|
| | | | |
FOR IMMEDIATE RELEASE May 4, 2016 | | CONTACTS: | | |
| | | News Media Jim Monroe | | 202-624-6620 |
| | | |
| | | Financial Community Douglas Bonawitz | | 202-624-6129 |
WGL Holdings, Inc. Reports Second Quarter Fiscal Year 2016 Financial Results;
Affirms Fiscal Year 2016 Non-GAAP Guidance
| |
| • | Consolidated GAAP earnings per share up — $2.11 per share vs. $1.63 per share |
| |
| • | Second quarter operating earnings per share down — $1.78 per share vs. $2.02 per share |
| |
| • | Operating earnings guidance for fiscal year 2016 — affirming a range of $3.00 per share to $3.20 per share |
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, 2016, of $106.3 million, or $2.11 per share, an improvement of $24.8 million, or $0.48 per share, over net income applicable to common stock of $81.5 million, or $1.63 per share, reported for the quarter ended March 31, 2015.
For the six months ended March 31, 2016, net income applicable to common stock was $174.5 million, or $3.48 per share, an improvement of $29.2 million, or $0.58 per share, over net income applicable to common stock of $145.3 million, or $2.90 per share, for the same period of the prior fiscal year.
On a consolidated basis, WGL uses operating earnings (loss) to evaluate overall financial performance, and evaluates segment financial performance based on earnings before interest and taxes, as adjusted (adjusted EBIT). Both operating earnings (loss) and adjusted EBIT adjust for the accounting recognition of certain transactions that are not representative of the ongoing earnings of the company. Additionally, we believe that adjusted EBIT enhances the ability to evaluate segment performance because it excludes interest and income tax expense, which are affected by corporate-wide strategies such as capital financing and tax sharing allocations. Operating earnings (loss) and adjusted EBIT are non-GAAP financial measures, which are not recognized in accordance with GAAP and should not be viewed as alternatives to GAAP measures of performance. Refer to “Reconciliation of Non-GAAP Financial Measures,” attached to this news release, for a more detailed discussion of management’s use of these measures and for reconciliations to GAAP financial measures.
For the quarter ended March 31, 2016, operating earnings were $89.5 million, or $1.78 per share, compared to operating earnings of $101.0 million, or $2.02 per share, for the same quarter of the prior fiscal year. For the six months ended March 31, 2016, operating earnings were $148.7 million, or $2.96 per share, compared to operating earnings of $159.0 million, or $3.18 per share, for the same period of the prior fiscal year.
“I am happy to announce another solid quarter of earnings at WGL Holdings,” said Terry McCallister, Chairman and Chief Executive Officer. “Adjusted EBIT improved compared to the second quarter of 2015 in both the regulated utility and in our commercial energy systems segments. The utility continues to benefit from new customers and from rate base growth driven by our accelerated infrastructure replacement programs, and the systems segment has seen improved earnings fueled by investments in distributed generation assets and by growth in our energy efficiency contracting business. While current market pricing has lowered results in the quarter compared to the prior year in the midstream energy services segment, we expect
results there to improve in the second half and to exceed our original plans for this business. Our retail energy-marketing business also realized lower results for the quarter, but as we have noted before, earnings in the segment were unusually high in 2015 driven in part by weather related portfolio optimization results.”
“While we are disappointed in the recent decision by the New York State Department of Environmental Conservation to deny approval for the Constitution pipeline, we remain committed to the project and to finding a path forward for this needed infrastructure investment. We are, however, still evaluating the accounting impacts of this development as well as any potential impacts to our financial forecasts.”
Second Quarter Results by Business Segment
Regulated Utility
For the three months ended March 31, 2016, the regulated utility segment reported adjusted EBIT of $153.9 million, compared to adjusted EBIT of $152.4 million for the same quarter of the prior fiscal year. For the six months ended March 31, 2016, the regulated utility segment reported adjusted EBIT of $240.5 million, compared to adjusted EBIT of $249.0 million for the same period of the prior fiscal year.
For both the three and six months ended March 31, 2016 comparisons, adjusted EBIT reflects: (i) higher revenues from customer growth; (ii) higher rate recovery related to our accelerated pipe replacement programs and (iii) lower expenses associated with employee incentives. For both period-to-period comparisons, these favorable variances were partially offset by: (i) the negative effects of certain natural gas consumption patterns in the District of Columbia; (ii) lower realized margins associated with our asset optimization program and (iii) a decrease in the recovery of carrying costs on lower average storage gas inventory balances. The comparison for the six months ended March 31, 2016, also reflects higher labor and support activity costs, higher depreciation expense related to the growth in our utility plant and other taxes.
