WGL Holdings, Inc. Logo

Print Print page   E-mail E-mail page   PDF Download PDF
« Previous Release | Next Release »



WGL Holdings, Inc. Reports a 22% Increase in Fiscal Year 2007 Earnings and Issues Fiscal Year 2008 Guidance

WASHINGTON, Nov. 7 /PRNewswire-FirstCall/ -- -- Consolidated earnings up 22% -- $2.19 per share vs. $1.79 per share for fiscal year 2006 -- Retail Energy-Marketing earnings up 67% -- $0.45 per share vs. $0.27 per share for fiscal year 2006 -- Utility growth continues with the addition of over 14,200 active customer meters during fiscal year 2007 -- Business process outsourcing initiative launched with expected customer service enhancements in fiscal year 2008 and long-term savings 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 determined in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP) for fiscal year 2007 of $107.9 million, or $2.19 per share, an increase of $20.3 million, or $0.40 per share, over net income of $87.6 million, or $1.79 per share, reported for fiscal year 2006. 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.

"We are realizing the sustainable benefits from our integrated strategies for success," said James H. DeGraffenreidt, Jr., chairman and chief executive officer of WGL Holdings. "Our rate design approaches in Maryland and Virginia directly enhance shareholder value, while protecting our customers from fluctuations due to weather, pricing and usage. Also, the success and continued growth of our unregulated businesses firmly positions us to become the retail energy company of choice," DeGraffenreidt affirmed.

For the three months ended September 30, 2007, we reported a seasonal net loss determined in accordance with GAAP of $(13.5) million, or $(0.27) per share, compared to a net loss of $(11.9) million, or $(0.24) per share, reported for the three months ended September 30, 2006. Reporting a net loss for quarters ended September 30 is typical due to the seasonal nature of our utility operations and the corresponding reduced demand for natural gas during this period.

We also evaluate our financial performance based on non-GAAP operating earnings (loss) per share. Non-GAAP operating earnings (loss) per share excludes the effect of: (i) warmer-than-normal/colder-than-normal weather for our regulated utility segment; (ii) certain unusual transactions; (iii) unrealized mark-to-market gains (losses) on energy-related derivatives and (iv) discontinued operations. Refer to "Use of Non-GAAP Operating Earnings (Loss) Per Share" and supporting reconciliations attached to this news release for a detailed discussion of management's use of this non-GAAP financial measure, as well as reconciliations of earnings per share determined in accordance with GAAP to non-GAAP operating earnings (loss) per share for both our consolidated and segment results.

For fiscal year 2007, our non-GAAP operating earnings were $1.99 per share, an increase of $0.05 per share over non-GAAP operating earnings of $1.94 per share for fiscal year 2006. For the fourth quarter of fiscal year 2007, we had a non-GAAP operating loss of $(0.31) per share compared to a loss of $(0.17) per share for the same quarter of the prior fiscal year.

Fiscal Year and Fourth Quarter Results by Business Segment

Regulated Utility Segment

Our regulated utility segment reported net income determined in accordance with GAAP of $89.9 million, or $1.82 per share, for fiscal year 2007, an increase of $5.3 million, or $0.09 per share, over net income of $84.6 million, or $1.73 per share for the preceding fiscal year. For fiscal year 2007, non-GAAP operating earnings for the regulated utility segment were $1.71 per share compared to $1.72 for fiscal year 2006. The year-to-year comparison in non-GAAP operating earnings for this segment is relatively unchanged primarily due to the fact that increased labor and benefit costs and higher depreciation due to the effect of increased investment in depreciable property, plant and equipment were offset by the favorable effects of the addition of over 14,200 active customer meters since the end of last year and new rates that went into effect in Virginia on February 13, 2007.

For the fourth quarter of fiscal year 2007, our regulated utility segment reported a seasonal net loss determined in accordance with GAAP of $(16.8) million, or $(0.34) per share, for the fourth quarter of fiscal year 2007, compared to a net loss of $(13.0) million, or $(0.27) per share, reported for the same quarter of the prior fiscal year. Our regulated utility segment had a non-GAAP operating loss of $(0.35) per share for the fourth quarter of fiscal year 2007 compared to a loss of $(0.29) per share for the fourth quarter of the prior fiscal year. This comparison in non-GAAP results primarily reflects favorable adjustments recorded in the fourth quarter of the prior fiscal year associated with customer billing and a true-up of lost-and- unaccounted-for gas.

