- Consolidated GAAP earnings per share
up — $3.74 per share vs. $3.31 per share; Record GAAP earnings of
$192.6 million
- Non-GAAP operating earnings per
share up — $3.11 per share vs. $3.08 per share; Operating earnings
of $160.2 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, 2017, of $192.6 million, or $3.74 per
share, an improvement of $25.0 million, or $0.43 per share, over
net income applicable to common stock of $167.6 million, or $3.31
per share, reported for the fiscal year ended September 30,
2016.
For the quarter ended September 30, 2017, net income
applicable to common stock was $3.3 million, or $0.06 per share,
compared to a net loss applicable to common stock of $(8.9)
million, or $(0.17) 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, 2017, operating
earnings were $160.2 million, or $3.11 per share, an improvement of
$4.6 million, or $0.03 per share, over operating earnings of $155.6
million, or $3.08 per share, for the prior fiscal year. For the
quarter ended September 30, 2017, we had an operating loss of
$(8.8) million, or $(0.17) per share, compared to an operating loss
of $(4.7) million, or $(0.09) 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)
2017 2016
(Decrease)
2017 2016 (Decrease)
EBIT
$ (12.8 ) $ (14.9 ) $ 2.1
$
266.3 $ 228.2 $ 38.1 Adjusted EBIT
$
(23.6 ) $ (21.2 ) $ (2.4 )
$ 227.2 $ 224.3 $ 2.9
For the three months ended September 30, 2017, the increase
in EBIT reflects higher unrealized margins associated with our
asset optimization program. Additionally, comparisons of both EBIT
and adjusted EBIT reflect: (i) higher customer growth; (ii) new
base rates in Virginia and the District of Columbia; and (iii)
higher realized margins associated with our asset optimization
program. These favorable variances were offset by higher
depreciation and amortization expenses associated with our new
billing system as well as growth in our utility plant, and
increases in operation and maintenance expenses.
For the fiscal year ended September 30, 2017, 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 increases in
both EBIT and adjusted EBIT reflect favorable variances for
customer growth and new base rates in Virginia and the District of
Columbia. These favorable variances were partially offset by higher
depreciation and amortization expenses and increases in operation
and maintenance expenses.
Retail Energy-Marketing
Three Months EndedSeptember 30,
Increase/
Fiscal Year EndedSeptember 30,
Increase/ (In millions)
2017 2016
(Decrease)
2017 2016 (Decrease)
EBIT
$ 10.4 $ 12.9 $ (2.5 )
$
53.2 $ 65.0 $ (11.8 ) Adjusted EBIT
$
12.4 $ 24.3 $ (11.9 )
$ 41.6 $ 54.2 $ (12.6 )
For both the three months and fiscal year ended September 30,
2017, the comparison in EBIT reflects higher unrealized
mark-to-market valuation on energy-related derivatives.
For the three months ended September 30, 2017, the
comparisons in EBIT and adjusted EBIT reflect: (i) lower realized
natural gas margins, primarily due to lower sales volume and
margins realized from portfolio optimization transactions; and (ii)
lower realized electric margins due to higher capacity charges from
the regional power grid operator (PJM) and lower sales volume when
compared to the same period in the prior fiscal year.
For the fiscal year ended September 30, 2017, the decrease
in both EBIT and adjusted EBIT reflects lower realized natural gas
margins due to a decrease in natural gas portfolio optimization
sales activity and margins as well as declining electric sales
volumes.
Commercial Energy Systems
Three Months EndedSeptember 30,
Increase/
Fiscal Year EndedSeptember 30,
Increase/ (In millions)
2017 2016
(Decrease)
2017 2016 (Decrease)
EBIT
$ 13.3 $ 11.7 $ 1.6
$ 40.8
$ 22.0 $ 18.8 Adjusted EBIT
$ 15.0
$ 13.1 $ 1.9
$
47.6 $ 27.3 $ 20.3
For both the three months and fiscal year ended
September 30, 2017, the increase in EBIT and adjusted EBIT
primarily reflects higher earnings from alternative energy
investments, including investments in tax equity partnerships.
Distributed generation assets in service have increased, which
increases solar generation sales, renewable energy credit sales and
rebate income. Additionally, the increase in EBIT reflects an
increase in other income due to the restructuring of an alternative
energy investment. Partially offsetting these favorable variances
were lower revenues from the energy-efficiency contracting business
due to a decrease in active projects this year compared to the same
period in the prior fiscal year.