Retail Energy-Marketing
For the three months ended March 31, 2016, the retail energy-marketing segment reported adjusted EBIT of $8.4 million, compared to adjusted EBIT of $27.0 million for the same quarter of the prior fiscal year. For the six months ended March 31, 2016, the retail energy-marketing segment reported adjusted EBIT of $13.6 million, compared to adjusted EBIT of $36.0 million for the same period of the prior fiscal year.
For both the three and six months ended March 31, 2016, the decline in adjusted EBIT primarily reflects lower natural gas margins due to a decrease in portfolio optimization activity that returned to more historical levels during these periods and lower electric margins due to higher capacity charges from the regional power grid operator (PJM). Further contributing to these unfavorable variances were higher operating expenses primarily due to commercial broker fees.
Commercial Energy Systems
For the three months ended March 31, 2016, the commercial energy systems segment reported adjusted EBIT of $2.3 million, an increase of $0.6 million, over adjusted EBIT of $1.7 million for the same quarter of the prior fiscal year. For the six months ended March 31, 2016, the commercial energy systems segment reported adjusted EBIT of $4.5 million, an increase of $1.6 million, over adjusted EBIT of $2.9 million, for the same period of the prior fiscal year. The increase in adjusted EBIT reflects: (i) improved margins from the energy-efficiency contracting business and (ii) the growth in distributed generation assets in service, including higher income from state rebate programs and solar renewable energy credit sales. Additionally, there were improved results in our investment solar businesses related to changes in the recognition of earnings for our solar partnership. These improvements were partially offset by a $3.0 million impairment related to our investment in thermal solar projects recorded during the three month period and higher operating and depreciation expenses.
Midstream Energy Services
For the three months ended March 31, 2016, the midstream energy services segment reported adjusted EBIT of $(8.4) million, compared to adjusted EBIT of $(3.1) million for the same quarter of the prior fiscal year. For the six months ended March 31, 2016, the midstream energy services segment reported adjusted EBIT of $4.8 million, an increase of $5.3 million, over adjusted EBIT of $(0.5) million for the same period of the prior fiscal year.
For the three months ended March 31, 2016, the decline in adjusted EBIT when compared to the same period in the prior fiscal year is primarily related to the recognition of losses associated with current market pricing. We anticipate these losses will reverse by fiscal year-end as we realize the value of economic hedging transactions we executed during the first two quarters
and as certain contractual procedures approach resolution. For the six months ended March 31, 2016, the increase in adjusted EBIT primarily reflects favorable spreads when compared to the same period in the prior fiscal year.
Earnings Outlook
We are affirming our consolidated non-GAAP operating earnings estimate for fiscal year 2016 in a range of $3.00 per share to $3.20 per share. This guidance does not include any potential impacts related to the decision by the New York Department of Environmental Conservation to deny the section 401 certification for the Constitution pipeline, other than a reduction in forecasted AFUDC related to the project. In providing fiscal year 2016 earnings guidance, management is aware that there could be differences between reported GAAP earnings and estimated operating earnings due to matters such as, but not limited to, unrealized mark-to-market positions for our energy-related derivatives. At this time, WGL management is not able to reasonably estimate the aggregate impact of these items on reported earnings and therefore is not able to provide a corresponding GAAP equivalent for its operating earnings guidance.
We assume no obligation to update this guidance. The absence of any statement by us in the future should not be presumed to represent an affirmation of this earnings guidance. For the assumptions underlying this guidance, please refer to the slides accompanying our webcast that will be posted to WGL’s website, www.wglholdings.com.
Other Information
We will hold a conference call at 10:30 a.m., Eastern Time on May 5, 2016, to discuss our second quarter fiscal year 2016 financial results. The live conference call will be available to the public via a link located on WGL’s website, www.wglholdings.com. To hear the live webcast, click on “Investor Relations” then “Events & Webcasts.” The webcast and related slides will be archived on WGL’s website through at least June 5, 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 or strategies and expectations. Forward-looking statements are typically identified by words such as, but not limited to, “estimates,” “expects,” “anticipates,” “intends,” “believes,” “plans,” and similar expressions, or future or conditional verbs such as “will,” “should,” “would,” and “could.” Although we believe such forward-looking statements are based on reasonable assumptions, we cannot give assurance that every objective will be achieved. Forward-looking statements speak only as of today, and we assume no duty to update them. Factors that could cause actual results to differ materially from those expressed or implied include, but are not limited to, general economic conditions and the factors discussed under the “Risk Factors” heading in our most recent annual report on Form 10-K and other documents that we have filed with, or furnished to, the U.S. Securities and Exchange Commission.
