Consolidated earnings per share —— $0.36 per share vs. $1.01 per share for the same quarter of the prior year Consolidated non-GAAP operating earnings per share —— $0.99 per share vs. $1.14 per share for the same quarter of the prior year Earnings Guidance for fiscal year 2014 —— affirming a range from $2.15 to $2.35 per share for non-GAAP operating earnings 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, 2013 , of $18.6 million , or $0.36 per share, compared to net income of $52.4 million , or $1.01 per share, reported for the quarter ended December 31, 2012 . Financial performance is also evaluated based on non-GAAP operating earnings (loss). Non-GAAP operating earnings (loss) adjusts for the effects of applying GAAP to certain transactions or classes of transactions that are not representative of the ongoing operating earnings of the company. 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 non-GAAP operating earnings, 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, 2013 , non-GAAP operating earnings were $51.4 million , or $0.99 per share, compared to non-GAAP operating earnings of $58.9 million , or $1.14 per share, for the same quarter of the prior fiscal year. “I am pleased to announce first quarter non-GAAP results that exceeded our internal expectations and showed strong growth in earnings at our regulated utility,” said Terry McCallister , Chairman and Chief Executive Officer. “These results were driven both by higher revenues and lower O&M expenses. I am also pleased with our very strong operational performance as we maintained uninterrupted service to our customers during an extremely cold winter marked by several days of natural gas send out that were among the highest in our history. “While volatile electricity costs in the PJM market continue to pressure the earnings of our retail energy-marketing business, the impact of the cold weather on natural gas spreads is expected to improve results at both our midstream energy services and utility segments and allow us to deliver annual results at the high end of our guidance. “Additionally, our board of directors has approved an eight-cent increase in our dividend to an annual rate of $1.76 per share. This increase is consistent with our previously announced goal of maintaining a 5% dividend growth rate, and reflects our continued confidence in our ability to achieve our strategic goals and accelerate our underlying earnings growth rate. This increase marks the 38 th year of consecutive dividend increases and the 163 rd year that we have paid a dividend.” First Quarter Results by Business Segment Regulated Utility For the quarter ended December 31, 2013 , the regulated utility segment reported net income of $38.7 million , or $0.75 per share, compared to net income of $38.7 million , or $0.75 per share, reported for the same quarter of the prior fiscal year. After adjustments, non-GAAP operating earnings for the regulated utility segment were $50.4 million , or $0.97 per share, for the quarter ended December 31, 2013 , an increase of $6.5 million , or $0.12 per share, over non-GAAP operating earnings of $43.9 million , or $0.85 per share, for the same quarter of the prior fiscal year. Higher non-GAAP operating earnings reflect higher revenues from customer growth, new base rates in Maryland , accelerated pipe replacement programs and favorable effects of changes in natural gas consumption patterns in the District of Columbia . Partially offsetting these favorable variances were higher property taxes. Retail Energy-Marketing For the quarter ended December 31, 2013 , the retail energy-marketing segment reported net income of $3.3 million , or $0.06 per share, compared to net income of $13.0 million , or $0.25 per share, reported for the same quarter of the prior fiscal year. Non-GAAP operating earnings for the retail energy-marketing segment were $1.0 million , or $0.02 per share, for the quarter ended December 31, 2013 , compared to non-GAAP operating earnings of $12.0 million , or $0.23 per share, for the same quarter of the prior fiscal year. Non-GAAP operating earnings reflect lower realized electric margins primarily due to higher electric capacity charges and higher ancillary services charges from the regional power grid operator (PJM) versus the same quarter of the prior year. Natural gas realized margins decreased due to timing issues on gas supply costs partially offset by higher realized gas margins on portfolio optimization activity. The pattern of margin recognition that the retail energy-marketing segment realizes in a given quarter varies from year to year. Commercial Energy Systems For the quarter ended