Midstream Energy Services
Three Months EndedSeptember 30,
Increase/
Fiscal Year EndedSeptember 30,
Increase/ (In millions)
2017 2016
(Decrease)
2017 2016 (Decrease)
EBIT
$ 16.5 $ (9.8 ) $ 26.3
$
37.7 $ 7.8 $ 29.9 Adjusted EBIT
$
0.4 $ (7.8 ) $ 8.2
$ 10.9 $ 2.6 $ 8.3
For the three months ended September 30, 2017, the increase
in EBIT reflects higher valuations on our derivative contracts
associated with our long-term transportation strategies. For the
fiscal year ended September 30, 2017, the increase in EBIT reflects
higher valuations and realized margins related to storage inventory
and the associated economic hedging transactions.
Additionally, for both the three months and fiscal year ended
September 30, 2017, the increase in both EBIT and adjusted EBIT
reflects higher realized margins on our transportation strategies
and higher income related to our pipeline investments. The
favorable variances for adjusted EBIT are partially offset by lower
income related to less favorable storage spreads when compared to
the same periods of the prior fiscal year.
Other Activities
Three Months EndedSeptember 30,
Increase/
Fiscal Year EndedSeptember 30,
Increase/ (In millions)
2017 2016
(Decrease)
2017 2016 (Decrease)
EBIT
$ (2.0 ) $ (0.4 ) $ (1.6 )
$ (19.9 ) $ (3.2 ) $ (16.7 ) Adjusted
EBIT
$ (1.8 ) $ (0.4 ) $
(1.4 )
$ (4.9 ) $ (3.2 )
$ (1.7 )
For both the three months and fiscal year ended September 30,
2017, the decrease in EBIT primarily relates to external costs
associated with the planned merger with AltaGas Ltd. (AltaGas).
Other Information
During the pendency period of the proposed merger between WGL
and AltaGas, WGL will not conduct earnings calls and will not give
forward year guidance. Additional information regarding financial
results and recent regulatory events can be found in WGL's and
Washington Gas' Form 10-K for the year ended September 30,
2017, as filed with the Securities and Exchange Commission, and is
also available at www.wglholdings.com.
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.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, dividends and other future
financial business performance, strategies, financing plans, legal
developments relating to Antero, the Constitution Pipeline, AltaGas
Ltd.’s proposed acquisition of us 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 the date of this release, 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 possibility that the
closing of the AltaGas transaction may not occur or may be delayed;
litigation related to the AltaGas transaction or limitations or
restrictions imposed by regulatory authorities that may delay or
negatively impact the transaction; the potential loss of customers,
employees or business partners as a result of the transaction 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)
September 30, 2017 September 30, 2016
ASSETS
Property, Plant and Equipment At original cost
$
6,143,841 $ 5,542,916 Accumulated depreciation and
amortization
(1,513,790 ) (1,415,679 )
Net property, plant and equipment
4,630,051
4,127,237
Current Assets Cash and cash
equivalents
8,524 5,573 Accounts receivable, net
553,312 491,020 Storage gas
243,984 207,132
Derivatives and other
180,069 139,749
Total current assets
985,889
843,474
Deferred Charges and Other Assets
1,010,069 1,078,739
Total Assets
$ 6,626,009 $ 6,049,450
CAPITALIZATION AND LIABILITIES Capitalization WGL
Holdings common shareholders’ equity
$ 1,502,690 $
1,375,561 Non-controlling interest
6,851 409 Washington Gas
Light Company preferred stock
28,173
28,173 Total equity
1,537,714
1,404,143 Long-term debt
1,430,861
1,435,045 Total capitalization
2,968,575 2,839,188
Current
Liabilities Notes payable and current maturities of long-term
debt