WGL Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
|
| | | | | | | | |
| (In thousands) | | March 31, 2016 | | September 30, 2015 |
| ASSETS | | | | |
| Property, Plant and Equipment | | | | |
| At original cost | | $ | 5,199,734 |
| | $ | 5,003,910 |
|
| Accumulated depreciation and amortization | | (1,367,215 | ) | | (1,331,182 | ) |
| Net property, plant and equipment | | 3,832,519 |
| | 3,672,728 |
|
| Current Assets | | | | |
| Cash and cash equivalents | | 9,874 |
| | 6,733 |
|
| Accounts receivable, net | | 577,622 |
| | 358,491 |
|
| Storage gas | | 133,947 |
| | 211,443 |
|
| Derivatives and other | | 202,765 |
| | 171,874 |
|
| Total current assets | | 924,208 |
| | 748,541 |
|
| Deferred Charges and Other Assets | | 902,838 |
| | 840,090 |
|
| Total Assets | | $ | 5,659,565 |
| | $ | 5,261,359 |
|
| CAPITALIZATION AND LIABILITIES | | | | |
| Capitalization | | | | |
| Common shareholders’ equity | | $ | 1,395,114 |
| | $ | 1,243,247 |
|
| Washington Gas Light Company preferred stock | | 28,173 |
| | 28,173 |
|
| Long-term debt | | 1,194,251 |
| | 944,201 |
|
| Total capitalization | | 2,617,538 |
| | 2,215,621 |
|
| Current Liabilities | | | | |
| Notes payable and current maturities of long-term debt | | 329,307 |
| | 357,000 |
|
| Accounts payable and other accrued liabilities | | 349,746 |
| | 325,146 |
|
| Derivatives and other | | 306,849 |
| | 300,768 |
|
| Total current liabilities | | 985,902 |
| | 982,914 |
|
| Deferred Credits | | 2,056,125 |
| | 2,062,824 |
|
| Total Capitalization and Liabilities | | $ | 5,659,565 |
| | $ | 5,261,359 |
|
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) | | 2016 | | 2015 | | 2016 | | 2015 |
| OPERATING REVENUES | | | | | | | | |
| Utility | | $ | 442,837 |
| | $ | 606,505 |
| | $ | 730,990 |
| | $ | 988,217 |
|
| Non-utility | | 392,852 |
| | 395,228 |
| | 718,083 |
| | 762,753 |
|
| Total Operating Revenues | | 835,689 |
| | 1,001,733 |
| | 1,449,073 |
| | 1,750,970 |
|
| OPERATING EXPENSES | | | | | | | | |
| Utility cost of gas | | 121,055 |
| | 310,138 |
| | 171,080 |
| | 439,842 |
|
| Non-utility cost of energy-related sales | | 351,720 |
| | 356,535 |
| | 634,207 |
| | 693,103 |
|
| Operation and maintenance | | 103,933 |
| | 104,287 |
| | 199,352 |
| | 196,667 |
|
| Depreciation and amortization | | 33,170 |
| | 30,103 |
| | 64,582 |
| | 59,463 |
|
| General taxes and other assessments | | 51,400 |
| | 57,784 |
| | 87,932 |
| | 97,167 |
|
| Total Operating Expenses | | 661,278 |
| | 858,847 |
| | 1,157,153 |
| | 1,486,242 |
|
| OPERATING INCOME | | 174,411 |
| | 142,886 |
| | 291,920 |
| | 264,728 |
|
| Equity in earnings of unconsolidated affiliates | | 4,768 |
| | 1,832 |
| | 6,031 |
| | 2,976 |
|
| Other income (expenses) — net | | 795 |
| | 338 |
| | 1,774 |
| | (4,017 | ) |
| Interest expense | | 12,999 |
| | 13,254 |
| | 25,759 |
| | 25,564 |
|
| INCOME BEFORE TAXES | | 166,975 |
| | 131,802 |
| | 273,966 |
| | 238,123 |
|
| INCOME TAX EXPENSE | | 60,357 |
| | 50,017 |
| | 98,847 |
| | 92,120 |
|
| NET INCOME | | $ | 106,618 |
| | $ | 81,785 |
| | $ | 175,119 |
| | $ | 146,003 |
|
| Dividends on Washington Gas Light Company preferred stock | | 330 |
| | 330 |
| | 660 |
| | 660 |
|
| NET INCOME APPLICABLE TO COMMON STOCK | | $ | 106,288 |
| | $ | 81,455 |
| | $ | 174,459 |
| | $ | 145,343 |
|
| WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | | | | | | | | |
| Basic | | 50,009 |
| | 49,720 |
| | 49,918 |
| | 49,851 |
|
| Diluted | | 50,282 |
| | 49,983 |
| | 50,166 |
| | 50,055 |
|
| EARNINGS PER AVERAGE COMMON SHARE | | | | | | | | |
| Basic | | $ | 2.13 |
| | $ | 1.64 |
| | $ | 3.49 |
| | $ | 2.92 |
|
| Diluted | | $ | 2.11 |
| | $ | 1.63 |
| | $ | 3.48 |
| | $ | 2.90 |
|
WGL Holdings, Inc.
