- Second quarter consolidated GAAP
earnings per share up — $2.63 per share vs. $2.39 per share; GAAP
earnings of $135.6 million
- Second quarter non-GAAP operating
earnings per share up — $2.12 per share vs. $1.87 per share;
Operating earnings of $109.5 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 quarter
ended March 31, 2018, of $135.6 million, or $2.63 per share,
an improvement of $12.5 million, or $0.24 per share, over net
income applicable to common stock of $123.1 million, or $2.39 per
share, reported for the quarter ended March 31, 2017. For the
six months ended March 31, 2018, net income applicable to common
stock was $273.6 million, or $5.31 per share, an improvement of
$92.6 million, or $1.79 per share, over net income applicable to
common stock of $181.0 million, or $3.52 per share for the same
period of the prior fiscal year.
During the six months ended March 31, 2018, we are reflecting a
decrease in current year tax expense from the year-over-year
reduction in the corporate tax rate from 35% to 21% included in the
Tax Cuts and Jobs Act (“Tax Act”) enacted in December 2017. As a
result, Washington Gas began passing on to customers approximately
$39.5 million, on an annual basis, through reduced rates beginning
in the second fiscal quarter. We have also remeasured our
accumulated deferred income tax assets and liabilities, which
resulted in recording a $60.3 million income tax benefit (net) in
GAAP net income. Non-GAAP operating earnings (described below) have
been adjusted to eliminate the re-measurement impact on deferred
income taxes of the legislation.
On a consolidated basis, WGL 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 quarter ended March 31, 2018, operating earnings
were $109.5 million, or $2.12 per share, an improvement of $13.4
million, or $0.25 per share, over operating earnings of $96.1
million, or $1.87 per share, for the same quarter of the prior
fiscal year. For the six months ended March 31, 2018, operating
earnings were $204.4 million, or $3.96 per share, an improvement of
$49.0 million, or $0.94 per share, over operating earnings of
$155.4 million, or $3.02 per share, for the same period of the
prior fiscal year.
Results by Business
Segment
Regulated Utility
Three Months Ended
March 31,
Increase/
Six Months Ended
March 31,
Increase/ (In millions)
2018
2017 (Decrease)
2018 2017 (Decrease) EBIT
$
151.1
$ 165.2 $ (14.1 )
$
249.4 $ 267.9 $ (18.5 ) Adjusted EBIT
$
143.6
$ 150.2 $ (6.6 )
$
245.0 $ 241.6 $ 3.4
For the three and six months ended March 31, 2018, EBIT
reflects lower unrealized margins associated with our asset
optimization program, partially offset by the effects of
colder-than-normal weather in the District of Columbia.
The comparisons of both EBIT and adjusted EBIT for the three and
six months ended March 31, 2018 reflect increases related to higher
customer growth and new base rates in Virginia and the District of
Columbia. These comparisons reflect decreases related to: (i) lower
billed and estimated utility rates associated with the pass-through
of tax savings from the Tax Act*; (ii) higher operation and
maintenance expenses primarily related to uncollectible accounts;
and (iii) higher depreciation and amortization expense.
* This decrease is offset in income tax expense.
Retail Energy-Marketing
Three Months Ended
March 31,
Increase/
Six Months Ended
March 31,
Increase/ (In millions)
2018
2017 (Decrease)
2018 2017 (Decrease) EBIT
$
15.1
$ 9.3 $ 5.8
$
18.8 $ 38.4 $ (19.6 ) Adjusted EBIT
$
20.0
$ 13.1 $ 6.9
$
26.5 $ 23.0 $ 3.5
For the three months ended March 31, 2018, the increase in both
EBIT and adjusted EBIT reflects higher realized gas margins due to
increased portfolio optimization margins, partially offset by lower
realized electric margins due to lower average selling prices and
lower sales volume along with higher operating expenses.
For the six months ended March 31, 2018, EBIT was reduced by
unrealized commodity margin losses in the current year compared to
gains in the prior year. The comparisons of both EBIT and adjusted
EBIT reflects higher realized gas margins due to higher portfolio
optimization margins, offset by lower realized electric margins due
to lower average selling prices and lower sales volume, along with
higher operating expenses.