Retail Energy-Marketing Segment

The retail energy-marketing segment reported net income determined in accordance with GAAP of $22.4 million, or $0.45 per share, for the fiscal year ended September 30, 2007, an increase of $9.1 million, or $0.18 per share, over net income of $13.3 million, or $0.27 per share, reported for fiscal year 2006. Non-GAAP operating earnings for the retail energy-marketing segment were $0.36 per share for the fiscal year ended September 30, 2007, an $0.08 per share improvement over $0.28 per share for fiscal year 2006. The year- over-year improvement in non-GAAP operating earnings was related to a substantial rise in electric sales volumes and higher margins per kilowatt hour sold. Sales volume growth was principally the result of new competitive opportunities that emerged during the second half of fiscal year 2006, as retail customers of the electric utilities in Maryland and Delaware switched to competitive electric suppliers in response to a sharp increase in utility rates. Higher margins per kilowatt hour sold resulted from the full-year benefit of these new customers coupled with favorable market conditions.

For the fourth quarter of fiscal year 2007, our retail energy-marketing segment reported net income determined in accordance with GAAP of $5.3 million, or $0.11 per share, compared to net income of $8.4 million, or $0.17 per share, reported for the same three-month period of the prior fiscal year. Non-GAAP operating earnings for the retail energy-marketing segment were $0.08 per share for the three months ended September 30, 2007, compared to $0.17 per share for the same three-month period of the prior fiscal year. The quarter- to-quarter decline in non-GAAP operating earnings related to both the sale of electricity and natural gas. Margins per kilowatt hour sold on new electric sales contracts decreased from the relatively large margins on sales in the prior period due to increases in wholesale market prices combined with more competitive rates offered by electric utilities that went into effect in the third quarter of fiscal year 2007. We also experienced a decline in natural gas sales volumes and margin per therm sold related to our natural gas sales.

Business Process Outsourcing

In the third quarter of fiscal year 2007, Washington Gas announced a ten- year agreement with Accenture to outsource a number of its business functions. To date, we have successfully transitioned human resources and purchasing. Other functions, including payroll, information technology, and consumer services are on schedule to transition by December 31, 2007. The agreement was designed to generate approximately $170 million in net savings over its ten-year term and provide customer service enhancements, including many that will be implemented in fiscal year 2008.

Earnings Outlook

Our GAAP earnings estimate for the full fiscal year 2008, is in a range of $2.08 to $2.18 per share. This estimate includes projected full fiscal year 2008 earnings from our regulated utility segment in a range of $1.83 per share to $1.89 per share and projected full fiscal year 2008 earnings from our unregulated business segments in a range of $0.25 per share to $0.29 per share.

We are also providing a consolidated earnings estimate for the full fiscal year 2008 based on non-GAAP operating earnings in a range of $2.17 per share to $2.27 per share. This estimate includes projected full fiscal year 2008 non-GAAP operating earnings from our regulated utility segment in a range of $1.84 per share to $1.90 per share, and projected full fiscal year 2008 non- GAAP operating earnings from our unregulated business segments in a range of $0.33 per share to $0.37 per share. Refer to the "Reconciliation of GAAP Earnings Guidance to Non-GAAP Earnings Guidance" attached to this press release for a reconciliation of our GAAP earnings estimate to our estimate based on non-GAAP operating earnings per share.

Guidance reflects the estimated addition of 17,500 new customers at the regulated utility in fiscal year 2008. The guidance includes an estimated increase in revenues in Maryland and the District of Columbia in connection with pending rate cases. These increases in rates are subject to a final determination by the Maryland Public Service Commission and the District of Columbia Public Service Commission, respectively. The guidance assumes normal weather throughout the guidance period, no effect of unusual items that could arise in the future, and no future gains or losses related to discontinued operations. 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.

Other Information

We will hold a conference call at 10:30 a.m. Eastern time on November 8, 2007, to discuss our fourth quarter and fiscal year 2007 financial results. The live conference call will be available to the public via a link located on the WGL Holdings Web site, www.wglholdings.com. Slides providing details of our results of operations will be posted to the Web site. To hear the live Webcast, click on the "Webcast" link located on the home page of the referenced site. The Webcast and related slides will be archived on the WGL Holdings Web site through December 7, 2007.

Headquartered in Washington, D.C., WGL Holdings has three operating segments: (i) the regulated utility segment which primarily consists of Washington Gas, a natural gas utility that serves over one million customers throughout metropolitan Washington, D.C., and the surrounding region; (ii) the retail-energy marketing segment which consists of Washington Gas Energy Services, Inc., a third-party marketer that competitively sells natural gas and electricity and (iii) the commercial heating, ventilating and air conditioning (HVAC) segment, which consists of Washington Gas Energy Systems, Inc. Additional information about WGL Holdings is available on our Web site, www.wglholdings.com.