Consolidated Financial and Operating Statistics
(Unaudited)
FINANCIAL STATISTICS
|
| | | | |
| | Twelve Months Ended March 31, |
| | 2016 | | 2015 |
| Closing Market Price — end of period | | $72.37 | | $56.40 |
| 52-Week Market Price Range | | $74.10 - $51.86 | | $59.08-$37.77 |
| Price Earnings Ratio | | 22.5 | | 16.7 |
| Annualized Dividends Per Share | | $1.95 | | $1.85 |
| Dividend Yield | | 2.7% | | 3.3% |
| Return on Average Common Equity | | 11.9% | | 13.4% |
Total Interest Coverage (times) | | 5.8 | | 7.1 |
| Book Value Per Share — end of period | | $27.72 | | $26.22 |
Common Shares Outstanding — end of period (thousands) | | 50,337 | | 49,729 |
UTILITY GAS STATISTICS
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
March 31, | | Six Months Ended
March 31, | | Twelve Months Ended
March 31, | |
| (In thousands) | | 2016 | | | | 2015 | | 2016 | | | | 2015 | | 2016 | | | | 2015 | |
| Operating Revenues | | | | | | | | | | | | | | | | | | | |
| Gas Sold and Delivered | | | | | | | | | | | | | | | | | | | |
| Residential — Firm | | $ | 279,973 |
| | | | $ | 411,386 |
| | $ | 447,661 |
| | | | $ | 655,120 |
| | $ | 609,207 |
| | | | $ | 827,935 |
| |
| Commercial and Industrial — Firm | | 59,679 |
| | | | 92,036 |
| | 96,288 |
| | | | 148,454 |
| | 135,772 |
| | | | 193,001 |
| |
| Commercial and Industrial — Interruptible | | 1,087 |
| | | | 1,256 |
| | 1,606 |
| | | | 1,974 |
| | 2,209 |
| | | | 2,499 |
| |
| Electric Generation | | 275 |
| | | | 275 |
| | 550 |
| | | | 550 |
| | 1,100 |
| | | | 1,100 |
| |
| | | 341,014 |
| | | | 504,953 |
| | 546,105 |
| | | | 806,098 |
| | 748,288 |
| | | | 1,024,535 |
| |
| Gas Delivered for Others | | | | | | | | | | | | | | | | | | | |
| Firm | | 80,492 |
| | | | 77,819 |
| | 142,396 |
| | | | 133,940 |
| | 213,660 |
| | | | 199,059 |
| |
| Interruptible | | 16,831 |
| | | | 20,857 |
| | 28,336 |
| | | | 34,593 |
| | 46,220 |
| | | | 53,383 |
| |
| Electric Generation | | 205 |
| | | | 107 |
| | 381 |
| | | | 239 |
| | 695 |
| | | | 508 |
| |
| | | 97,528 |
| | | | 98,783 |
| | 171,113 |
| | | | 168,772 |
| | 260,575 |
| | | | 252,950 |
| |
| | | 438,542 |
| | | | 603,736 |
| | 717,218 |
| | | | 974,870 |
| | 1,008,863 |
| | | | 1,277,485 |
| |
| Other | | 4,295 |
| | | | 2,769 |
| | 13,772 |
| | | | 13,347 |
| | 36,954 |
| | | | 38,887 |
| |
| Total | | $ | 442,837 |
| | | | $ | 606,505 |
| | $ | 730,990 |
| | | | $ | 988,217 |
| | $ | 1,045,817 |
| | | | $ | 1,316,372 |
| |
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended
March 31, | | Six Months Ended
March 31, | | Twelve Months Ended
March 31, | |
| (In thousands of therms) | | 2016 | | | | 2015 | | 2016 | | | | 2015 | | 2016 | | | | 2015 | |
| Gas Sales and Deliveries | | | | | | | | | | | | | | | | | | | |
| Gas Sold and Delivered | | | | | | | | | | | | | | | | | | | |
| Residential — Firm | | 321,765 |
| | | | 410,701 |
| | 474,689 |
| | | | 627,760 |
| | 581,803 |
| | | | 735,038 |
| |
| Commercial and Industrial — Firm | | 79,817 |
| | | | 98,729 |
| | 124,709 |
| | | | 157,907 |
| | 164,345 |
| | | | 197,483 |
| |
| Commercial and Industrial — Interruptible | | 1,332 |
| | | | 390 |
| | 2,051 |
| | | | 1,445 |
| | 2,678 |
| | | | 2,177 |
| |
| | | 402,914 |
| | | | 509,820 |
| | 601,449 |
