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WGL Holdings, Inc. Reports First Quarter Fiscal Year 2012 Financial Results; Affirms Fiscal Year 2012 Non-GAAP Guidance

WASHINGTON--(BUSINESS WIRE)-- 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 determined in accordance with generally accepted accounting principles in the United States of America (GAAP) for the quarter ended December 31, 2011 of $50.4 million, or $0.98 per share, compared to net income of $65.2 million, or $1.28 per share, reported for the quarter ended December 31, 2010.

Financial performance is also evaluated based on non-GAAP operating earnings (loss). Non-GAAP operating earnings (loss) excludes the effects of: (i) unrealized mark-to-market gains (losses) on energy-related derivatives in our regulated utility and retail energy marketing segments; (ii) certain gains and losses associated with optimizing the utility segment's system capacity assets and (iii) certain unusual transactions. In addition, non-GAAP operating earnings for our wholesale energy solutions segment reflect an adjustment to GAAP earnings to reflect storage inventory valued at current market prices. Refer to "Use of Non-GAAP Operating Earnings (Loss)" 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 net income determined in accordance with GAAP to non-GAAP operating earnings (loss) for both our consolidated and segment results.

For the quarter ended December 31, 2011, non-GAAP operating earnings were $58.1 million, or $1.13 per share, compared to non-GAAP operating earnings of $52.6 million, or $1.03 per share, for the same quarter of the prior fiscal year.

This quarter, we have made certain changes to our operating segments to reflect the recent growth of our non-utility business activities and the impact of those activities on our financial performance. All of our commercial energy assets and operating activities are now reported within a newly-defined operating segment entitled commercial energy systems. All activities of Washington Gas Energy Systems, Inc. (WGESystems) are included in the commercial energy systems segment. WGESystems had previously been reported in the design build energy systems segment, which is now being eliminated as an operating segment. In addition, we have transferred all commercial solar projects, previously reported under retail energy-marketing into the commercial energy systems segment. In the future, commercial solar projects, energy efficiency projects and combined heat and power projects, which we own and manage directly, will be reported as commercial energy systems. We have also established wholesale energy solutions as a new segment that contains the activities of Capitol Energy Ventures Corp. (CEV), our non-utility asset optimization business, which we began in fiscal year 2010 and previously included in our segment reporting as part of "other activities." Prior period operating segment information has been restated to reflect these new classifications.

"We are pleased to announce strong first quarter earnings that reflect our ongoing success in executing our strategies," said Terry D. McCallister, Chairman and Chief Executive Officer of WGL Holdings. "Our non-GAAP results improved compared to the prior year as we began to realize higher revenues from our recent rate cases as well as continued gains in our non-utility businesses. Based on these results and our optimism for the year ahead, we are affirming our non-GAAP guidance midpoint of $2.52 per share for 2012."

First Quarter Results by Business Segment

Regulated Utility Segment

For the quarter ended December 31, 2011, the regulated utility segment reported net income of $44.4 million, or $0.86 per share, an increase of $3.7 million or $0.06 per share, over net income of $40.7 million, or $0.80 per share, reported for the first quarter of the prior fiscal year. After adjustments, non-GAAP operating income for the regulated utility segment was $44.1 million, or $0.86 per share, for the quarter ended December 31, 2011, virtually unchanged from non-GAAP operating earnings of $44.3 million, or $0.87 per share, for the same quarter of the prior fiscal year. Higher revenues from the implementation of new rates in Virginia and Maryland and an increase of more than 9,300 average active customer meters were offset by: (i) lower realized margins associated with our asset optimization program; (ii) higher operation and maintenance expenses and (iii) higher depreciation expense due to the growth in, and changes in the asset mix of, our investment in utility.