Commercial Energy Systems
Three Months Ended
March 31,
Increase/
Six Months Ended
March 31,
Increase/ (In millions)
2018 2017 (Decrease)
2018 2017 (Decrease) EBIT
$
3.6
$ 8.5 $ (4.9 )
$
9.2 $ 13.2 $ (4.0 ) Adjusted EBIT
$
5.2
$ 10.3 $ (5.1 )
$
12.5 $ 16.4 $ (3.9 )
For the three and six months ended March 31, 2018, the
decrease in both EBIT and adjusted EBIT reflects lower earnings due
to a decline in active projects in our energy efficiency business
and higher operating expenses in our commercial distributed
generation business. For the three months ended March 31, 2018, the
decrease in both EBIT and adjusted EBIT also reflects lower
earnings from our investment distributed generation business,
including investments in tax equity partnerships.
Midstream Energy Services
Three Months Ended
March 31,
Increase/
Six Months Ended
March 31,
Increase/ (In millions)
2018
2017 (Decrease)
2018 2017 (Decrease) EBIT
$
7.3
$ 42.0 $ (34.7 )
$
29.5 $ 13.5 $ 16.0 Adjusted EBIT
$
(2.2
) $ (1.3 ) $ (0.9 )
$ 26.2 $ 1.4 $
24.8
The EBIT comparisons for both periods reflect lower
mark-to-market valuations associated with long-term transportation
strategies. Additionally, both the EBIT and adjusted EBIT
comparisons for the three and six months ended March 31, 2018
include a $34.0 million impairment related to our investment in
Constitution Pipeline Company, LLC (Constitution).
The three months ended March 31, 2018 EBIT comparison also
reflects lower realized margins related to storage inventory and
economic hedging transactions, which along with the lower
mark-to-market valuations described above are mostly offset by
higher transportation margins. The three months ended March 31,
2018 adjusted EBIT comparison reflects higher margins on both our
transportation and storage strategies that mostly offset the
impairment of Constitution.
For the six months ended March 31, 2018 EBIT and adjusted EBIT
comparisons, higher margins on our transportation and storage
strategies more than offset the impairment of Constitution.
Other Activities
Three Months Ended
March 31,
Increase/
Six Months Ended
March 31,
Increase/ (In millions)
2018
2017 (Decrease)
2018 2017 (Decrease) EBIT
$
(2.2
) $ (15.1 ) $ 12.9
$
(6.4 ) $ (16.3 ) $ 9.9 Adjusted EBIT
$
(2.0
) $ (1.1 ) $ (0.9 )
$ (5.6 ) $ (2.3 )
$ (3.3 )
For the three and six months ended March 31, 2018, the increase
in EBIT relates to lower costs related to the planned merger with
AltaGas Ltd. (AltaGas). For the three and six months ended March
31, 2018, the decrease in adjusted EBIT reflects higher internal
costs related to the planned merger with AltaGas.
Intersegment Eliminations
Three Months Ended
March 31,
Increase/
Six Months Ended
March 31,
Increase/ (In millions)
2018
2017 (Decrease)
2018 2017 (Decrease) EBIT
$
(4.1
) $ (1.5 ) $ (2.6 )
$
(2.4 ) $ (0.4 ) $ (2.0 ) Adjusted EBIT
$
(4.1
) $ (1.4 ) $ (2.7 )
$ (2.4 ) $ 0.1
$ (2.5 )
For the three and six months ended March 31, 2018, the variance
in intersegment eliminations relates primarily to timing
differences between the revenue and expense recognition of
renewable energy credits by Commercial Energy Systems and Retail
Energy-Marketing.