| | | | 787,112 |
| | 748,826 |
| | | | 934,698 |
| |
| Gas Delivered for Others | | | | | | | | | | | | | | | | | | | |
| Firm | | 218,692 |
| | | | 279,133 |
| | 351,970 |
| | | | 439,139 |
| | 470,956 |
| | | | 565,683 |
| |
| Interruptible | | 82,999 |
| | | | 93,488 |
| | 145,534 |
| | | | 171,147 |
| | 234,651 |
| | | | 269,082 |
| |
| Electric Generation | | 59,154 |
| | | | 28,955 |
| | 102,380 |
| | | | 55,210 |
| | 226,231 |
| | | | 140,484 |
| |
| | | 360,845 |
| | | | 401,576 |
| | 599,884 |
| | | | 665,496 |
| | 931,838 |
| | | | 975,249 |
| |
| Total | | 763,759 |
| | | | 911,396 |
| | 1,201,333 |
| | | | 1,452,608 |
| | 1,680,664 |
| | | | 1,909,947 |
| |
| Utility Gas Purchase Expense (excluding asset optimization) | | 34.12 |
| | ¢ | | 56.88 |
| ¢ | 34.83 |
| | ¢ | | 56.63 |
| ¢ | 37.81 |
| | ¢ | | 57.26 |
| ¢ |
| HEATING DEGREE DAYS | | | | | | | | | | | | | | | | | | | |
| Actual | | 1,996 |
| | | | 2,471 |
| | 2,952 |
| | | | 3,726 |
| | 3,155 |
| | | | 4,003 |
| |
| Normal | | 2,098 |
| | | | 2,107 |
| | 3,429 |
| | | | 3,450 |
| | 3,737 |
| | | | 3,758 |
| |
| Percent Colder (Warmer) than Normal | | (4.9 | )% | | | | 17.3 | % | | (13.9 | )% | | | | 8.0 | % | | (15.6 | )% | | | | 6.5 | % | |
| Average Active Customer Meters | | 1,144,147 |
| | | | 1,132,836 |
| | 1,139,798 |
| | | | 1,127,843 |
| | 1,136,067 |
| | | | 1,123,632 |
| |
| WGL ENERGY SERVICES | | | | | | | | | | | | | | | | | | | |
| Natural Gas Sales | | | | | | | | | | | | | | | | | | | |
Therm Sales (thousands of therms) | | 315,900 |
| | | | 314,500 |
| | 505,500 |
| | | | 515,600 |
| | 702,900 |
| | | | 714,100 |
| |
Number of Customers (end of period) | | 139,400 |
| | | | 150,000 |
| | 139,400 |
| | | | 150,000 |
| | 139,400 |
| | | | 150,000 |
| |
| Electricity Sales | | | | | | | | | | | | | | | | | | | |
Electricity Sales (thousands of kWhs) | | 3,192,700 |
| | | | 2,988,200 |
| | 6,119,200 |
| | | | 5,656,700 |
| | 12,519,400 |
| | | | 11,468,500 |
| |
Number of Accounts (end of period) | | 134,400 |
| | | | 150,100 |
| | 134,400 |
| | | | 150,100 |
| | 134,400 |
| | | | 150,100 |
| |
| WGL ENERGY SYSTEMS | | | | | | | | | | | | | | | | | | | |
| Megawatts in service | | 134 |
| | | | 87 |
| | 134 |
| | | | 87 |
| | 134 |
| | | | 87 |
| |
| Megawatt hours generated | | 43,691 |
| | | | 27,902 |
| | 77,306 |
| | | | 52,771 |
| | 171,598 |
| | | | 112,006 |
| |
WGL Holdings, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
The tables below reconcile adjusted EBIT on a segment basis to GAAP income (loss) before income taxes and reconcile operating earnings (loss) on a consolidated basis to GAAP net income (loss) applicable to common stock. Management believes that adjusted EBIT and operating earnings (loss) provide a more meaningful representation of our earnings from ongoing operations on a segment and consolidated basis, respectively. These measures facilitate analysis by providing consistent and comparable measures to help management, investors and analysts better understand and evaluate our operating results and performance trends, and assist in analyzing period-to-period comparisons. Additionally, we use these non-GAAP measures to report to the board of directors and to evaluate management’s performance.