Retail Energy-Marketing Segment

For the quarter ended December 31, 2011, the retail energy-marketing segment reported net income of $0.8 million, or $0.02 per share, compared to net income of $24.9 million, or $0.49 per share, reported for the same quarter of the prior fiscal year. Non-GAAP operating earnings for the retail energy-marketing segment were $13.1 million, or $0.25 per share, for the quarter ended December 31, 2011, an increase of $6.3 million, or $0.12 per share, over non-GAAP operating earnings of $6.8 million, or $0.13 per share, for the same quarter of the prior fiscal year. The differences between GAAP net income and non-GAAP operating earnings are due to adjustments to eliminate unrealized mark-to-market gains and losses attributable to certain wholesale energy supply and retail sales contracts. The increase in non-GAAP operating earnings reflects higher realized natural gas and electricity margins. The increase in natural gas sales margins for the quarter is primarily attributed to favorable spreads between retail prices and storage withdrawals and a more favorable pattern of margin recognition in the current quarter versus the same quarter of the prior year. These favorable impacts are partially offset by lower retail sales volumes resulting from warmer weather and less profitable portfolio optimization activity. Electric sales margins were higher due to favorable price conditions and a more favorable pattern of margin recognition in the current quarter versus the same quarter of the prior year. The pattern of margin recognition varies from year to year.

Commercial Energy Systems

For the quarter ended December 31, 2011, the commercial energy systems segment reported net income of $0.3 million compared to a net loss of $(2,000) for the same quarter last year. The increase in earnings is primarily due to the commencement of project work for government agency customers that was delayed in the prior year. There were no non-GAAP adjustments for this segment for any of the periods presented.

Wholesale Energy Solutions

For the quarter ended December 31, 2011, the wholesale energy solutions segment reported net income of $5.2 million, or $0.10 per share, an increase of $5.1 million, over net income of $0.1 million for the same period of the prior fiscal year. Non-GAAP operating earnings for the wholesale energy solutions segment were $1.0 million, or $0.02 per share, compared to $1.9 million, or $0.04 per share, for the same period of the prior fiscal year. Non-GAAP operating earnings for the year were lower than in the prior year principally due to lower market prices of natural gas supply as well as higher operation and maintenance expense as a result of new storage and optimization arrangements. Partially offsetting this decrease in operating earnings were higher recognized margins associated with our optimization strategies.

Earnings Outlook

We are raising our GAAP earnings estimate for the fiscal year 2012 to a range of $2.64 per share to $2.76 per share. This estimate includes projected fiscal year 2012 earnings from our regulated utility segment in a range of $1.84 per share to $1.90 per share and projected fiscal year 2012 earnings from our unregulated business segments in a range of $0.80 per share to $0.86 per share.

We are affirming our consolidated earnings estimate for fiscal year 2012 based on non-GAAP operating earnings to a range of $2.46 per share to $2.58 per share. This estimate includes projected fiscal year 2012 non-GAAP operating earnings from our regulated utility segment in a range of $1.82 per share to $1.88 per share, and projected fiscal year 2012 non-GAAP operating earnings from our unregulated business segments in a range of $0.64 per share to $0.70 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 per share estimate to our estimate based on non-GAAP operating earnings per share.

We assume no obligation to update this guidance. The absence of any statement by us in the future should not be presumed to represent an affirmation of this earnings guidance. For the assumptions underlying this guidance, please refer to the slides accompanying our webcast that will be posted to the WGL Holdings website, www.wglholdings.com.

Other Information

We will hold a conference call at 10:30 a.m. Eastern Time on February 6, 2012, to discuss our first quarter fiscal year 2012 financial results. The live conference call will be available to the public via a link located on the WGL Holdings website, www.wglholdings.com. 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 website through March 6, 2012.

Headquartered in Washington, D.C., WGL Holdings, Inc. has four 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; (iii) the commercial energy systems segment which consists of Washington Gas Energy Systems, Inc., a provider of design-build energy efficiency solutions to government and commercial clients and commercial solar projects and (iv) the wholesale energy solutions segment which consists of Capitol Energy Ventures Corp., an asset optimization business that acquires, manages and optimizes natural gas storage and transportation assets. Additional information about WGL Holdings, Inc. is available on our website, 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 net income determined in accordance with GAAP to non-GAAP operating earnings (loss) for both our consolidated and segment results as well as reconciliations of our GAAP earnings guidance to our non-GAAP earnings guidance.