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’ combined Form 10-Q for the fiscal quarter ended
March 31, 2018, to be filed with the Securities and Exchange
Commission, and which will also be 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 Resources Corporation (Antero), our
investment in Constitution, AltaGas’s proposed acquisition of our
company and other expectations. Forward-looking statements are
typically identified by words such as, but are 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
proposed merger with AltaGas may not occur or may be delayed;
litigation related to the proposed AltaGas transaction or
limitations or restrictions imposed by regulatory authorities that
may delay or negatively impact the proposed 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
quarterly reports on Form 10-Q 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)
March 31, 2018
September 30, 2017
ASSETS
Property, Plant and Equipment At original cost
$ 6,199,912 $ 6,143,841 Accumulated depreciation and
amortization
(1,552,274 )
(1,513,790 ) Net property, plant and equipment
4,647,638
4,630,051
Current Assets Cash and cash equivalents
46,319 8,524 Accounts receivable, net
730,563 553,312
Storage gas
76,199 243,984 Derivatives and other
167,943 180,069
Total current assets
1,021,024
985,889
Deferred Charges and
Other Assets 1,178,164
1,010,069
Total Assets
$ 6,846,826 $ 6,626,009
CAPITALIZATION AND LIABILITIES Capitalization
WGL Holdings common shareholders’ equity
$ 1,721,772
$ 1,502,690 Non-controlling interest
6,868 6,851 Washington
Gas Light Company preferred stock
28,173 28,173 Total
equity
1,756,813
1,537,714 Long-term debt
1,879,304 1,430,861 Total
capitalization
3,636,117
2,968,575
Current Liabilities Notes
payable and current maturities of long-term debt
524,833
809,844 Accounts payable and other accrued liabilities
358,046 423,824 Derivatives and other
270,918 255,320 Total
current liabilities
1,153,797
1,488,988
Deferred Credits
2,056,912
2,168,446
Total Capitalization and Liabilities
$ 6,846,826 $ 6,626,009
WGL Holdings, Inc.
Condensed Consolidated Statements of
Income
(Unaudited)
Three Months Ended
March 31,
Six Months Ended
March 31,
(In thousands, except per share data)
2018
2017 2018 2017
OPERATING REVENUES Utility
$ 523,480 $ 466,270
$ 898,470 $ 793,333 Non-utility
362,971 375,480
640,421 657,904
Total Operating Revenues
886,451 841,750
1,538,891
1,451,237
OPERATING EXPENSES Utility cost of gas
196,757 134,458
319,030 209,958 Non-utility cost of
energy-related sales
287,204 301,780
512,706 554,666
Operation and maintenance
112,556 118,261
214,782
218,978 Depreciation and amortization
40,722 39,110
81,707 74,393 General taxes and other assessments
55,039 50,544
99,926
90,932
Total Operating Expenses
692,278 644,153
1,228,151
1,148,927
OPERATING INCOME 194,173 197,597
310,740 302,310 Equity in earnings of unconsolidated
affiliates
(27,414 ) 7,344
(21,522 )
7,609 Other expenses — net
(391 ) (1,953 )
(1,171 ) (1,475 ) Interest expense
7,637 14,255
27,834
30,490
INCOME BEFORE TAXES 158,731 188,733
260,213 277,954
INCOME TAX EXPENSE (BENEFIT)
27,223 70,778
(3,887 )
104,232
NET INCOME $ 131,508 $
117,955
$ 264,100 $ 173,722 Net loss attributable to
non-controlling interest
(4,372 ) (5,439 )
(10,150 ) (7,974 ) Dividends on Washington Gas Light
Company preferred stock
330
330
660
660
NET INCOME APPLICABLE TO
COMMON STOCK $ 135,550
$ 123,064
$
273,590 $ 181,036
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING Basic
51,358 51,217
51,336 51,192 Diluted
51,577
51,476
51,561 51,458
EARNINGS
PER AVERAGE COMMON SHARE Basic
$ 2.64 $ 2.40
$ 5.33 $ 3.54 Diluted
$
2.63 $ 2.39
$ 5.31 $ 3.52
The following table reconciles EBIT by
operating segment to net income (loss) applicable to common
stock.
Three Months Ended
March 31,
Six Months Ended
March 31,
(In thousands)
2018 2017
2018 2017 EBIT: Regulated utility
151,069 165,171
249,434 267,888 Retail
energy-marketing
15,104 9,255
18,846 38,440
Commercial energy systems
3,562 8,547
9,209 13,210
Midstream energy services
7,306 41,993
29,491 13,509
Other activities
(2,185 ) (15,067 )
(6,356
) (16,265 ) Intersegment eliminations
(4,116 ) (1,472 )
(2,427 ) (364 ) Total
170,740 208,427
298,197 316,418 Interest expense
7,637 14,255
27,834 30,490 Income tax expense
(benefit)
27,223 70,778
(3,887 ) 104,232
Dividends on Washington Gas preferred stock
330 330
660 660 Net income
applicable to common stock
135,550
123,064
273,590 181,036
WGL Holdings, Inc.
