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February 3, 2005 at 12:00 AM EST
WGL Holdings, Inc. Reports Increased First Quarter Earnings and Raises Fiscal Year 2005 Earnings Guidance
WGL Holdings, Inc. Reports Increased First Quarter Earnings and Raises Fiscal Year 2005 Earnings Guidance
WASHINGTON, Feb. 3 /PRNewswire-FirstCall/ -- WGL Holdings, Inc. (NYSE: WGL) (the Company), the parent company of Washington Gas Light Company and other energy-related subsidiaries, today reported net income of $43.1 million, or $0.88 per share, for the three months ended December 31, 2004, the first quarter of its fiscal year 2005. This represents a $3.6 million, or $0.07 per share, increase over net income reported of $39.5 million, or $0.81 per share, for the three months ended December 31, 2003. Unless otherwise noted, earnings per share amounts are presented in this news release on a diluted basis, and are based on weighted average common and common equivalent shares outstanding. Excluding the effects of unique transactions described below, the Company's consolidated earnings from normal operations for the first quarter of fiscal year 2005 were $0.88 per share, a $0.03 per share increase over earnings from normal operations of $0.85 per share reported for the same quarter of fiscal year 2004. While there were no unique transactions in the current quarter, earnings from normal operations for the first quarter of fiscal year 2004 exclude the effect of additional depreciation expense unrelated to that period of $3.5 million (pre-tax), or $0.04 per share, that was recorded in connection with a Virginia rate order. The $0.03 per share increase in earnings from normal operations for the current quarter was due primarily to customer growth, the impact of favorable regulatory decisions and reduced income tax expense, partially offset by the impact of lower natural gas deliveries and lower earnings from the Company's non-utility operations. The Company reviews its financial results from normal operations (based on normal weather, and uninfluenced by unique transactions) to monitor its progress towards achieving its five-year financial objectives. A reconciliation of the Company's earnings per share reported in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP) to earnings per share from normal operations is attached to this press release. Commenting on first quarter results and the outlook for the year, WGL Holdings' Chairman and CEO James H. DeGraffenreidt, Jr. said, "Our strong first quarter earnings resulted from continued customer growth and our success in implementing new utility rates that more accurately reflect our cost of providing safe and reliable service." DeGraffenreidt added, "We are poised to deliver strong financial results in fiscal year 2005 as we capitalize on the growth of our region and opportunities to operate our businesses more efficiently." Three Months Ended December 31, 2004 Regulated Utility Operations The operating results of the Company's regulated utility segment are the primary influence on overall consolidated operating results. For the first three months of fiscal year 2005, the regulated utility segment reported net income of $39.8 million, or $0.81 per share, an increase of $5.1 million, or $0.10 per share, over net income of $34.7 million, or $0.71 per share, reported for the same quarter of the prior fiscal year. The effect of the additional depreciation expense of $3.5 million (pre-tax) recorded in the first quarter of fiscal year 2004, as previously discussed, improved the comparison of results for the first quarter of fiscal year 2005 to the results for the same quarter of the prior fiscal year by $0.04 per share. Net utility revenues increased $478,000 during the first quarter of fiscal year 2005 when compared to the same quarter of the prior fiscal year. This increase primarily was attributable to the addition of 27,874 active customer meters, an increase of 2.8 percent, from the end of the same quarter of the prior fiscal year. The 2005 first quarter also benefited $0.03 per share from realizing a full quarter's effect of favorable changes in rates charged to customers that were implemented in Maryland on November 6, 2003 and the District of Columbia on November 24, 2003. The regulated utility's operations are weather sensitive, with a significant portion of its revenue coming from deliveries of natural gas to residential and commercial heating customers. Weather, when measured by heating degree days, was approximately two percent colder than normal for the first quarter of both fiscal years 2005 and 2004. Although heating degree days were essentially unchanged this first quarter when compared to the same quarter of the prior fiscal year, total gas deliveries to firm customers fell 7.5 million therms, or two percent, to 394.5 million therms during the current quarter. Due to the relatively small number of normal heating degree days that occur in the initial part of the Company's first fiscal quarter, actual degree days during this period may not correlate closely with total gas deliveries. The decline in total gas deliveries that occurred during the current quarter, net of increased deliveries due to customer growth, reduced net income for the first quarter of fiscal year 2005 by an estimated $1 million, or $0.02 per share. First quarter 2005 earnings for the regulated utility segment reflect a one percent increase in operation and maintenance expenses of $790,000, reducing earnings per share by $0.01 per share when compared to the first quarter of fiscal year 2004. Higher employee benefit costs were mostly offset by reduced labor costs due to nine percent fewer employees. The regulated utility segment benefited during the current quarter from reduced income taxes due to a lower effective federal income tax rate (primarily attributable to a non-taxable benefit of a Medicare prescription drug subsidy), lower general taxes and lower financing costs. Together these items contributed an additional $0.06 per share of increased earnings for this segment. Non-Utility Operations The Company's non-utility operations reported net income of $3.3 million, or $0.07 per share, for the three months ended December 31, 2004, as compared to net income of $4.9 million, or $0.10 per share, reported for the same three-month period of the prior fiscal year. The retail energy-marketing segment reported