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 we have filed with, or furnished to, the U.S. Securities and Exchange Commission.

 
WGL Holdings, Inc.
Consolidated Balance Sheets

(Unaudited)

             
  December 31,   September 30,
(In thousands)     2011     2011
ASSETS
Property, Plant and Equipment
At original cost $ 3,621,319 $ 3,575,973
Accumulated depreciation and amortization     (1,099,883 )     (1,086,072 )
Net property, plant and equipment     2,521,436       2,489,901  
 
Current Assets
Cash and cash equivalents 5,516 4,332
Accounts receivable, net 530,324 296,423
Storage gas 321,074 290,394
Other     161,367       133,584  
Total current assets     1,018,281       724,733  
Deferred Charges and Other Assets     614,817       594,400  
Total Assets   $ 4,154,534     $ 3,809,034  
 
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $ 1,235,719 $ 1,202,715
Washington Gas Light Company preferred stock 28,173 28,173
Long-term debt     584,041       587,213  
Total capitalization     1,847,933       1,818,101  
 
 
Current Liabilities
Notes payable and current maturities of long-term debt 278,081 116,525
Accounts payable and other accrued liabilities 299,415 279,434
Other     274,542       180,781  
Total current liabilities     852,038       576,740  
Deferred Credits     1,454,563       1,414,193  
Total Capitalization and Liabilities   $ 4,154,534     $ 3,809,034  
 
 

WGL Holdings, Inc.

Consolidated Statements of Income

(Unaudited)

             
  Three Months Ended
      December 31,
(In thousands, except per share data)     2011       2010  
OPERATING REVENUES  
Utility $ 364,147 $ 409,294
Non-utility     363,610       386,580  
Total Operating Revenues     727,757       795,874  
 
OPERATING EXPENSES
Utility cost of gas 155,309 208,620
Non-utility cost of energy-related sales 335,862 328,793
Operation and maintenance 81,624 77,568
Depreciation and amortization 24,240 22,644
General taxes and other assessments     36,797       40,472  
Total Operating Expenses     633,832       678,097  
 
OPERATING INCOME 93,925 117,777
Other Income — Net 1,041 888
Interest Expense
Interest on long-term debt 9,662 9,774
AFUDC and other — net     160       172  
Total Interest Expense     9,822       9,946  
INCOME BEFORE INCOME TAXES 85,144 108,719
INCOME TAX EXPENSE     34,376       43,157  
NET INCOME 50,768 65,562
Dividends on Washington Gas preferred stock     330       330  
 
NET INCOME APPLICABLE TO COMMON STOCK   $ 50,438     $ 65,232  
 
AVERAGE COMMON SHARES OUTSTANDING
Basic 51,438 51,067
Diluted     51,533       51,143  
 
EARNINGS PER AVERAGE COMMON SHARE
Basic $ 0.98 $ 1.28
Diluted   $ 0.98     $ 1.28  
 
Net Income (Loss) Applicable To Common Stock — By Segment ($000):
 
Regulated utility   $ 44,406     $ 40,684  
 
Non-utility operations:
Retail energy-marketing 845 24,935
Commercial energy systems 305 (2 )
Wholesale energy solutions 5,237 59
Other activities     (355 )     (444 )
Total non-utility     6,032       24,548  
NET INCOME APPLICABLE TO COMMON STOCK   $ 50,438     $ 65,232  
 
 
WGL Holdings, Inc.
Consolidated Financial and Operating Statistics

(Unaudited)

   
FINANCIAL STATISTICS
              Twelve Months Ended December 31,
              2011 2010
 

Closing Market Price — end of period

$ 44.22 $ 35.77
52-Week Market Price Range $44.99-$34.71 $40.00-$31.00
Price Earnings Ratio 22.2 14.3
Annualized Dividends Per Share $ 1.55 $ 1.51
Dividend Yield 3.5 % 4.2 %
Return on Average Common Equity 8.4 % 10.9 %
Total Interest Coverage (times) 5.3 6.2

Book Value Per Share — end of period

$ 24.00 $ 23.51

Common Shares Outstanding — end of period (thousands)