Consolidated Financial and Operating
Statistics
(Unaudited)
FINANCIAL STATISTICS
Twelve Months
Ended
March 31,
2018 2017 Closing Market
Price — end of period
$83.65 $82.53 52-Week
Market Price Range
$86.45 - $81.22 $83.58 - $58.69 Price
Earnings Ratio
15.0 24.1 Annualized Dividends Per Share
$2.06 $2.04 Dividend Yield
2.5% 2.5% Return on
Average Common Equity
17.5% 11.9% Total Interest Coverage
(times)
4.9 5.7 Book Value Per Share — end of period
$33.52 $30.03 Common Shares Outstanding — end of period
(thousands)
51,359 51,219
WGL Holdings, Inc.
Consolidated Financial and Operating
Statistics
(Unaudited)
UTILITY GAS STATISTICS
Three Months EndedMarch 31,
Six Months EndedMarch 31,
Twelve Months EndedMarch 31, (In thousands)
2018 2017
2018
2017
2018 2017
Operating Revenues
Gas Sold and Delivered
Residential — Firm
$ 338,074 $ 297,406
$
570,563 $ 495,427
$ 760,342 $ 663,189
Commercial and Industrial — Firm
76,152 60,624
126,208 105,971
176,325 146,422 Commercial and
Industrial — Interruptible
1,390
1,099
1,868
1,653
2,454 2,228
415,616 359,129
698,639
603,051
939,121
811,839 Gas Delivered for Others Firm
78,287 86,024
140,729 142,099
207,618 206,413
Interruptible
20,578 14,369
35,110 29,139
55,702 46,879 Electric Generation
378 201
781 576
1,536 1,599
99,243
100,594
176,620
171,814
264,856 254,891
514,859 459,723
875,259 774,865
1,203,977
1,066,730 Other
8,621
6,547
23,211
18,468
44,497 39,416
Total $ 523,480
$ 466,270
$ 898,470
$ 793,333
$
1,248,474 $ 1,106,146
Three Months
EndedMarch 31, Six Months
EndedMarch 31, Twelve Months
EndedMarch 31, (In thousands of therms)
2018 2017
2018
2017
2018 2017
Gas
Sales and Deliveries Gas Sold and Delivered Residential — Firm
361,209 286,159
584,977 493,641
691,616
609,576 Commercial and Industrial — Firm
91,490 66,898
150,378 124,619
200,196 167,742 Commercial and
Industrial — Interruptible
1,470
1,465
2,036
2,279
2,312 2,999
454,169 354,522
737,391
620,539
894,124
780,317 Gas Delivered for Others Firm
222,909 182,743
381,446 344,325
532,151
493,385 Interruptible
77,191 75,572
148,833 139,735
251,643 233,214 Electric Generation
19,771 13,229
51,845 36,828
102,628
225,701
319,871
271,544
582,124 520,888
886,422 952,300
Total 774,040
626,066
1,319,515 1,141,427
1,780,546
1,732,617
Utility Gas Purchase Expense (excluding asset
optimization)
45.67
¢
43.94
¢
44.26
¢
40.17
¢
39.04
¢
35.15
¢
HEATING DEGREE DAYS Actual
2,106 1,727
3,441
2,923
3,645 4,651 Normal
2,099 2,098
3,410
3,416
3,711 5,525 Percent Colder (Warmer) than Normal
0.3 % (17.7 )%
0.9 % (14.4
)%
(1.8 )%
(15.8 )%
Average Active Customer Meters
1,172,365 1,154,427
1,169,572
1,151,289
1,164,162
1,148,092
WGL ENERGY SERVICES
Natural Gas Sales Therm Sales
(thousands of therms)
247,400 269,100
446,300 489,600
649,900 734,800 Number of Customers (end of period)
112,500 122,800
112,500
122,800
112,500
122,800
Electricity Sales
Electricity Sales (thousands of kWhs)
2,875,600 3,048,300
5,677,000 6,151,500
11,773,800 13,123,000 Number of
Accounts (end of period)
106,200
121,200
106,200 121,200
106,200 121,200
WGL ENERGY SYSTEMS Megawatts in service
238
200
238 200
238 200 Megawatt hours generated
66,071 57,695
128,129
106,449
311,391
240,007
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 present the unaudited reconciliation of
non-GAAP operating earnings to GAAP net income (loss) applicable to
common stock (consolidated by quarter):
WGL Holdings, Inc.
