,637 — —
7,637 Losses associated with Antero contract(f) — — —
(6,424 ) — —
(6,424 ) Net insurance
proceeds(g)
1,722
— —
— —
— 1,722 Total non-GAAP
adjustments
$ 6,288 $
(11,369 ) $ (1,398 )
$ (8,486 ) $ —
$ — $
(14,965 ) EBIT
$ (14,883
) $ 12,913 $
11,741 $ (9,824 )
$ (411 ) $ (88 )
$ (552 )
Three Months Ended September 30, 2015 (In thousands)
Regulated
Utility
RetailEnergy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(l)
Eliminations
Total Adjusted EBIT $ (19,787 ) $ 13,818
$ 6,140 $ (1,676 ) $ (752 )
$ (421 ) $ (2,678 ) Non-GAAP adjustments: Unrealized
mark-to-market valuations on energy-related derivatives(a) 7,006
(5,271 ) — 15,182 — — 16,917 Storage optimization program (b) (461
) — — — — — (461 ) DC weather impact(c) (95 ) — — — — — (95 )
Distributed generation asset related investment tax credits(d) — —
(1,183 ) — — — (1,183 ) Change in measured value of inventory(e) —
— — 7,117 — — 7,117 Competitive service provider imbalance cash
settlement(h) (1,331 ) (1,103 )
— — —
— (2,434 ) Total non-GAAP
adjustments $ 5,119 $ (6,374 ) $ (1,183
) $ 22,299 $ — $ —
$ 19,861 EBIT $ (14,668 ) $ 7,444
$ 4,957 $ 20,623 $ (752 )
$ (421 ) $ 17,183
WGL Holdings, Inc.
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)
Fiscal Year Ended
September 30, 2016 (In thousands) Regulated
Utility
RetailEnergy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(l)
Eliminations
Total Adjusted EBIT
$ 224,314
$ 54,219 $ 27,329
$ 17,843 $
(3,184 ) $ (504 )
$ 320,017 Non-GAAP adjustments: Unrealized
mark-to-market valuations on energy-related derivatives(a)
11,951 10,749 — 20,708 —
— 43,408 Storage optimization program(b)
(376
) — — — — — (376
) DC weather impact(c)
(9,392 ) —
— — — — (9,392 )
Distributed generation asset related investment tax credits(d)
— — (5,337 ) — — —
(5,337 ) Change in measured value of inventory(e)
— — — (15,548 ) —
— (15,548 ) Losses associated with Antero
contract(f) — — —
(15,196 ) — —
(15,196
) Net insurance proceeds(g)
1,722
— —
— —
— 1,722 Total
non-GAAP adjustments
$ 3,905
$ 10,749 $ (5,337
) $ (10,036 ) $
— $ — $
(719 ) EBIT
$ 228,219
$ 64,968 $ 21,992
$ 7,807 $
(3,184 ) $ (504 )
$ 319,298
Fiscal Year Ended September 30, 2015 (In thousands)
Regulated
Utility
RetailEnergy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(l)
Eliminations
Total Adjusted EBIT $ 235,713 $ 68,459
$ 16,803 $ (3,571 ) $ (4,042 )
$ (1,013 ) $ 312,349 Non-GAAP adjustments:
Unrealized mark-to-market valuations on energy-related
derivatives(a) (6,322 ) (20,727 ) — (5,807 ) — — (32,856 ) Storage
optimization program (b) (3,704 ) — — — — — (3,704 ) DC weather
impact(c) 86 — — — — — 86 Distributed generation asset related
investment tax credits(d) — — (4,134 ) — — — (4,134 ) Change in
measured value of inventory(e) — — — 6,658 — — 6,658 Competitive
service provider imbalance cash settlement (h) (1,331 ) (1,103 ) —
— — — (2,434 ) Impairment loss on Springfield Operations Center(i)
(465 ) — — — — — (465 ) Unrecovered government contracting costs(j)
— — (2,981 ) — — — (2,981 ) Investment impairment(k)
— — —
— (5,625 ) —
(5,625 ) Total non-GAAP adjustments $ (11,736
) $ (21,830 ) $ (7,115 ) $ 851 $
(5,625 ) $ — $ (45,455 ) EBIT $ 223,977
$ 46,629 $ 9,688 $ (2,720
) $ (9,667 ) $ (1,013 ) $ 266,894
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. The
adjustment for the quarter ended June 30, 2016, includes $3.8
million related to the quarter ended March 31, 2016. (g) Represents
the net proceeds of an environmental insurance policy, net of
regulatory sharing. The adjustment for the quarter ended September
30, 2016, includes $0.9 million related to prior periods of fiscal
year 2016. (h) Eliminates the financial effects of a potential
refund to customers related to an order of the DC Public Service
Commission (PSC of DC) in October 2015 associated with a cash
settlement of competitive service provider gas imbalances billed
during the 2008-2009 winter season. (i) Represents an impairment
charge as well as accrued selling expenses related to Washington
Gas' Springfield Operations Center. (j) 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. (k) 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. (l)
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/20161116006673/en/
WGL Holdings, Inc.News MediaBernie
Tylor, 202-624-6778orFinancial
CommunityDouglas Bonawitz, 202-624-6129
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