December 31, 2013 , the commercial energy systems segment reported a net loss of $(0.1) million , compared to net income of $1.0 million , or $0.02 per share, for the same quarter of the prior fiscal year. The decrease in earnings is due to lower revenue from project work for government agency customers. There were no non-GAAP adjustments for this segment for any of the periods presented. Midstream Energy Services Segment For the quarter ended December 31, 2013 , the midstream energy services segment reported a net loss of $(21.8) million , or $(0.42) per share, compared to net income of $1.3 million , or $0.02 per share, for the same period of the prior fiscal year. Non-GAAP operating earnings for the midstream energy services segment were $1.2 million , or $0.02 per share, compared to non-GAAP operating earnings of $3.5 million , or $0.07 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 unfavorable storage spreads partially offset by lower expenses. Other Activities For the quarter ended December 31, 2013 , other activities reported a net loss of $(1.7) million , or $(0.03) per share, compared to a net loss of $(1.6) million , or $(0.03) per share, for the same quarter of the prior fiscal year. Non-GAAP operating losses for other activities were $(1.2) million , or $(0.02) per share, compared to non-GAAP operating losses of $(1.6) million , or $(0.03) per share, for the same period of the prior fiscal year. The non-GAAP comparisons reflect the positive impact of tax sharing allocations partially offset by corporate branding initiative costs and our ongoing business development activities. Earnings Outlook We are affirming our non-GAAP consolidated earnings estimate for fiscal year 2014 in a range of $2.15 per share to $2.35 per share. In providing fiscal year 2014 earnings guidance, management is aware that there could be differences between what is reported earnings and estimated earnings for 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 February 6, 2014 , to discuss our first quarter fiscal year 2014 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 the “Webcast” link located on the home page of the referenced site. The webcast and related slides will be archived on WGL's website through March 6, 2014 . Headquartered in Washington, D.C. , WGL is a leading source for clean and efficient energy solutions. Through our affiliates and strategic relationships, the Company offers a diverse set of energy sources including natural gas, wind and solar as well as a range of energy solutions – generation, storage, transportation, distribution, supply and efficiency – which serve customers in more than 25 states. WGL has five operating segments: Washington Gas Light Company , a regulated natural gas utility serving approximately 1.1 million customers in the metropolitan Washington, D.C. , area; Washington Gas Energy Services, Inc. , one of the largest natural gas, electricity and green energy suppliers in the Mid-Atlantic; Washington Gas Energy Systems, Inc. , a distributed generation and energy efficiency business, offering solar, fuel cell, combined heat and power, and other technologies across the United States ; WGL Midstream, a midstream energy services business, investing in and optimizing natural gas pipelines and storage facilities in the Midwest and Eastern United States ; and Hampshire Gas , a natural gas storage business which owns and operates facilities in and around Hampshire County, West Virginia . As product and service innovation are critical for value creation and sustaining growth, we are continuously increasing our assets and investments in targeted clean energy sectors. This strategy supports WGL's core business, as well as provides opportunity for growth through partnerships and investments. WGL’s diversity is its strength. We are dedicated to the sustainability of our business, the customers and communities we serve, and the environment. To learn more, visit 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) 2013 2013 ASSETS Property, Plant and Equipment At original cost $ 4,169,718 $ 4,118,149 Accumulated depreciation and amortization (1,222,359 ) (1,210,686 ) Net property, plant and equipment 2,947,359 2,907,463 Current Assets Cash and cash equivalents 4,810 3,478 Accounts receivable, net 599,005 318,534 Storage gas 241,868 347,291 Other 194,604 150,708 Total current assets 1,040,287 820,011 Deferred Charges and Other Assets 643,880 532,586 Total Assets $ 4,631,526 $ 4,260,060 CAPITALIZATION AND LIABILITIES Capitalization Common shareholders' equity $ 1,272,861 $ 1,274,545 Washington Gas Light Company preferred stock 28,173 28,173 Long-term debt 599,223 