Please see the attached comparative statements for additional information on our operating results. Also attached to this news release are: (i) reconciliations of earnings per share determined in accordance with GAAP to non-GAAP operating earnings (loss) per share for both our consolidated and segment results; (ii) reconciliations of our GAAP earnings guidance to our non-GAAP earnings guidance and (iii) reconciliations of WGL Holdings' net income determined in accordance with GAAP and GAAP Net Cash Flow provided by operating activities to free cash flow, a non-GAAP measure.

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 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 filed with or furnished to the Securities and Exchange Commission.


                                WGL Holdings, Inc.
                        Consolidated Statements of Income
                  For Periods Ended September 30, 2007 and 2006
                                   (Unaudited)

                                   Three Months Ended    Twelve Months Ended
                                      September 30,         September 30,
    (In thousands, except per
     share data)                     2007      2006        2007        2006

    OPERATING REVENUES
      Utility                      $134,088  $131,922  $1,497,274  $1,622,510
      Non-utility                   191,597  $191,689   1,148,734  $1,015,373
        Total Operating Revenues    325,685   323,611   2,646,008   2,637,883

    OPERATING EXPENSES
      Utility cost of gas            53,448    44,318     875,811   1,016,669
      Non-utility cost of energy-
       related sales                173,907   171,004   1,079,378     971,560
      Operation and maintenance      70,254    64,080     275,344     258,022
      Depreciation and amortization  23,632    23,531      90,605      93,055
      General taxes and other
       assessments                   15,881    18,479     100,023      96,187
        Total Operating Expenses    337,122   321,412   2,421,161   2,435,493

    OPERATING INCOME (LOSS)         (11,437)    2,199     224,847     202,390
    Other Income (Expenses)-Net         681       525       3,378       3,241
    Interest Expense
      Interest on long-term debt     10,000    10,048      40,047      40,634
      Other - net                     1,389     1,944       8,821       7,670
        Total Interest Expense       11,389    11,992      48,868      48,304
    Dividends on Washington Gas
     preferred stock                    330       330       1,320       1,320
    INCOME (LOSS) FROM CONTINUING
     OPERATIONS BEFORE INCOME
     TAXES                          (22,475)   (9,598)    178,037     156,007
    INCOME TAX EXPENSE (BENEFIT)     (8,931)   (2,370)     70,137      61,313

    INCOME (LOSS) FROM CONTINUING
     OPERATIONS                     (13,544)   (7,228)    107,900      94,694
    Loss from discontinued
     operations, net of income tax
     benefit                              -    (4,639)          -      (7,116)

    NET INCOME (LOSS) APPLICABLE
     TO COMMON STOCK               $(13,544) $(11,867)   $107,900     $87,578

    AVERAGE COMMON SHARES
     OUTSTANDING
      Basic                          49,312    48,817      49,172      48,773
      Diluted                        49,312    48,817      49,377      48,905

    EARNINGS (LOSS) PER AVERAGE
     COMMON SHARE
      Basic
        Income (loss) from continuing
         operations                  $(0.27)   $(0.15)      $2.19       $1.94
        Loss from discontinued
         operations                       -     (0.09)          -       (0.14)
          Basic earnings (loss) per
           average common share      $(0.27)   $(0.24)      $2.19       $1.80
      Diluted
        Income (loss) from continuing
         operations                  $(0.27)   $(0.15)      $2.19       $1.94
        Loss from discontinued
         operations                       -     (0.09)          -       (0.15)
          Diluted earnings (loss) per
           average common share      $(0.27)   $(0.24)      $2.19       $1.79


       Net Income (Loss) Applicable To Common Stock-By Segment ($000):

    Regulated utility              $(16,750) $(13,000)    $89,889     $84,599
    Non-utility operations:
      Retail energy-marketing         5,317     8,364      22,426      13,315
      Commercial HVAC                   192       126         367         450
        Total major non-utility       5,509     8,490      22,793      13,765
      Other, principally non-
       utility activities            (2,303)   (2,718)     (4,782)     (3,670)
        Total non-utility             3,206     5,772      18,011      10,095
    INCOME (LOSS) FROM CONTINUING
     OPERATIONS                     (13,544)   (7,228)    107,900      94,694
    Loss from discontinued
     operations, net of income tax
     benefit                              -    (4,639)          -      (7,116)
    NET INCOME (LOSS) APPLICABLE
     TO COMMON STOCK               $(13,544) $(11,867)   $107,900     $87,578