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)
Fiscal Year 2018
Quarterly Period Ended(1) (In thousands, except per share data)
Dec. 31 Mar. 31 Jun. 30
Sept. 30 Fiscal Year Operating earnings
(loss)
$ 94,923 $
109,485 $
204,408 Non-GAAP adjustments(2)
(14,351 )
10,287 (4,064 ) De-designated interest rate
swaps(3)
(354 ) 13,183 12,829 Income
tax effect of non-GAAP adjustments(4)
4,956 (4,839
) 117 Re-measurement impact of Tax Cuts and Jobs
Act(5)
52,866
7,434
60,300 Net
income (loss) applicable to common stock
$
138,040 $ 135,550
$ — $ —
$ 273,590 Diluted average common
shares outstanding
51,549
51,577
51,561
Operating earnings (loss) per share
$ 1.84
$ 2.12 $ 3.96 Per share effect of
non-GAAP adjustments
0.84
0.51
1.35
Diluted earnings (loss) per average common share
$ 2.68 $ 2.63
$ 5.31 Fiscal Year 2017
Quarterly Period Ended(1) (In thousands, except per
share data) Dec. 31(6) Mar. 31
Jun. 30 Sept. 30 Fiscal Year
Operating earnings (loss) $ 59,362 $ 96,087 $ 155,449 Non-GAAP
adjustments(2) (2,324 ) 38,468 36,144 De-designated interest rate
swaps(3) — 2,516 2,516 Income tax effect of non-GAAP adjustments(4)
934 (14,007 )
(13,073 ) Net income (loss) applicable to common
stock $ 57,972 $ 123,064
$ — $ — $ 181,036
Diluted average common shares outstanding
51,445 51,476
51,458 Operating earnings (loss) per share $ 1.15 $ 1.87 $
3.02 Per share effect of non-GAAP adjustments
(0.02 ) 0.52
0.50
Diluted earnings (loss) per average common share $
1.13 $ 2.39
$ 3.52
(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.
(2) 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.
(3) 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 our 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 and settled in January 2018 for $13.8 million.
(4) 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.
(5) In December 2017, the Tax Cuts and Jobs Act was signed into
law, resulting in, among other effects, a reduction in the
corporate tax rate from 35% to 21%. This resulted in a net deferred
tax benefit of $52.9 million. An additional true up provision of
$7.4 million was recorded in March 2018. This adjustment only
reflects the re-measurement impact and not the effect on ongoing
earnings of the lower tax rate.
(6) Non-GAAP measures for the quarter ended December 31, 2016
have been recast to include $6.8 million of 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.