809,844 331,385 Accounts payable and other accrued
liabilities
423,824 405,351 Derivatives and other
255,320 290,190 Total current
liabilities
1,488,988 1,026,926
Deferred Credits 2,168,446
2,183,336
Total Capitalization and Liabilities
$ 6,626,009 $ 6,049,450
WGL Holdings, Inc. Condensed Consolidated
Statements of Income
(Unaudited)
Three Months EndedSeptember 30,
Fiscal Year EndedSeptember 30,
(In thousands, except per share data)
2017
2016
2017 2016
OPERATING REVENUES
Utility
$ 151,036 $ 131,505
$
1,143,337 $ 1,044,117 Non-utility
278,087
328,394
1,211,387
1,305,442
Total Operating Revenues
429,123 459,899
2,354,724
2,349,559
OPERATING EXPENSES
Utility cost of gas
14,408 8,370
274,247 245,189
Non-utility cost of energy-related sales
215,217 290,990
1,002,908 1,123,077 Operation and maintenance
113,435
104,963
429,890 401,776 Depreciation and amortization
40,651 34,198
154,138 132,566 General taxes and other
assessments
29,564 26,685
152,528 146,655
Total
Operating Expenses 413,275 465,206
2,013,711 2,049,263
OPERATING INCOME (LOSS) 15,848 (5,307 )
341,013 300,296 Equity in earnings of unconsolidated
affiliates
5,099 3,248
20,216 13,806 Other income
(expenses) — net
2,410 957
1,819 4,646 Interest
expense
18,474 13,553
74,026 52,310
INCOME (LOSS)
BEFORE TAXES 4,883 (14,655 )
289,022 266,438
INCOME TAX EXPENSE (BENEFIT) 4,778
(5,545 )
111,159 98,074
NET INCOME (LOSS) $ 105 $ (9,110 )
$ 177,863 $ 168,364 Net loss attributable to
non-controlling interest
(3,544 ) (550 )
(16,077 ) (550 ) Dividends on Washington Gas Light
Company preferred stock
330 330
1,320 1,320
NET INCOME
(LOSS) APPLICABLE TO COMMON STOCK $ 3,319
$ (8,890 )
$ 192,620
$ 167,594
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING Basic
51,219 51,070
51,205 50,369
Diluted
51,491 51,070
51,475 50,564
EARNINGS (LOSS)
PER AVERAGE COMMON SHARE Basic
$ 0.06 $ (0.17 )
$ 3.76 $ 3.33 Diluted
$ 0.06
$ (0.17 )
$ 3.74 $
3.31
The following table reconciles EBIT by
operating segment to net income (loss) applicable to common
stock.
Three Months EndedSeptember 30,
Fiscal Year EndedSeptember 30,
(In thousands)
2017 2016
2017
2016 EBIT: Regulated utility
$ (12,807
) $ (14,883 )
$ 266,307 $ 228,219 Retail
energy-marketing
10,420 12,913
53,195 64,968
Commercial energy systems
13,270 11,741
40,834 21,992
Midstream energy services
16,529 (9,824 )
37,689
7,807 Other activities
(1,978 ) (411 )
(19,865
) (3,184 ) Intersegment eliminations
1,467
(88 )
965 (504 )
Total
$ 26,901 $ (552 )
$ 379,125 $
319,298 Interest expense
18,474 13,553
74,026 52,310
Income tax expense (benefit)
4,778 (5,545 )
111,159
98,074 Dividends on Washington Gas preferred stock
330 330
1,320
1,320 Net income (loss) applicable to common
stock
$ 3,319 $ (8,890 )
$ 192,620 $ 167,594
WGL Holdings, Inc.
Consolidated Financial and Operating
Statistics
(Unaudited)
FINANCIAL STATISTICS
Fiscal Year EndedSeptember
30,
2017 2016
Closing Market Price — end of period
$84.20
$62.70 52-Week Market Price Range
$86.89 -
$58.66 $74.10 - $56.90 Price Earnings Ratio
22.4 18.8
Annualized Dividends Per Share
$2.04 $1.95 Dividend Yield
2.4% 3.1% Return on Average Common Equity
13.4% 12.8%
Total Interest Coverage (times)
5.0 5.8 Book Value Per Share
— end of period
$29.34 $26.93 Common Shares Outstanding —
end of period (thousands)
51,219
51,081
UTILITY GAS STATISTICS
Three
Months EndedSeptember 30, Fiscal Year
EndedSeptember 30, (In thousands)
2017 2016
2017 2016
Operating Revenues Gas Sold and Delivered Residential — Firm
$ 74,222 $ 65,671
$ 685,206 $ 615,170
Commercial and Industrial — Firm
23,395 16,386
156,088 136,646 Commercial and Industrial — Interruptible
107 318
2,239
2,181
97,724
82,375
843,533
753,997 Gas Delivered for Others Firm
30,604
28,898
208,988 206,709 Interruptible
8,733 8,182