                               WGL Holdings, Inc.
                           Consolidated Balance Sheets
                               September 30, 2007
                                   (Unaudited)

                                               September 30,     September 30,
    (In thousands)                                 2007              2006

    ASSETS
    Property, Plant and Equipment
      At original cost                          $3,072,935        $2,949,951
      Accumulated depreciation and amortization   (922,494)         (882,056)
        Net property, plant and equipment        2,150,441         2,067,895

    Current Assets
      Cash and cash equivalents                      4,870             4,350
      Accounts receivable, net                     192,021           197,733
      Storage gas-at cost (first-in, first-out)    294,889           296,061
      Other                                         81,945            63,878
        Total current assets                       573,725           562,022
    Deferred Charges and Other Assets              322,195           161,489
        Total Assets                            $3,046,361        $2,791,406

    CAPITALIZATION AND LIABILITIES
    Capitalization
      Common shareholders' equity                 $980,767          $921,807
      Washington Gas Light Company
       preferred stock                              28,173            28,173
      Long-term debt                               616,419           576,139
        Total capitalization                     1,625,359         1,526,119

    Current Liabilities
      Notes payable and current maturities
       of long-term debt                           205,341           238,370
      Accounts payable and other accrued
       liabilities                                 216,861           201,401
      Other                                        134,854           121,071
        Total current liabilities                  557,056           560,842
    Deferred Credits                               863,946           704,445
        Total Capitalization and Liabilities    $3,046,361        $2,791,406



                               WGL Holdings, Inc.
                Consolidated Financial and Operating Statistics
                 For Periods Ended September 30, 2007 and 2006
                                  (Unaudited)

    FINANCIAL STATISTICS
                                                  Twelve Months Ended
                                                      September 30,
                                                2007               2006

    Closing Market Price-end of period            $33.89             $31.34
    52-Week Market Price Range             $35.91-$29.79      $32.88-$27.04
    Price Earnings Ratio                            15.5               17.4
    Annualized Dividends Per Share                 $1.37              $1.35
    Dividend Yield                                   4.0 %              4.3 %
    Return on Average Common Equity                 11.3 %              9.6 %
    Total Interest Coverage (times) (1)              4.6                4.2
    Book Value Per Share-end of period            $19.89             $18.86
    Common Shares Outstanding-end of
     period  (thousands)                          49,316             48,878

    (1) Calculated using income from continuing operations.


    UTILITY GAS STATISTICS
                             Three Months Ended         Twelve Months Ended
                                September 30,               September 30,
    (In thousands)            2007         2006          2007          2006

    Operating Revenues
      Gas Sold and Delivered
        Residential - Firm   $71,581      $71,587      $987,409   $1,049,655
        Commercial and
         Industrial - Firm    23,724       24,224       278,949      338,288
        Commercial and
         Industrial -
         Interruptible         1,080        1,441         6,618        8,190
        Electric Generation      283          275         1,108        1,232
                              96,668       97,527     1,274,084    1,397,365
      Gas Delivered for Others
        Firm                  17,484       16,918       139,675      135,988
        Interruptible          8,032        7,569        49,524       42,286
        Electric Generation       94           80           293          287
                              25,610       24,567       189,492      178,561
                             122,278      122,094     1,463,576    1,575,926
        Other                 11,810        9,828        33,698       46,584
          Total             $134,088     $131,922    $1,497,274   $1,622,510

                              Three Months Ended        Twelve Months Ended
                                 September 30,              September 30,
    (In thousands of therms)   2007         2006          2007          2006

    Gas Sales and Deliveries
      Gas Sold and Delivered
        Residential - Firm    37,204       41,306       648,701      593,594
        Commercial and
         Industrial - Firm    18,735       20,826       203,962      213,997
        Commercial and
         Industrial -
         Interruptible           940        1,404         5,275        6,185
                              56,879       63,536       857,938      813,776
      Gas Delivered for Others
        Firm                  41,427       45,320       433,420      403,812
        Interruptible         45,440       43,939       267,305      251,003
        Electric Generation   66,506       60,540       111,950      108,315
                             153,373      149,799       812,675      763,130
          Total              210,252      213,335     1,670,613    1,576,906

    WASHINGTON GAS ENERGY SERVICES
      Natural Gas Sales
        Therm Sales
         (thousands of
         therms)              73,830       81,156       725,465      696,694

        Number of
         Customers
         (end of period)     140,700      142,700       140,700      142,700

      Electricity Sales
        Electricity Sales
         (thousands
         of kWhs)          1,051,305    1,022,247     3,943,844    2,412,407