WGL Holdings, Inc.Reconciliation of
Non-GAAP Financial Measures(Unaudited)
The following tables summarize non-GAAP adjustments by operating
segment and present reconciliations 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 March 31, 2018 (In thousands)
Regulated
Utility
Retail Energy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities
Eliminations
Total Adjusted EBIT
143,604 20,000
5,232
(2,231 ) (2,049 )
(4,103 ) $
160,453 Non-GAAP adjustments:
Unrealized mark-to-market valuations on
energy-related derivatives(a)
12,292 (4,896 )
— 2,122 — (13 ) 9,505
Storage optimization program(b)
(2,968 ) —
— — — — (2,968 ) DC
weather impact(c)
(1,859 ) — — —
— — (1,859 ) Distributed generation
asset related investment tax credits(d)
— —
(1,670 ) — — — (1,670
) Change in measured value of inventory(e)
— —
— 7,415 — — 7,415 Merger related
costs(f) — —
—
—
(136 )
—
(136 ) Total
non-GAAP adjustments
$ 7,465
$ (4,896 )
$ (1,670 ) $ 9,537
$ (136 )
$ (13 ) $ 10,287
EBIT
$ 151,069
$ 15,104 $
3,562 $ 7,306
$ (2,185 )
$ (4,116 ) $
170,740
Three Months Ended March 31, 2017 (In
thousands) Regulated
Utility
Retail Energy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities
Eliminations
Total Adjusted EBIT $ 150,223
$ 13,149 $ 10,312
$ (1,252 ) $ (1,061 ) $ (1,412 )
$ 169,959 Non-GAAP adjustments: Unrealized
mark-to-market valuations on energy-related derivatives(a) 21,050
(3,894 ) — 23,658 — (60 ) 40,754 Storage optimization program (b)
866 — — — — — 866 DC weather impact(c) (6,968 ) — — — — — (6,968 )
Distributed generation asset related investment tax credits(d) — —
(1,765 ) — — — (1,765 ) Change in measured value of inventory(e) —
— — 19,587 — — 19,587 Merger related costs (f) — — — — (11,905 ) —
(11,905 ) Third-party guarantee (g) —
— —
— (2,101 )
— (2,101 ) Total non-GAAP
adjustments $ 14,948 $ (3,894 )
$ (1,765 ) $ 43,245
$ (14,006 ) $ (60 ) $ 38,468
EBIT $ 165,171 $ 9,255
$ 8,547 $ 41,993
$ (15,067 ) $ (1,472 ) $
208,427
WGL Holdings, Inc.
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)
Six Months Ended March 31, 2018 (In thousands)
Regulated
Utility
Retail Energy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities
Eliminations
Total Adjusted EBIT
$
244,954 $ 26,534
$ 12,546 $
26,226 $ (5,563 )
$ (2,436 )
$ 302,261 Non-GAAP adjustments:
Unrealized mark-to-market valuations on
energy-related derivatives(a)
10,846 (7,688 )
— 2,243 — 9 5,410 Storage
optimization program(b)
(3,429 ) — —
— — — (3,429 ) DC weather
impact(c)
(2,937 ) — — —
— — (2,937 ) Distributed generation
asset related investment tax credits(d)
— —
(3,337 ) — — — (3,337
) Change in measured value of inventory(e)
— —
— 1,022 — — 1,022 Merger related
costs(f) — —
—
—
(793 )
—
(793 ) Total
non-GAAP adjustments
$ 4,480
$ (7,688 )
$ (3,337 ) $ 3,265
$ (793 )
$ 9 $ (4,064
) EBIT
$ 249,434
$ 18,846 $
9,209 $ 29,491
$ (6,356 )
$ (2,427 ) $
298,197
Six Months Ended March 31, 2017 (In thousands)
Regulated
Utility
Retail Energy-
Marketing
Commercial
Energy
Systems
Midstream
Energy
Services
Other
Activities
Eliminations
Total Adjusted EBIT $ 241,603
$ 23,044 $ 16,384
$ 1,409 $ (2,259 ) $ 93
$ 280,274 Non-GAAP adjustments:
Unrealized mark-to-market valuations on energy-related
derivatives(a) 36,486 15,396 — 13,981 — (457 ) 65,406 Storage
optimization program (b) 202 — — — — — 202 DC weather impact(c)
(10,403 ) — — — — — (10,403 ) Distributed generation asset related
investment tax credits(d) — — (3,174 ) — — — (3,174 ) Change in
measured value of inventory(e) — — — (1,881 ) — — (1,881 ) Merger
related costs (f) — — — — (11,905 ) — (11,905 ) Third-party
guarantee (g) — —
— —
(2,101 ) —
(2,101 ) Total non-GAAP adjustments $
26,285 $ 15,396 $ (3,174
) $ 12,100 $ (14,006 )
$ (457 ) $ 36,144 EBIT $
267,888 $ 38,440 $ 13,210
$ 13,509 $ (16,265 )
$ (364 ) $ 316,418
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 proposed merger with AltaGas.
(g)
Guarantee on behalf of a third party
associated with a solar investment.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180503006815/en/
WGL Holdings, Inc.News
MediaBrian Edwards,
202-624-6620orFinancial
CommunityDouglas Bonawitz, 202-624-6129
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