                51,484       51,113  
 
UTILITY GAS STATISTICS                      
Three Months Ended Twelve Months Ended
      December 31,     December 31,  
(In thousands)   2011 2010     2011   2010
 
Operating Revenues
Gas Sold and Delivered

Residential — Firm

$ 231,150 $ 271,438 $ 775,555 $ 872,335

Commercial and Industrial — Firm

52,092 65,216 182,536 202,019

Commercial and Industrial — Interruptible

549 782 2,257 3,188
Electric Generation     183     275       1,008       1,100  
      283,974     337,711       961,356       1,078,642  
Gas Delivered for Others
Firm 57,507 47,320 179,314 161,227
Interruptible 12,944 14,897 48,619 49,678
Electric Generation     138     70       527       511  
      70,589     62,287       228,460       211,416  
354,563 399,998 1,189,816 1,290,058
Other     9,584     9,296       29,618       26,491  
Total   $ 364,147   $ 409,294   $   1,219,434   $   1,316,549  
                       
Three Months Ended Twelve Months Ended
      December 31,     December 31,  
(In thousands of therms)   2011 2010     2011   2010
 
Gas Sales and Deliveries
Gas Sold and Delivered

Residential — Firm

183,200 238,172 622,587 683,778

Commercial and Industrial — Firm

49,497 63,039 165,665 180,376

Commercial and Industrial — Interruptible

    705     792       2,486       2,989  
      233,402     302,003       790,738       867,143  
Gas Delivered for Others
Firm 140,661 166,813 475,036 489,011
Interruptible 71,947 86,329 257,039 276,606
Electric Generation     7,827     16,311       132,071       178,175  
      220,435     269,453       864,146       943,792  
Total     453,837     571,456       1,654,884       1,810,935  
 
WASHINGTON GAS ENERGY SERVICES                      
Natural Gas Sales
Therm Sales (thousands of therms) 182,733 216,521 644,636 632,865
 
Number of Customers (end of period)     177,100     169,400       177,100       169,400  
 
Electricity Sales
Electricity Sales (thousands of kWhs) 2,512,580 2,446,455 10,857,998 9,849,274
 
Number of Accounts (end of period)     194,400     168,300       194,400       168,300  
 
UTILITY GAS PURCHASED EXPENSE
(excluding asset optimization)     67.33   ¢ 67.58   ¢   68.18   ¢   74.06 ¢
 
HEATING DEGREE DAYS                      
Actual 1,194 1,505 3,688 3,911
Normal 1,350 1,346 3,774 3,764
Percent Colder (Warmer) than Normal     (11.6 ) % 11.8   %   (2.3 ) %   3.9 %
 
Average Active Customer Meters     1,088,528     1,079,141       1,087,529       1,077,594  
 

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

The attached reconciliations are provided to clearly identify adjustments made to net income calculated in accordance with GAAP to derive non-GAAP operating earnings (loss). Management believes non-GAAP operating earnings (loss) provides a more meaningful representation of our earnings from ongoing operations by adjusting for the effects of: (i) unrealized mark-to-market gains and losses from energy-related derivatives for our regulated utility and retail marketing operations; (ii) certain gains and losses associated with optimizing the utility segment's capacity assets; (iii) changes in the measured value of our inventory for our wholesale energy solutions segment and (iv) certain unusual transactions. 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, and assist in analyzing period-to-period comparisons. Additionally, we use this non-GAAP measure to report to the board of directors and to evaluate management's performance. The economic substance underlying our adjustments to calculate non-GAAP operating earnings (loss) is as follows:

There are limits in using non-GAAP operating earnings (loss) to analyze our results, as they are 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 may 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 net income, the most directly comparable GAAP financial measure.