        Number of Accounts
         (end of period)      65,900       63,300        65,900       63,300

    UTILITY GAS PURCHASED
     EXPENSE
    (excluding off system)     94.76 c      75.08 c      103.04 c     124.56 c

    HEATING DEGREE DAYS
      Actual                      10           22         3,955        3,710
      Normal                      16           16         3,815        3,807
      Percent Colder (Warmer)
       than Normal             (37.5)%       37.5 %         3.7 %       (2.5)%

      Number of Active
       Customer Meters
       (end of period)     1,046,201    1,031,916     1,046,201     1,031,916



               WGL Holdings, Inc. (Regulated Utility Segment)
               For Periods Ended September 30, 2007 and 2006
                                (Unaudited)

                             Statements of Income

                              Three Months Ended     Twelve Months Ended
                                 September 30,          September 30,
    (In thousands)               2007      2006        2007        2006

    Operating Revenues         $136,643  $133,929  $1,513,839  $1,637,491
    Operating Expenses:
      Cost of gas                56,003    46,325     892,376   1,031,650
      Operation                  51,354    46,593     206,623     198,044
      Maintenance                10,129    10,469      39,685      38,423
      Depreciation and
       amortization              23,420    23,445      89,907      92,712
      General taxes and other
       assessments:
        Revenue taxes             6,683     9,243      55,949      55,964
        Other                     8,705     8,864      40,648      40,726
          Total operating
           expenses             156,294   144,939   1,325,188   1,457,519

    Operating income (loss)     (19,651)  (11,010)    188,651     179,972
    Other income (expenses)
     - net                          395       461       2,615       1,950
    Interest expense             10,953    10,914      45,157      44,026
    Dividends on Washington
     Gas preferred stock            330       330       1,320       1,320
    Income tax expense
     (benefit)                  (13,789)   (8,793)     54,900      51,977
            Net income (loss)  $(16,750) $(13,000)    $89,889     $84,599


                       Utility Net Revenues ($000) (1)

    Operating revenues         $136,643  $133,929  $1,513,839  $1,637,491
    Less:  Cost of gas           56,003    46,325     892,376   1,031,650
           Revenue taxes          6,683     9,243      55,949      55,964
      Utility net revenues      $73,957   $78,361    $565,514    $549,877

    (1)  We analyze the operating results of our regulated utility segment
         based on utility net revenues. Washington Gas Light Company includes
         the cost of the natural gas commodity and revenue taxes (comprised
         principally of gross receipts taxes) in its rates charged to
         customers as reflected in operating revenues. Accordingly, changes in
         the cost of gas and revenue taxes associated with sales made to
         customers have no direct effect on the net revenues or net income of
         the regulated utility segment.



                              WGL HOLDINGS, INC.
             USE OF NON-GAAP OPERATING EARNINGS (LOSS) PER SHARE
                                 (Unaudited)

The attached reconciliations are provided to clearly identify adjustments made to diluted earnings (loss) per average common share calculated in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP) to derive non-GAAP operating earnings (loss) per share. Management believes non-GAAP operating earnings (loss) per share provides a more meaningful representation of our earnings from ongoing operations by excluding the effects of: (i) warmer-than-normal/colder-than-normal weather, (ii) certain unusual transactions, (iii) unrealized mark-to-market gains and losses from energy-related derivatives and (iv) our discontinued operations. This presentation facilitates analysis by providing a consistent and comparable measure to help management, investors and analysts better understand and evaluate our operating results and performance trends. Additionally, we use this non-GAAP measure to report to the board of directors, evaluate management's performance and for incentive compensation purposes.

We exclude from non-GAAP operating earnings (loss) per share the effects of warmer-than-normal/colder-than-normal weather to "normalize" 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. Additionally, we exclude unrealized mark-to-market adjustments for our energy-related derivatives to provide a more transparent and accurate view of the ongoing financial results of our operations. When these derivatives settle, the economic impact is reflected in our non-GAAP operating results, as we are only removing the interim unrealized mark-to-market amounts which are ultimately reversed when these derivatives are settled. These non-GAAP adjustments also assist both management and investors to analyze period-over-period comparisons.

There are limits in using non-GAAP operating earnings (loss) per share to analyze our results, as it is not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. In addition, using non-GAAP operating earnings (loss) per share to analyze our earnings have limited value as it excludes 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 diluted earnings (loss) per average common share, the most directly comparable GAAP financial measure.