524,067 Total capitalization 1,900,257 1,826,785 Current Liabilities Notes payable and current maturities of long-term debt 473,300 440,100 Accounts payable and other accrued liabilities 313,955 270,658 Other 303,116 239,319 Total current liabilities 1,090,371 950,077 Deferred Credits 1,640,898 1,483,198 Total Capitalization and Liabilities $ 4,631,526 $ 4,260,060 WGL Holdings, Inc. Consolidated Statements of Income (Unaudited) Three Months Ended December 31 , (In thousands, except per share data) 2013 2012 OPERATING REVENUES Utility $ 386,541 $ 347,933 Non-utility 293,756 338,803 Total Operating Revenues 680,297 686,736 OPERATING EXPENSES Utility cost of gas 186,881 142,970 Non-utility cost of energy-related sales 305,351 299,149 Operation and maintenance 88,142 83,630 Depreciation and amortization 26,590 27,304 General taxes and other assessments 40,621 39,067 Total Operating Expenses 647,585 592,120 OPERATING INCOME 32,712 94,616 Equity in earnings of unconsolidated affiliates 490 245 Other income — net 219 429 Interest expense 8,992 9,193 INCOME BEFORE INCOME TAXES 24,429 86,097 INCOME TAX EXPENSE 5,470 33,379 NET INCOME 18,959 52,718 Dividends on Washington Gas Light Company preferred stock 330 330 NET INCOME APPLICABLE TO COMMON STOCK $ 18,629 $ 52,388 AVERAGE COMMON SHARES OUTSTANDING Basic 51,816 51,631 Diluted 51,827 51,688 EARNINGS PER AVERAGE COMMON SHARE Basic $ 0.36 $ 1.01 Diluted $ 0.36 $ 1.01 Net Income (Loss) Applicable To Common Stock — By Segment ($000): Regulated utility $ 38,721 $ 38,666 Non-utility operations: Retail energy-marketing 3,315 13,021 Commercial energy systems (137 ) 1,038 Midstream energy services (21,788 ) 1,276 Other activities (1,683 ) (1,613 ) Total non-utility (20,293 ) 13,722 Intersegment eliminations 201 - NET INCOME APPLICABLE TO COMMON STOCK $ 18,629 $ 52,388 WGL Holdings, Inc. Consolidated Financial and Operating Statistics (Unaudited) FINANCIAL STATISTICS Twelve Months Ended December 31 , 2013 2012 Closing Market Price — end of period $ 40.06 $ 39.19 52-Week Market Price Range $ 46.96-$37.96 $ 44.97-$35.96 Price Earnings Ratio 44.5 14.3 Annualized Dividends Per Share $ 1.68 $ 1.60 Dividend Yield 4.2 % 4.1 % Return on Average Common Equity 3.6 % 11.2 % Total Interest Coverage (times) 2.7 7.3 Book Value Per Share — end of period $ 24.55 $ 25.23 Common Shares Outstanding — end of period (thousands) 51,842 51,651 UTILITY GAS STATISTICS Three Months Ended Twelve Months Ended December 31 , December 31 , (In thousands) 2013 2012 2013 2012 Gas Sold and Delivered Residential — Firm $ 244,921 $ 221,411 $ 763,742 $ 687,937 Commercial and Industrial — Firm 60,218 51,128 183,404 154,565 Commercial and Industrial — Interruptible 521 488 2,755 1,524 Electric Generation 275 275 1,100 1,192 305,935 273,302 951,001 845,218 Gas Delivered for Others Firm 56,222 54,315 179,510 170,418 Interruptible 13,025 14,085 50,062 47,264 Electric Generation 114 81 589 670 69,361 68,481 230,161 218,352 375,296 341,783 1,181,162 1,063,570 Other 11,245 6,150 32,170 29,570 Total $ 386,541 $ 347,933 $ 1,213,332 $ 1,093,140 Three Months Ended Twelve Months Ended December 31 , December 31 , (In thousands of therms) 2013 2012 2013 2012 Gas Sold and Delivered Residential — Firm 226,067 209,492 677,000 566,497 Commercial and Industrial — Firm 63,171 55,414 188,698 155,432 Commercial and Industrial — Interruptible 562 704 2,756 2,042 289,800 265,610 868,454 723,971 Gas Delivered for Others Firm 158,642 150,460 496,364 446,496 Interruptible 77,697 76,037 272,543 247,121 Electric Generation 37,118 51,217 163,434 386,707 273,457 277,714 932,341 1,080,324 Total 563,257 543,324 1,800,795 1,804,295 WASHINGTON GAS ENERGY SERVICES Natural Gas Sales Therm Sales (thousands of therms) 210,566 210,890 702,148 638,577 Number of Customers (end of period) 168,000 174,000 168,000 174,000 Electricity Sales Electricity Sales (thousands of kWhs) 2,828,393 2,803,717 12,157,695 12,086,009 Number of Accounts (end of period) 189,000 186,800 189,000 186,800 UTILITY GAS PURCHASED EXPENSE (excluding asset optimization) 56.35˘ 51.23˘ 55.20˘ 54.41˘ HEATING DEGREE DAYS Actual 1,394 1,309 3,854 3,151 Normal 1,344 1,348 3,771 3,797 Percent Colder (Warmer) than Normal 3.7 % (2.9 )% 2.2 % (17.0 )% Average Active Customer Meters 1,111,138 1,099,176 1,107,901 1,096,622 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 segments; (ii) unrealized gains (losses) on certain derivatives for the long-term purchase of natural gas for the midstream energy services segment; (iii) certain gains and losses associated with optimizing the utility segment’s capacity assets; (iv) changes in the measured value of our inventory for our