To derive our non-GAAP measures, we adjust for the accounting recognition of certain transactions (non-GAAP adjustments) based on at least one of the following criteria:
| |
| • | To better match the accounting recognition of transactions with their economics; |
| |
| • | To better align with regulatory view/recognition; |
| |
| • | To eliminate the effects of: |
| |
| i. | Significant out of period adjustments; |
| |
| ii. | Other significant items that may obscure historical earnings comparisons and are not indicative of performance trends; and |
| |
| iii. | For adjusted EBIT, other items which may obscure segment comparisons. |
There are limits in using adjusted EBIT and operating earnings (loss) to analyze our segment and consolidated results, respectively, as they are not prepared in accordance with GAAP and may be different than non-GAAP financial measures used by other companies. In addition, using adjusted EBIT and operating earnings (loss) to analyze our results may have limited value as they exclude certain items that may have a material impact on our reported financial results. We compensate for these limitations by providing investors with the attached reconciliations to the most directly comparable GAAP financial measures.
The following table summarizes the reconciliations of adjusted EBIT by segment to income before income taxes:
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended March 31, | | Six Months Ended March 31, |
| (In thousands) | | 2016 | | 2015 | | 2016 | | 2015 |
| Adjusted EBIT: | | | | | | | | |
| Regulated utility | | $ | 153,915 |
| | $ | 152,395 |
| | $ | 240,538 |
| | $ | 248,951 |
|
| Retail energy-marketing | | 8,376 |
| | 27,031 |
| | 13,621 |
| | 35,986 |
|
| Commercial energy systems | | 2,338 |
| | 1,683 |
| | 4,533 |
| | 2,851 |
|
| Midstream energy services | | (8,373 | ) | | (3,062 | ) | | 4,756 |
| | (496 | ) |
Other activities(*) | | (1,476 | ) | | (846 | ) | | (2,256 | ) | | (2,320 | ) |
| Eliminations | | (621 | ) | | (19 | ) | | (594 | ) | | (51 | ) |
| Total | | $ | 154,159 |
| | $ | 177,182 |
| | $ | 260,598 |
| | $ | 284,921 |
|
Non-GAAP adjustments(1) | | 25,815 |
| | (32,126 | ) | | 39,127 |
| | (21,234 | ) |
| Interest expense | | 12,999 |
| | 13,254 |
| | 25,759 |
| | 25,564 |
|
| Income before income taxes | | $ | 166,975 |
| | $ | 131,802 |
| | $ | 273,966 |
| | $ | 238,123 |
|
| Income tax expense | | 60,357 |
| | 50,017 |
| | 98,847 |
| | 92,120 |
|
| Dividends on Washington Gas preferred stock | | 330 |
| | 330 |
| | 660 |
| | 660 |
|
| Net income applicable to common stock | | $ | 106,288 |
| | $ | 81,455 |
| | $ | 174,459 |
| | $ | 145,343 |
|
|
| |
| (*) | Activities and transactions that are not significant enough on a stand-alone basis to warrant treatment as an operating segment and that do not fit into one of our four operating segments. |
WGL Holdings, Inc. (Consolidated by Quarter)
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
The following tables represent the reconciliation of operating earnings to net income applicable to common stock (consolidated by quarter):
|
| | | | | | | | | | | | | | | | |
| Fiscal Year 2016 |
| | Quarterly Period Ended* |
| (In thousands, except per share data) | | Dec. 31 | | Mar. 31 | | Jun. 30 | | Sept. 30 | | Fiscal Year |
| Operating earnings | | $ | 59,205 |
| | $ | 89,490 |
| | | | | | $ | 148,695 |
|
Non-GAAP adjustments(1) | | 13,312 |
| | 25,815 |
| | | | | | 39,127 |
|
| Income tax effect of non-GAAP adjustments | | (4,346 | ) | | (9,017 | ) | | | | | | (13,363 | ) |
| Net income applicable to common stock | | $ | 68,171 |
| | $ | 106,288 |
| | | | | | $ | 174,459 |
|
| Diluted average common shares outstanding | | 50,030 |
| | 50,282 |
| | | | | | 50,166 |
|
| Operating earnings per share | | $ | 1.18 |
| | $ | 1.78 |
| | | | | | $ | 2.96 |
|
| Per share effect of non-GAAP adjustments | | 0.18 |
| | 0.33 |
| | | | | | 0.52 |
|