                WGL HOLDINGS, INC. (Consolidating by Segment)
  RECONCILIATION OF GAAP DILUTED EARNINGS (LOSS) PER AVERAGE COMMON SHARE TO
                 NON-GAAP OPERATING EARNINGS (LOSS) PER SHARE
                                 (Unaudited)

                      Twelve Months Ended September 30, 2007
                               Retail                        Dis-
                    Regulated  Energy-           Other     continued  Consoli-
                     Utility  Marketing  HVAC  Activities  Operations  dated

    GAAP diluted
     earnings (loss)
     per average
     common share       $1.82   $0.45    $0.01    $(0.09)      $-      $2.19
    Less: (Loss) from
     discontinued
     operations - net (a)   -       -        -         -        -          -
    GAAP diluted
     earnings (loss)
     per share from
     continuing
     operations         $1.82   $0.45    $0.01    $(0.09)      $-      $2.19
    Adjusted for:
    Colder-than-normal
     weather (b)        (0.06)      -        -         -        -      (0.06)
    Retroactive
     depreciation
     expense
     adjustment (c)     (0.05)      -        -         -        -      (0.05)
    Unrealized
     mark-to-market
     (gain) loss on
     energy-related
     derivatives (d)        -   (0.09)       -         -        -      (0.09)
    Non-GAAP operating
     earnings (loss)
     per share          $1.71   $0.36    $0.01    $(0.09)      $-      $1.99


                      Twelve Months Ended September 30, 2006
                               Retail                        Dis-
                    Regulated  Energy-           Other     continued  Consoli-
                     Utility  Marketing  HVAC  Activities  Operations  dated

    GAAP diluted
     earnings (loss)
     per average
     common share       $1.73   $0.27    $0.01    $(0.07)  $(0.15)     $1.79
    Less: (Loss) from
     discontinued
     operations - net (a)   -       -        -         -    (0.15)     (0.15)
    GAAP diluted
     earnings (loss)
     per share from
     continuing
     operations         $1.73   $0.27    $0.01    $(0.07)      $-      $1.94
    Adjusted for:
    Colder-than-normal
     weather (e)        (0.05)      -        -         -        -      (0.05)
    Reserve for
     disallowance of
     natural gas
     costs (f)           0.06       -        -         -        -       0.06
    Energy-marketing
     reversal of fee
     expense (g)            -   (0.04)       -         -        -      (0.04)
    Unrealized
     mark-to-market
     (gain) loss on
     energy-related
     derivatives (d)    (0.02)   0.05        -         -        -       0.03
    Non-GAAP operating
     earnings (loss)
     per share          $1.72   $0.28    $0.01    $(0.07)      $-      $1.94


                         Quarter Ended September 30, 2007
                               Retail                        Dis-
                    Regulated  Energy-           Other     continued  Consoli-
                     Utility  Marketing  HVAC  Activities  Operations  dated

    GAAP diluted
     earnings (loss)
     per average
     common share      $(0.34)  $0.11       $-    $(0.04)      $-     $(0.27)
    Less: (Loss) from
     discontinued
     operations - net (a)   -       -        -         -        -          -
    GAAP diluted
     earnings (loss)
     per share from
     continuing
     operations        $(0.34)  $0.11       $-    $(0.04)      $-     $(0.27)
    Adjustments for:
    Unrealized
     mark-to-market
     (gain) loss on
     energy-related
     derivatives (d)    (0.01)  (0.03)       -         -        -      (0.04)
    Non-GAAP operating
     earnings (loss)
     per share         $(0.35)  $0.08       $-    $(0.04)      $-     $(0.31)


                         Quarter Ended September 30, 2006
                               Retail                        Dis-
                    Regulated  Energy-           Other     continued  Consoli-
                     Utility  Marketing  HVAC  Activities  Operations  dated

    GAAP diluted
     earnings (loss)
     per average
     common share      $(0.27)  $0.17       $-    $(0.05)  $(0.09)    $(0.24)
    Less: (Loss) from
     discontinued
     operations - net (a)   -       -        -         -    (0.09)     (0.09)
    GAAP diluted
     earnings (loss)
     per share from
     continuing
     operations        $(0.27)  $0.17       $-    $(0.05)      $-     $(0.15)
    Adjustments for:
    Unrealized
     mark-to-market
     (gain) loss on
     energy-related
     derivatives (d)    (0.02)      -        -         -        -      (0.02)
    Non-GAAP operating
     earnings (loss)
     per share         $(0.29)  $0.17       $-    $(0.05)      $-     $(0.17)


    Footnotes
    (Footnote references a - g are described on the following page)