WGL HOLDINGS, INC. (Consolidating by Segment)
RECONCILIATION OF GAAP NET INCOME (LOSS) TO
NON-GAAP OPERATING EARNINGS (LOSS)

(Unaudited)

 
Three Months Ended December 31, 2011
(In thousands, except per share data)  

Regulated
Utility

 

Retail Energy-
Marketing

 

Commercial
Energy
Systems

 

Wholesale
Energy
Solutions

 

Other
Activities

  Consolidated
GAAP net income (loss)   $ 44,406   $ 845   $ 305   $ 5,237   $ (355 )   $ 50,438
Adjusted for (items shown after-tax):
Unrealized mark-to-market loss (gain) on energy-related derivatives (a) (212 ) 12,209 - - - 11,997
Storage optimization program (b) 138 - - - - 138
Weather derivative products (c) (228 ) - - - - (228 )
Change in measured value of inventory (d)     -       -       -       (4,238 )     -       (4,238 )
Non-GAAP operating earnings (loss)   $ 44,104     $ 13,054     $ 305     $ 999     $ (355 )   $ 58,107  
GAAP diluted earnings (loss) per average
common share (51,533 shares) $ 0.86 $ 0.02 $ 0.01 $ 0.10 $ (0.01 ) $ 0.98
Per share effect of non-GAAP adjustments     -       0.23       -       (0.08 )     -       0.15  
Non-GAAP operating earnings (loss) per share   $ 0.86     $ 0.25     $ 0.01     $ 0.02     $ (0.01 )   $ 1.13  
 
Three Months Ended December 31, 2010 (f)
(In thousands, except per share data)  

Regulated
Utility

 

Retail Energy-
Marketing

 

Commercial
Energy
Systems

 

Wholesale
Energy
Solutions

 

Other
Activities

 

Consolidated

GAAP net income (loss) $ 40,684 $ 24,935 $ (2 ) $ 59 $ (444 ) $ 65,232
Adjusted for (items shown after-tax):
Unrealized mark-to-market loss (gain) on energy-related derivatives (a) 5,930 (18,126 ) - - - (12,196 )
Storage optimization program (b) (1,720 ) - - - - (1,720 )
Weather derivative products (c) (182 ) - - - - (182 )
Change in measured value of inventory (d) - - - 1,878 - 1,878
Amortization of derivative contract termination (e)     (429 )     -       -       -       -       (429 )
Non-GAAP operating earnings (loss)   $ 44,283     $ 6,809     $ (2 )   $ 1,937     $ (444 )   $ 52,583  
GAAP diluted earnings (loss) per average
common share (51,143 shares) $ 0.80 $ 0.49 $ - $ - $ (0.01 ) $ 1.28
Per share effect of non-GAAP adjustments     0.07       (0.36 )     -       0.04       -       (0.25 )
Non-GAAP operating earnings (loss) per share   $ 0.87     $ 0.13     $ -     $ 0.04     $ (0.01 )   $ 1.03  
 
(Footnote references are described on the following page.)
 
WGL HOLDINGS, INC. (Consolidated by Quarter)
RECONCILIATION OF GAAP NET INCOME (LOSS) TO
NON-GAAP OPERATING EARNINGS (LOSS)

(Unaudited)

Fiscal Year 2012
      Quarterly Period Ended
(In thousands, except per share data)   Dec. 31   Mar. 31   Jun. 30   Sept. 30   Fiscal Year
GAAP net income   $ 50,438               $ 50,438
Adjusted for (items shown after-tax):
Unrealized mark-to-market loss on energy-related derivatives (a) 11,997 11,997
Storage optimization program (b) 138 138
Weather derivative products (c) (228 ) (228 )
Change in measured value of inventory (d)     (4,238 )                       (4,238 )
Non-GAAP operating earnings   $ 58,107                       $ 58,107  
Diluted average common shares outstanding     51,533                         51,533  
GAAP diluted earnings per average common share $ 0.98 $ 0.98
Per share effect of non-GAAP adjustments     0.15                         0.15  
Non-GAAP operating earnings per share   $ 1.13                       $ 1.13  
 