49,731 46,300 Electric Generation
396
543
1,331 1,954
39,733 37,623
260,050 254,963
137,457 119,998
1,103,583 1,008,960 Other
13,579 11,507
39,754
35,157
Total $
151,036 $ 131,505
$
1,143,337 $ 1,044,117
Three Months EndedSeptember
30,
Fiscal Year EndedSeptember 30, (In
thousands of therms)
2017 2016
2017 2016
Gas Sales and Deliveries Gas
Sold and Delivered Residential — Firm
38,688 33,749
600,279 590,625 Commercial and Industrial — Firm
25,040 14,731
174,436 167,832 Commercial and
Industrial — Interruptible
10 425
2,554 2,771
63,738 48,905
777,269 761,228 Gas Delivered
for Others Firm
74,554 60,001
495,031 501,030
Interruptible
41,775 44,083
242,545 239,013 Electric
Generation
28,301 122,968
87,611 291,252
144,630 227,052
825,187
1,031,295
Total
208,368 275,957
1,602,456
1,792,523
Utility Gas Purchase
Expense (excluding asset optimization) 31.66
¢ 36.79 ¢
41.57 ¢ 35.44
¢
HEATING DEGREE DAYS Actual
6 1
3,127
3,341 Normal
11 11
3,717 3,730 Percent Colder
(Warmer) than Normal
(45.5 )% (90.9 )%
(15.9 )% (10.4 )%
Average
Active Customer Meters 1,160,305
1,143,616
1,154,952 1,141,763
WGL ENERGY SERVICES
Natural Gas Sales
Therm Sales (thousands of therms)
90,200 100,900
693,300 750,700 Number of Customers (end of period)
116,200 133,000
116,200
133,000
Electricity Sales
Electricity Sales (thousands of kWhs)
3,048,500 3,769,600
12,248,400 13,090,700 Number of Accounts (end of period)
113,700 127,400
113,700 127,400
WGL ENERGY
SYSTEMS Megawatts in service
221 145
221 145
Megawatt hours generated
93,352 68,481
290,465 211,495
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 2017 Quarterly Period
Ended(1) (In thousands, except per share data)
Dec. 31
Mar. 31 Jun. 30 Sept. 30 Fiscal Year
Operating earnings (loss)
$ 59,362
$ 96,087 $ 13,635
$ (8,840 ) $ 160,244
Non-GAAP adjustments(3)
(2,324 ) 38,468
(3,093 ) 22,317 55,368 De-designated
interest rate swaps(4)
— 2,516 (7,757 )
(329 ) (5,570 ) Income tax effect of
non-GAAP adjustments(5)
934
(14,007 ) 5,480
(9,829 ) (17,422 ) Net income
(loss) applicable to common stock
$ 57,972
$ 123,064 $
8,265 3,319 $
192,620 Diluted average common shares outstanding
51,445 51,476
51,493 51,491
51,475 Operating earnings (loss) per share
$
1.15 $ 1.87 $ 0.26 $
(0.17 ) $ 3.11 Per share effect of
non-GAAP adjustments
(0.03 )
0.52 (0.10 ) 0.23
0.63 Diluted earnings (loss) per
average common share
$ 1.12
$ 2.39 $ 0.16
$ 0.06 $ 3.74
Fiscal Year 2016(2) Quarterly Period
Ended(1) (In thousands, except per share data) Dec. 31
Mar. 31 Jun. 30 Sept. 30 Fiscal Year
Operating earnings (loss) $ 59,205 $ 89,490 $ 11,561 (4,656 ) $
155,600 Non-GAAP adjustments(3) 13,312 25,815 (16,109 ) (8,541 )
14,477 Income tax effect of non-GAAP adjustments(5) (4,346 )
(9,017 ) 6,573 4,307
(2,483 ) 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 $ 0.23 $ (0.09 ) $ 3.08 Per share
effect of non-GAAP adjustments 0.18 0.33
(0.19 ) (0.08 ) 0.23 Diluted
earnings (loss) per average common share $ 1.36
$ 2.11 $ 0.04 $ (0.17 ) $
3.31
(1) 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.
WGL Holdings, Inc. (Consolidated by
Quarter)
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)
(2)Prior year non-GAAP measures have been recast to include
$15.2 million of pre-tax losses associated with the index price
used in certain gas purchases from Antero. The index price used to
invoice these purchases had been the subject of an arbitration
proceeding; however, in February 2017, the arbitral tribunal ruled
in favor of Antero.
(3)Refer to the reconciliations of adjusted EBIT to EBIT below
for further details on our non-GAAP adjustments. Note that non-GAAP
adjustments associated with interest expense or income taxes are
shown separately and are not included in the reconciliation from
adjusted EBIT to EBIT.