                 WGL HOLDINGS, INC. (Consolidated by Quarter)
  RECONCILIATION OF GAAP DILUTED EARNINGS (LOSS) PER AVERAGE COMMON SHARE TO
                 NON-GAAP OPERATING EARNINGS (LOSS) PER SHARE

                                 Fiscal Year 2007
                                     Quarterly Period Ended (h)
                                                                      Year-
                                Dec. 31  Mar. 31  Jun. 30  Sept. 30  To-Date
    GAAP diluted earnings
     (loss) per average
     common share                 $0.92    $1.29    $0.26   $(0.27)   $2.19
    Less: (Loss) from
     discontinued
     operations - net (a)             -        -        -        -        -
    GAAP diluted earnings
     (loss) per share from
     continuing operations        $0.92    $1.29    $0.26   $(0.27)   $2.19
    Adjusted for:
    Colder-than-normal
     weather (b)                      -    (0.02)   (0.04)       -    (0.06)
    Retroactive depreciation
     expense adjustment (c)       (0.05)       -        -        -    (0.05)
    Unrealized mark-to-market
     (gain) loss on energy-
     related derivatives (d)       0.03        -    (0.08)   (0.04)   (0.09)
    Non-GAAP operating
     earnings (loss) per share    $0.90    $1.27   $ 0.14   $(0.31)   $1.99


                                 Fiscal Year 2006
                                     Quarterly Period Ended (h)
                                                                      Year-
                                Dec. 31  Mar. 31  Jun. 30  Sept. 30  To-Date
    GAAP diluted earnings
     (loss) per average
     common share                 $0.91    $1.16   $(0.04)  $(0.24)   $1.79
    Less: (Loss) from
     discontinued
     operations - net (a)         (0.02)   (0.01)   (0.03)   (0.09)   (0.15)
    GAAP diluted earnings
     (loss) per share from
     continuing operations        $0.93    $1.17   $(0.01)  $(0.15)   $1.94
    Adjusted for:
    Warmer (colder)-than-normal
     weather (e)                  (0.07)    0.02        -        -    (0.05)
    Reserve for disallowance
     of natural gas costs (f)         -     0.06        -        -     0.06
    Energy-marketing reversal
     of fee expense (g)               -    (0.04)       -        -    (0.04)
    Unrealized mark-to-market
     (gain) loss on energy-
     related derivatives (d)       0.05     0.01    (0.01)   (0.02)    0.03
    Non-GAAP operating
     earnings (loss) per share    $0.91    $1.22   $(0.02)  $(0.17)   $1.94


    Footnotes:

    (a) Represents an adjustment for the discontinued operations of a
        commercial heating, ventilation and air conditioning subsidiary of WGL
        Holdings, sold in September 2006.

    (b) Weather was 4.9 percent and 31.8 percent colder than normal during the
        quarters ended March 31, 2007 and June 30, 2007, respectively.  There
        were no adjustments related to weather during the quarters ended
        December 31, 2006 or September 30, 2006.

    (c) Represents an adjustment that reduced depreciation expense applicable
        to the period from January 1, 2006, through September 30, 2006.  This
        adjustment was recorded in the first quarter of fiscal year 2007 upon
        approval of new depreciation rates by the staff of the Virginia State
        Corporation Commission.

    (d) Represents the change in the unrealized mark-to-market positions of
        our energy-related derivatives that are recorded to income during the
        period.  For the regulated utility segment, to the extent that our
        unrealized mark-to-market gains and losses are not shared with
        customers, these amounts are recorded directly to income.  All
        unrealized mark-to-market gains and losses for the retail-energy
        marketing segment are recorded directly to income.

    (e) Weather was 10.1 percent colder than normal and 8.9 percent warmer
        than normal during the quarters ended December 31, 2005 and March 31,
        2006, respectively.  There were no adjustments related to weather
        during the quarters ended June 30, 2006 or September 30, 2006.

    (f) Represents a charge recorded by the regulated utility segment related
        to a proposed order from a Hearing Examiner, which we are currently
        appealing to the Public Service Commission of Maryland, that
        recommends the disallowance of certain natural gas costs incurred by
        Washington Gas and collected from customers in a prior fiscal year.

    (g) Income recognized by the energy-marketing segment to reflect the
        reversal of fees that were previously assessed by the District of
        Columbia Public Service Commission and accrued in prior fiscal years.