| Diluted earnings per average common share | | $ | 1.36 |
| | $ | 2.11 |
| | | | | | $ | 3.48 |
|
| Fiscal Year 2015 |
| | Quarterly Period Ended* |
| (In thousands, except per share data) | | Dec. 31 | | Mar. 31 | | Jun. 30 | | Sept. 30 | | Fiscal Year |
| Operating earnings | | $ | 58,004 |
| | $ | 101,034 |
| | | | | | $ | 159,038 |
|
Non-GAAP adjustments(1) | | 10,892 |
| | (32,126 | ) | | | | | | (21,234 | ) |
| Income tax effect of non-GAAP adjustments | | (5,008 | ) | | 12,547 |
| | | | | | 7,539 |
|
| Net income applicable to common stock | | $ | 63,888 |
| | $ | 81,455 |
| | | | | | $ | 145,343 |
|
| Diluted average common shares outstanding | | 50,091 |
| | 49,983 |
| | | | | | 50,055 |
|
| Operating earnings per share | | $ | 1.16 |
| | $ | 2.02 |
| | | | | | $ | 3.18 |
|
| Per share effect of non-GAAP adjustments | | 0.12 |
| | (0.39 | ) | | | | | | (0.28 | ) |
| Diluted earnings per average common share | | $ | 1.28 |
| | $ | 1.63 |
| | | | | | $ | 2.90 |
|
* 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.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
(1) The following tables summarize non-GAAP adjustments, by operating segment and present a reconciliation of adjusted EBIT to EBIT. EBIT is defined as earnings before interest and taxes from continuing operations. Items we do not include in EBIT are interest expense, inter-company financing activity, dividends on Washington Gas preferred stock, and income taxes.
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2016 |
| (In thousands) | | Regulated Utility | | Retail Energy- Marketing | | Commercial Energy Systems | | Midstream Energy Services | | Other Activities | |
Eliminations | | Total |
| Adjusted EBIT | | $ | 153,915 |
| | $ | 8,376 |
| | $ | 2,338 |
| | $ | (8,373 | ) | | $ | (1,476 | ) | | $ | (621 | ) | | $ | 154,159 |
|
| Non-GAAP adjustments: | | | | | | | | | | | | | | |
Unrealized mark-to-market valuations on energy-related derivatives(a) | | 13,693 |
| | (5,298 | ) | | — |
| | 11,486 |
| | — |
| | — |
| | 19,881 |
|
Storage optimization program(b) | | (826 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (826 | ) |
DC weather impact(c) | | (2,511 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (2,511 | ) |
Distributed generation asset related investment tax credits(d) | | — |
| | — |
| | (1,316 | ) | | — |
| | — |
| | — |
| | (1,316 | ) |
Change in measured value of inventory(e) | | — |
| | — |
| | — |
| | 10,587 |
| | — |
| | — |
| | 10,587 |
|
| Total non-GAAP adjustments | | $ | 10,356 |
| | $ | (5,298 | ) | | $ | (1,316 | ) | | $ | 22,073 |
| | $ | — |
| | $ | — |
| | $ | 25,815 |
|
| EBIT | | $ | 164,271 |
| | $ | 3,078 |
| | $ | 1,022 |
| | $ | 13,700 |
| | $ | (1,476 | ) | | $ | (621 | ) | | $ | 179,974 |
|
| | | | | | | | | | | | | | | |
| Three Months Ended March 31, 2015 |
| (In thousands) | | Regulated Utility | | Retail Energy- Marketing | | Commercial Energy Systems | | Midstream Energy Services | | Other Activities | |
Eliminations | | Total |
| Adjusted EBIT | | $ | 152,395 |
| | $ | 27,031 |
| | $ | 1,683 |
| | $ | (3,062 | ) | | $ | (846 | ) | | $ | (19 | ) | | $ | 177,182 |
|
| Non-GAAP adjustments: | | | | | | | | | | | | | | |
Unrealized mark-to-market valuations on energy-related derivatives(a) | | (27,979 | ) | | 11,395 |
| | — |
| | (7,478 | ) | | — |
| | — |
| | (24,062 | ) |
Storage optimization program (b) | | 1,581 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,581 |
|
DC weather impact(c) | | 4,283 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 4,283 |
|
Distributed generation asset related investment tax credits(d) | | — |
| | — |
| | (961 | ) | | — |
| | — |
| | — |
| | (961 | ) |
Change in measured value of inventory(e) | | — |
| | — |
| | — |
| | (12,967 | ) | | — |
| | — |
| | (12,967 | ) |
| Total non-GAAP adjustments | | $ | (22,115 | ) | | $ | 11,395 |
| | $ | (961 | ) | | $ | (20,445 | ) | | $ | — |
| | $ | — |
| | $ | (32,126 | ) |