(4)Non-GAAP adjustment related to mark-to-market valuations on
forward starting interest rate swaps associated with anticipated
future financing. Due to certain covenants in the Merger Agreement
with AltaGas, it is no longer probable that the 30-year debt
issuance that the swaps were originally intended to hedge will
occur. However, we believe that some form of financing will
continue to be required. The hedges were de-designated in January
2017.
(5)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.
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, 2017 (In thousands)
Regulated
Utility
Retail Energy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(i)
Eliminations
Total Adjusted EBIT
$ (23,631 )
$ 12,434 $ 15,047
$ 384 $
(1,751 ) $ 2,101
$ 4,584 Non-GAAP adjustments:
Unrealized mark-to-market
valuations on energy-related derivatives(a)
9,623
(2,014 ) — 11,226 — (634
) 18,201 Storage optimization program(b)
1,203
— — — — — 1,203 DC
weather impact(c)
(2 ) — — —
— — (2 ) Distributed generation asset
related investment tax credits(d)
— — (1,777
) — — — (1,777 ) Change
in measured value of inventory(e)
— — —
4,919 — — 4,919 Merger related costs(f)
— — —
—
(227 ) —
(227 ) Total non-GAAP adjustments
$
10,824 $ (2,014 )
$ (1,777 ) $ 16,145
$ (227 ) $
(634 ) $ 22,317 EBIT
$ (12,807 ) $
10,420 $ 13,270
$ 16,529 $ (1,978
) $ 1,467 $
26,901
Three Months Ended September 30, 2016 (In thousands)
Regulated
Utility
Retail Energy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(j)
Eliminations
Total Adjusted EBIT $ (21,171 ) $ 24,282
$ 13,139 $ (7,762 ) $ (411 )
$ (88 ) $ 7,989 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 Net insurance
proceeds(h) $ 1,722 $ — $ —
$ — $ — $ —
$ 1,722 Total non-GAAP adjustments $ 6,288
$ (11,369 ) $ (1,398 ) $ (2,062 ) $ —
$ — $ (8,541 ) EBIT $ (14,883 )
$ 12,913 $ 11,741 $ (9,824 )
$ (411 ) $ (88 ) $ (552 )
WGL Holdings, Inc.
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)
Fiscal Year Ended September 30, 2017 (In thousands)
Regulated
Utility
Retail Energy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(j)
Eliminations
Total Adjusted EBIT
$ 227,228
$ 41,597 $ 47,586
$ 10,880 $
(4,862 ) $ 1,328
$ 323,757 Non-GAAP adjustments:
Unrealized mark-to-market
valuations on energy-related derivatives(a)
49,338
11,598 — 18,823 — (363 )
79,396 Storage optimization program(b)
1,496 —
— — — — 1,496 DC weather
impact(c)
(11,755 ) — — —
— — (11,755 ) Distributed generation
asset related investment tax credits(d)
— —
(6,752 ) — — — (6,752
) Change in measured value of inventory(e)
— —
— 7,986 — — 7,986 Merger related
costs(f)
— — — — (12,902
) — (12,902 ) Third party guarantee(g)
— — —
— (2,101 )
— (2,101 ) Total non-GAAP
adjustments
$ 39,079 $
11,598 $ (6,752 )
$ 26,809 $ (15,003
) $ (363 ) $
55,368 EBIT
$ 266,307
$ 53,195 $ 40,834
$ 37,689 $
(19,865 ) $ 965
$ 379,125
Fiscal Year Ended September 30, 2016 (In thousands)
Regulated
Utility
Retail Energy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities(i)
Eliminations
Total Adjusted EBIT $ 224,314 $ 54,219
$ 27,329 $ 2,647 $ (3,184
) $ (504 ) $ 304,821 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 ) Net insurance proceeds(h) 1,722 —
— — —
1,722 Total non-GAAP adjustments $
3,905 $ 10,749 $ (5,337 ) $
5,160 $ — $ — $ 14,477
EBIT $ 228,219 $ 64,968 $
21,992 $ 7,807 $ (3,184 ) $ (504
) $ 319,298
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 external costs
associated with the Merger Agreement with AltaGas.
(g)
Guarantee on behalf of a third party
associated with a solar investment.
(h)
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.
(i)
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/20171117005862/en/
WGL Holdings, Inc.News
MediaBrian Edwards,
202-624-6620orFinancial
CommunityDouglas Bonawitz, 202-624-6129
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