    (h) 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 GAAP EARNINGS GUIDANCE TO
                          NON-GAAP EARNINGS GUIDANCE
                     FISCAL YEAR ENDED SEPTEMBER 30, 2008

                                   Consolidated
                                                               Low     High
    GAAP Earnings Guidance Range                              $2.08    $2.18
    Adjusted for:
    Unrealized mark-to-market loss on energy-related
     derivatives (a)                                           0.09     0.09
    Non-GAAP Earnings Guidance Range                          $2.17    $2.27


                            Regulated Utility Segment
                                                               Low     High
    GAAP Earnings Guidance Range                              $1.83    $1.89
    Adjusted for:
    Unrealized mark-to-market loss on energy-related
     derivatives (a)                                           0.01     0.01
    Non-GAAP Earnings Guidance Range                          $1.84    $1.90


                          Unregulated Business Segments
                                                              Low      High
    GAAP Earnings Guidance Range                             $0.25     $0.29
    Adjusted for:
    Unrealized mark-to-market loss on energy-related
     derivatives (a)                                          0.08      0.08
    Non-GAAP Earning Guidance Range                          $0.33     $0.37


    (a) Represents the reversal of certain of our existing unrealized mark-to-
        market positions related to our energy derivatives that will be
        recorded to income during fiscal year 2008. For the regulated utility
        segment, to the extent that our unrealized mark-to-market gains and
        losses are not shared with customers, these amounts are recorded
        directly to income. All unrealized mark-to-market gains and losses for
        the retail-energy marketing segment are recorded directly to income.



                    RECONCILIATIONS OF GAAP NET INCOME AND
            GAAP NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES TO
                                FREE CASH FLOW
                                 (Unaudited)

Below is a reconciliation of net income derived in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP) and GAAP Net Cash Flow provided by operating activities to free cash flow, a non-GAAP measure. We utilize free cash flow as a liquidity measure to determine our ability to generate sufficient cash from internal operations to finance long-term investments, most notably capital expenditures. The assumption underlying this analysis is that changes in working capital and changes in cash from other assets and other liabilities have no effect on free cash flow because they net to zero when combined over a period of several years.

We further use this measure to evaluate trends of our future needs for external debt and equity financing. This data can also be utilized to compare our performance to that of our peers. Free cash flow, as we define and utilize it, does not relate to cash available for discretionary expenditures. Additionally, there are limits in using free cash flow to measure our liquidity, as it is not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. We compensate for these limitations by providing investors with the reconciliations below.


       ANALYSIS OF TOTAL FREE CASH FLOW LESS THAN CAPITAL EXPENDITURES

                                                         Fiscal Year Ended
                                                           September 30,
    (In thousands)                                        2007        2006
    GAAP net income (applicable to common stock)        $107,900     $87,578
    Less: (Loss) from discontinued operations - net            -      (7,116)
    GAAP income from continuing operations               107,900      94,694
    Depreciation and amortization (a)                     93,256      96,843
    Change in deferred income taxes - accelerated
     depreciation                                          6,831       7,324
          Adjusted cash available before dividends       207,987     198,861
    Dividends on common stock                            (66,818)    (65,338)
    Total free cash flow (Non-GAAP Measure)              141,169     133,523
    Less: Capital expenditures (b)                      (158,101)   (161,496)
    Total Free Cash Flow Less than Capital Expenditures $(16,932)   $(27,973)


    (a) Includes amortization of other regulatory assets and liabilities as
        well as amortization of debt related costs.

    (b) Excludes Allowance for Funds Used During Construction.  Additionally,
        excludes adjustments for capital expenditures accrued and other cash-
        basis adjustments.



                 RECONCILIATION OF ANALYSIS OF FREE CASH FLOW
           TO GAAP-BASED NET CASH PROVIDED BY OPERATING ACTIVITIES

                                                         Fiscal Year Ended
                                                           September 30,
    (In thousands)                                        2007        2006
    GAAP net cash provided by operating activities      $213,298     $85,707
    Less: Net cash used in operating activities of
          discontinued operations                              -      (1,100)
    GAAP net cash provided by operating activities of
     continuing operations                               213,298      86,807

    Adjustments for:
    Deferred income taxes, except for accelerated
     depreciation                                            (35)     (2,343)
    Other, principally changes in assets and liabilities  (5,276)    114,397
         Adjusted cash available before dividends        207,987     198,861
    Dividends on common stock                            (66,818)    (65,338)
    Total Free Cash Flow (Non-GAAP Measure)             $141,169    $133,523

SOURCE WGL Holdings, Inc.

CONTACT:
Media:
Eric Grant
+1-202-624-6091
Investors:
Melissa E. Adams
+1-202-624-6410
of WGL Holdings, Inc.

Close window | Back to top