midstream energy services segment; (v) for our regulated utility segment , the estimated financial effects of warmer-than-normal/colder-than-normal weather as measured consistent with our jurisdictional tariffs, to the extent the effects are not offset by weather protection mechanisms; (vi) incremental legal and consulting costs associated with business development activities; and (vii) 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, to forecast future results 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: To provide a more transparent and accurate view of the ongoing financial results of our operations, we exclude unrealized mark-to-market adjustments for our energy-related derivatives for our regulated utility and retail energy-marketing operations as well as certain derivatives for the long-term purchase of natural gas for the midstream energy services segment. i. For our regulated utility segment, we use derivatives with the primary objective of locking in a future profit. This profit does not change even though the unrealized fair value of the underlying derivatives may change period-to-period, until settlement. Additionally, for the regulated utility segment, sharing with customers is based on realized profit, and does not factor in unrealized gains and losses; therefore, excluding these unrealized losses is consistent with regulatory sharing requirements. ii. For our retail energy-marketing segment, we use derivatives to lock in a price for energy supplies to match future retail sales commitments. These derivatives are subject to mark-to-market treatment, while most of the corresponding retail sales contracts are not. iii. For the midstream energy services segment, we have entered into certain long-term natural gas purchase agreements which are accounted for as derivatives. These agreements were entered into to take advantage of potential basis spreads, not to hedge inventory. When the natural gas is delivered in the future, any gains and losses from the physical sale of that gas will be recognized. With the exception of certain transactions related to the optimization of system capacity assets as discussed below, when these derivatives settle, the realized economic impact is reflected in our non-GAAP operating results, as we are only removing interim unrealized mark-to-market amounts. We adjust for certain gains and losses associated with the optimization of the regulated utility segment’s capacity assets. Transactions to optimize our system storage capacity assets are structured to lock in a profit that is recognized, for regulatory purposes, as the natural gas is delivered to end-use customers. These transactions may result in gains and losses that consist of: (i) the settlement of physical and financial derivatives related to the management of our storage inventory; and (ii) lower-of-cost or market adjustments from the difference between the cost of physical inventory compared to the amount realized through rates when the inventory is ultimately delivered to customers. In our GAAP results, due to timing differences between when the physical and financial transactions settle, and when the natural gas is sold to the end-use customer, gains and losses associated with our storage optimization strategy may be spread across different reporting periods. For purposes of calculating non-GAAP operating earnings (loss), gains and losses associated with these transactions are included in the reporting period when the gas is delivered to the end-use customer and the ultimate profit is realized for regulatory purposes. These adjustments reflect a better matching between the economic costs and benefits of the overall optimization strategy. We also exclude valuation adjustments to the carrying value of non-system natural gas storage inventory in our regulated utility segment. This inventory is held solely to support asset optimization transactions. Valuation adjustments to reflect lower-of-cost or market under current accounting standards may not be representative of the margins that will be realized and shared with our utility ratepayers. Non-GAAP earnings reflect actual margins realized based on the unadjusted historical cost in storage when inventory is withdrawn and sold. Our non-utility midstream energy services segment owns natural gas storage inventory in connection with its asset optimization strategies. Certain storage inventory is economically hedged with physical sales contracts. We adjust the value of that inventory using the same forward price that is used to calculate the fair value of the related physical sales contracts under derivative accounting requirements. The remaining storage optimization inventory is valued using delivered market prices for the month following the end of the reporting period. 