| EBIT | | $ | 130,280 |
| | $ | 38,426 |
| | $ | 722 |
| | $ | (23,507 | ) | | $ | (846 | ) | | $ | (19 | ) | | $ | 145,056 |
|
WGL Holdings, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended March 31, 2016 |
| (In thousands) | | Regulated Utility | | Retail Energy- Marketing | | Commercial Energy Systems | | Midstream Energy Services | | Other Activities | |
Eliminations | | Total |
| Adjusted EBIT | | $ | 240,538 |
| | $ | 13,621 |
| | $ | 4,533 |
| | $ | 4,756 |
| | $ | (2,256 | ) | | $ | (594 | ) | | $ | 260,598 |
|
| Non-GAAP adjustments: | | | | | | | | | | | | | | |
Unrealized mark-to-market valuations on energy-related derivatives(a) | | 33,116 |
| | (11,110 | ) | | — |
| | 22,322 |
| | — |
| | — |
| | 44,328 |
|
Storage optimization program(b) | | (351 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (351 | ) |
DC weather impact(c) | | (9,743 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (9,743 | ) |
Distributed generation asset related investment tax credits(d) | | — |
| | — |
| | (2,568 | ) | | — |
| | — |
| | — |
| | (2,568 | ) |
Change in measured value of inventory(e) | | — |
| | — |
| | — |
| | 7,461 |
| | — |
| | — |
| | 7,461 |
|
| Total non-GAAP adjustments | | $ | 23,022 |
| | $ | (11,110 | ) | | $ | (2,568 | ) | | $ | 29,783 |
| | $ | — |
| | $ | — |
| | $ | 39,127 |
|
| EBIT | | $ | 263,560 |
| | $ | 2,511 |
| | $ | 1,965 |
| | $ | 34,539 |
| | $ | (2,256 | ) | | $ | (594 | ) | | $ | 299,725 |
|
| | | | | | | | | | | | | | | |
| Six Months Ended March 31, 2015 |
| (In thousands) | | Regulated Utility | | Retail Energy- Marketing | | Commercial Energy Systems | | Midstream Energy Services | | Other Activities | |
Eliminations | | Total |
| Adjusted EBIT | | $ | 248,951 |
| | $ | 35,986 |
| | $ | 2,851 |
| | $ | (496 | ) | | $ | (2,320 | ) | | $ | (51 | ) | | $ | 284,921 |
|
| Non-GAAP adjustments: | | | | | | | | | | | | | | |
Unrealized mark-to-market valuations on energy-related derivatives(a) | | (2,902 | ) | | (13,455 | ) | | — |
| | 851 |
| | — |
| | — |
| | (15,506 | ) |
Storage optimization program (b) | | (2,599 | ) | | — |
| | — |
| | — |
| | — |
| | — |
| | (2,599 | ) |
DC weather impact(c) | | 1,457 |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,457 |
|
Distributed generation asset related investment tax credits(d) | | — |
| | — |
| | (1,870 | ) | | — |
| | — |
| | — |
| | (1,870 | ) |
Change in measured value of inventory(e) | | — |
| | — |
| | — |
| | 2,909 |
| | — |
| | — |
| | 2,909 |
|
Investment impairment(f) | | — |
| | — |
| | — |
| | — |
| | (5,625 | ) | | — |
| | (5,625 | ) |
| Total non-GAAP adjustments | | $ | (4,044 | ) | | $ | (13,455 | ) | | $ | (1,870 | ) | | $ | 3,760 |
| | $ | (5,625 | ) | | $ | — |
| | $ | (21,234 | ) |
| EBIT | | $ | 244,907 |
| | $ | 22,531 |
| | $ | 981 |
| | $ | 3,264 |
| | $ | (7,945 | ) | | $ | (51 | ) | | $ | 263,687 |
|
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, since the margins will be recognized for regulatory purposes when the withdrawals are made at the unadjusted historical cost of storage inventory. |
| |
| (c) | Eliminates the estimated financial effects of warm or cold weather in the District of Columbia, as measured consistent with our regulatory tariff. 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. This adjustment also includes the estimated effects of certain sharing mechanisms on all of our non-GAAP unrealized gains and losses. Adjusting our storage optimization inventory in this fashion better aligns the settlement of both our physical and financial transactions and allows investors and management to better analyze the results of our non-utility asset optimization strategies. |
| |
| (f) | Represents an impairment of an equity investment in a solar holding company, accounted for at cost, which occurred in the first quarter of fiscal year 2015. We did not believe this impairment charge was indicative of our historical or future performance trends. |