Fiscal Year 2011 (f)
      Quarterly Period Ended
(In thousands, except per share data)   Dec. 31   Mar. 31   Jun. 30   Sept. 30   Fiscal Year
GAAP net income $ 65,232 $ 65,232
Adjusted for (items shown after-tax):
Unrealized mark-to-market gain on energy-related derivatives (a) (12,196 ) (12,196 )
Storage optimization program (b) (1,720 ) (1,720 )
Weather derivative products (c) (182 ) (182 )
Change in measured value of inventory (d) 1,878 1,878
Amortization of derivative contract termination (e)     (429 )                       (429 )
Non-GAAP operating earnings   $ 52,583                       $ 52,583  
Diluted average common shares outstanding     51,143                         51,143  
GAAP diluted earnings per average common share $ 1.28 $ 1.28
Per share effect of non-GAAP adjustments     (0.25 )                       (0.25 )
Non-GAAP operating earnings per share   $ 1.03                       $ 1.03  
 

Footnotes:

(a)

 

Adjustments to eliminate the change in the unrealized mark-to-market positions of our energy-related derivatives that were 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 and the wholesale energy solutions segment are recorded directly to income.

(b)

Adjustments to shift the timing of storage optimization margins 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)

Represents weather derivatives that are recorded at fair value rather than being valued based on actual variations from normal weather. Thus, any portion of recorded fair value that is not directly offset by an increase/decrease in revenue due to weather is excluded for non-GAAP purposes.

(d)

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.

(e)

During the fourth quarter of fiscal year 2009, Washington Gas terminated a long-term energy-related derivative contract related to its transportation capacity optimization and recognized an associated loss of $3.9 million for GAAP purposes. For non-GAAP purposes, this loss is being recognized in this period to be matched against the margins earned in the quarters that would have been constrained if the contract had not been terminated.

(f)

Consolidated non-GAAP earnings have been revised to reflect the change in the non-GAAP adjustment methodology in the wholesale energy solutions segment to include unrealized gains and losses of physical and financial purchase and sales contracts in non-GAAP earnings and to value the storage inventory to market value or to the price used in valuing the physical forward sale economically hedging the storage.

WGL HOLDINGS, INC.
RECONCILIATION OF GAAP EARNINGS GUIDANCE TO
NON-GAAP EARNINGS GUIDANCE
FISCAL YEAR ENDING SEPTEMBER 30, 2012
Consolidated
      Low     High
GAAP Earnings Per Share Guidance Range   $ 2.64   $ 2.76
Adjusted for:

Unrealized mark-to-market gain on energy-related derivatives (a)

(0.08 ) (0.08 )

Storage optimization program (b)

0.01 0.01

Retroactive depreciation expense adjustment (c)

(0.03 ) (0.03 )

Change in measured value of inventory (d)

    (0.08 )     (0.08 )
Non-GAAP Operating Earnings Per Share Guidance Range   $ 2.46     $ 2.58  
 
 
Regulated Utility Segment
      Low     High
GAAP Earnings Per Share Guidance Range $ 1.84 $ 1.90
Adjusted for:

Storage optimization program (b)

0.01 0.01

Retroactive depreciation expense adjustment (c)

    (0.03 )     (0.03 )

Non-GAAP Operating Earnings Per Share Guidance Range

  $ 1.82     $ 1.88  
 
 
Unregulated Business Segments
      Low     High
GAAP Earnings Per Share Guidance Range $ 0.80 $ 0.86
Adjusted for:

Unrealized mark-to-market gain on energy-related derivatives (a)

(0.08 ) (0.08 )

Change in measured value of inventory (d)

    (0.08 )     (0.08 )
Non-GAAP Operating Earnings Per Share Guidance Range   $ 0.64     $ 0.70  

Footnotes:

(a)

 

Represents the estimated 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 2012. 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 and the wholesale energy solutions segment in the other activities segment are recorded directly to income.

(b)

Adjustments to shift the timing of storage optimization margins 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)

Represents an adjustment that reduces depreciation expense applicable to the period from January 1, 2010 through September 30, 2011. This adjustment will be recorded upon approval of new depreciation rates by the Virginia State Corporation Commission (SCC of VA).

(d)

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.

WGL Holdings, Inc.
News Media
Ruben Rodriguez, 202-624-6620
or
Financial Community
Douglas Bonawitz, 202-624-6129

Source: WGL Holdings, Inc.

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