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 allows our reported non-GAAP earnings to better align with 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. Washington Gas has regulatory weather protection mechanisms in Maryland and Virginia designed to neutralize the estimated financial effects of weather. In the District of Columbia, Washington Gas may enter into weather protection products to help neutralize the estimated financial effects of warm or cold weather. To the extent that Washington Gas does not have weather protection or products, or the effects of weather exceed our weather protection, we will exclude these effects from non-GAAP operating earnings (loss). 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. We exclude certain incremental legal and consulting costs associated with business development activities. These costs are unpredictable and may vary greatly with each opportunity. Management believes by excluding these costs, it allows both management and investors to better compare, analyze and forecast the performance of our revenue generating operations. We exclude certain unusual transactions that may be the result of regulatory or legal decisions, or items that we may deem outside of the ordinary course of business. 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, 2013 (In thousands, except per share data) Regulated Utility Retail Energy- Marketing Commercial Energy Systems Midstream Energy Services Other Activities Intersegment Eliminations Consolidated GAAP net income (loss) $ 38,721 $ 3,315 $ (137) $ (21,788) $ (1,683) $ 201 $ 18,629 Adjusted for (items shown after-tax): (a) Unrealized mark-to-market loss (gain) on energy-related derivatives (b) 15,762 (2,349) - 14,380 - - 27,793 Storage optimization program (c) (1,123) - - - - - (1,123) Change in measured value of inventory (d) - - - 8,597 - - 8,597 Competitive service provider imbalance cash settlement (e) (294) - - - - - (294) Incremental professional services fees (f) - - - - 440 - 440 Impairment loss on Springfield Operations Center (g) 464 - - - - - 464 DC weather impact (h) 513 - - - - - 513 Regulatory asset - tax effect Medicare Part D (i) (3,621) - - - - - (3,621) Non-GAAP operating earnings (loss) $ 50,422 $ 966 $ (137) $ 1,189 $ (1,243) $ 201 $ 51,398 GAAP diluted earnings (loss) per average common share (51,827 shares) $ 0.75 $ 0.06 $ - $ (0.42) $ (0.03) $ - $ 0.36 Per share effect of non-GAAP adjustments 0.22 (0.04) - 0.44 0.01 - 0.63 Non-GAAP operating earnings (loss) per share $ 0.97 $ 0.02 $ - $ 0.02 $ (0.02) $ - $ 0.99 Three Months Ended December 31, 2012 (In thousands, except per share data) Regulated Utility Retail Energy- Marketing Commercial Energy Systems Midstream Energy Services Other Activities Intersegment Eliminations Consolidated GAAP net income (loss) $ 38,666 $ 13,021 $ 1,038 $ 1,276 $ (1,613) $ - $ 52,388 Adjusted for (items shown after-tax): (a) Unrealized mark-to-market loss (gain) on energy-related derivatives (b) 5,205 (1,055) - - - - 4,150 Storage optimization program (c) (90) - - - - - (90) Change in measured value of inventory (d) - - - 2,271 - - 2,271 Weather derivative products (j) 143 - - - - - 143 Non-GAAP operating earnings (loss) $ 43,924 $ 11,966 $ 1,038 $ 3,547 $ (1,613) $ - $ 58,862 GAAP diluted earnings (loss) per average common share (51,688 shares) $ 0.75 $ 0.25 $ 0.02 $ 0.02 $ (0.03) $ - $ 1.01 Per share effect of non-GAAP adjustments 0.10 (0.02) - 0.05 - - 0.13 Non-GAAP operating earnings (loss) per share $ 0.85 $ 0.23 $ 0.02 $ 0.07 $ (0.03) $ - $ 1.14 (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 2014 Quarterly Period Ended (In thousands, except per share data) Dec. 31 Mar. 31 Jun. 30 Sept. 30 Fiscal Year GAAP net income $ 18,629 $ 18,629 Adjusted for (items shown after-tax): (a) Unrealized mark-to-market loss on energy-related derivatives (b) 27,793 27,793 Storage optimization program (c) (1,123) (1,123) Change in the measured value of inventory (d) 8,597 8,597 Competitive service provider imbalance cash settlement (e) (294) (294) Incremental professional services fees (f) 440 440 Impairment loss on Springfield Operations Center (g) 464 464 DC weather impact (h) 513 513 Regulatory asset - tax effect Medicare Part D (i) (3,621) (3,621) Non-GAAP operating earnings $ 51,398 $ 51,398 Diluted average common shares outstanding 51,827 51,827 GAAP diluted earnings per average common share $ 0.36 $ 0.36 Per share effect of non-GAAP adjustments 0.63 0.63 Non-GAAP operating earnings per share $ 0.99 $ 0.99 Fiscal Year 2013 Quarterly Period Ended (In thousands, except per share data) Dec. 31 Mar. 31 Jun. 30 Sept. 30 Fiscal Year GAAP net income $ 52,388 $ 52,388 Adjusted for (items shown after-tax): (a) Unrealized mark-to-market loss on energy-related derivatives (b) 4,150 4,150 Storage optimization program (c) (90) (90) Change in the measured value of inventory (d) 2,271 2,271 Weather derivative products (j) 143 143 Non-GAAP operating earnings $ 58,862 $ 58,862 Diluted average common shares outstanding 51,688 51,688 GAAP diluted earnings per average common share $ 1.01 $ 1.01 Per share effect of non-GAAP adjustments 0.13 0.13 Non-GAAP operating earnings per share $ 1.14 $ 1.14 Footnotes: (a) Non-GAAP adjustments are shown net of tax based on the composite tax rate for each segment. For the three months ended December 31, 2013 and 2012, the tax expenses related to the adjustments were $21.9 million and $4.1 million , respectively. (b) Adjustments to eliminate the change in the unrealized mark-to-market positions of our energy-related derivatives for regulated utility, retail energy-marketing, as well as certain derivatives for the long-term purchase of natural gas for the midstream energy services segment that were recorded to income during the period. For the regulated utility segment, the portion of our unrealized mark-to-market gains and losses that are not recognized as being shared with customers are recorded directly to income for GAAP purposes. All unrealized mark-to-market gains and losses for the retail energy-marketing and midstream energy services segments are recorded directly to income. (c) 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. (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. This adjustment also includes the estimated effects of certain sharing mechanisms on all of our non-GAAP unrealized gains and losses. (e) Represents amounts collected and expected to be collected by the regulated utility segment and the expense and payment made by the retail energy-marketing segment to the regulated utility segment in relation to the refund to customers ordered by the Public Service Commission of Maryland (PSC of MD) in September 2011 associated with a cash settlement of gas imbalances with competitive service providers. The order remanded the matter to a hearing examiner to determine the amount of the refund as the difference between charges made to customers and the charges that would have been incurred had the imbalances been made up through volumetric adjustments. (f) These costs include incremental legal and consulting costs in connection with business development activities. These costs are unpredictable and may vary greatly with each opportunity. Management believes by excluding these costs, it allows both management and investors to better compare, analyze and forecast the performance of our revenue generating opportunities. (g) During the first quarter of fiscal year 2014, Washington Gas recorded an impairment charge related to its Springfield Operations Center . Non-GAAP earnings have been adjusted to reflect a comparable measure in analyzing period-to-period comparisons. (h) Eliminates the estimated financial effects of warm or cold weather in the District of Columbia , as measured consistent with our regulatory tariff. For fiscal year 2014, Washington Gas did not enter into weather protection products due to recent rate case activity and the pricing environment. (i) In March 2010 , the Patient Protection and Affordable Care Act (PPACA) eliminated future Medicare Part D (Med D) tax benefits for Washington Gas' tax years beginning after September 30, 2013 . On March 30, 2012 , based on positions taken by the PSC of MD in Washington Gas’ rate case, Washington Gas determined that it is not probable that the PSC of MD would permit recovery of this asset. Therefore, the Maryland portion of the regulatory asset related to the Med D benefit was charged to tax expense. In November of 2013, the PSC of MD issued an order authorizing Washington Gas to establish a regulatory asset and amortize the costs related to the change in tax treatment of Med D. (j) For fiscal year 2013, Washington Gas entered into weather derivatives to neutralize the estimated financial effects of weather in the District of Columbia . These weather derivatives were recorded at fair value rather than being valued based on actual variations from normal weather. This adjustment is to exclude the portion of the fair value that is not directly offset by an increase/decrease in revenue due to weather. 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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