net income of $4.1 million, or $0.09 per share, for the current three-month period, compared to $4.8 million, or $0.10 per share, reported for the same three-month period of the prior fiscal year. The decline in year-over-year earnings primarily reflects lower gross margins from the sale of natural gas that resulted largely from the volatility in the price of natural gas during the current quarter, which necessitated mark-to-market accounting adjustments on certain contracts used to hedge this segment's supply risks. Electric sales volumes for the current quarter were lower than the comparable quarter of the prior fiscal year due to increased competition from other retail energy-marketers, as well as from below-market utility rates, that reduced sales to large commercial and governmental customers. The lower electric sales volumes in the current quarter were substantially offset by a higher electric margin per kilowatt-hour sold. The Company believes there may be future opportunities to rebuild the electric customer base as utility service offerings are periodically reset to market rates. The Company's commercial heating, ventilating and air conditioning (HVAC) segment reported a net loss of $432,000 or $0.01 per share, for the first quarter of fiscal year 2005, relatively unchanged from the net loss of $498,000, or $0.01 per share, reported for the same quarter of the prior fiscal year. Earnings Outlook The Company raised its consolidated earnings estimate for the full fiscal year 2005 to a range of $1.83 to $1.93 per share, from its previous guidance of $1.79 to $1.89 per share. This updated estimate includes an increase in projected earnings from its unregulated businesses to a range of $0.09 to $0.13 per share, from the previous range of $0.04 to $0.08 per share. The annual guidance for the consolidated entity includes estimated earnings for the second quarter of fiscal year 2005 of $1.40 to $1.46 per share, which reflects projected earnings from the Company's unregulated businesses of $0.01 to $0.03 per share. This guidance includes the estimated effect of actual weather through January 31, 2005 and assumes normal weather thereafter. These estimates also assume no effect that may result from performing earnings tests pursuant to a December 18, 2003 rate order issued by the State Corporation Commission of Virginia, and exclude the effect of unusual items that could arise in the future. Other Information The Company will hold a conference call at 10:30 a.m. Eastern time on February 4, 2005, to discuss its first quarter financial results. The live conference call will be available to the public via a link located on the WGL Holdings Web site, http://www.wglholdings.com. To hear the live Webcast, click on the Live Webcast icon located on the home page of the referenced site. The Webcast will be archived for replay on the WGL Holdings Web site through March 4, 2005. Headquartered in Washington, D.C., WGL Holdings is the parent company of Washington Gas Light Company, a natural gas utility that serves approximately one million customers throughout metropolitan Washington, D.C., and the surrounding region. In addition, it holds a group of energy-related retail businesses that focus primarily on retail energy-marketing and commercial heating, ventilating and air conditioning services. Additional information about WGL Holdings is available on its Web site, http://www.wglholdings.com. Note: This news release and other statements by the Company 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 the Company believes such forward-looking statements are based on reasonable assumptions, it cannot give assurance that every objective will be achieved. Forward-looking statements speak only as of today, and the Company assumes no duty to update them. As previously disclosed in the Company's filings with the Securities and Exchange Commission, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: variations in weather conditions from normal levels; changes in economic, competitive, political and regulatory conditions and developments; changes in capital and energy commodity market conditions; changes in credit ratings of debt securities of WGL Holdings, Inc. or Washington Gas Light Company that may affect access to capital or the cost of debt; changes in credit market conditions and creditworthiness of customers and suppliers; changes in relevant laws and regulations, including tax, environmental and employment laws and regulations; legislative, regulatory and judicial mandates and decisions; timing and success of business and product development efforts; technological improvements; the pace of deregulation efforts and the availability of other competitive alternatives; terrorist activities; and other uncertainties. The outcome of negotiations and discussions the Company may hold with other parties from time to time regarding utility and energy- related investments and strategic transactions that are both recurring and non-recurring may also affect future performance. For a further discussion of the risks and uncertainties, see the Company's most recent annual report on Form 10-K filed with the Securities and Exchange Commission.
Please see the following comparative statements for additional
information. Also attached is a reconciliation of the Company's earnings per
share reported in accordance with GAAP to earnings per share from normal
operations.
WGL Holdings, Inc.
Consolidated Statements of Income
For Periods Ended December 31, 2004 and 2003
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
(In thousands, except per
share data) 2004 2003 2004 2003
UTILITY OPERATIONS
Operating Revenues $408,951 $375,314 $1,301,585 $1,301,378
Less: Cost of gas 228,611 198,778 698,801 702,803
Revenue taxes 17,095 13,769 53,405 44,448
Utility Net Revenues 163,245 162,767 549,379 554,127
Other Operating Expenses
Operation and
maintenance 55,998 55,208 227,541 216,330
Depreciation and
amortization 22,196 25,205 88,501 89,139
General taxes 9,057 9,871 35,730 38,104
Income taxes 24,037 24,758 57,742 65,491
Utility Other
Operating Expenses 111,288 115,042 409,514 409,064
Utility Operating
Income 51,957 47,725 139,865 145,063
NON-UTILITY OPERATIONS
Operating Revenues
Retail energy-marketing 205,288 202,258 792,889 754,548
Heating, ventilating and
air conditioning (HVAC) 9,518 7,534 32,107 32,465
Other non-utility
activities 294 183 1,784 1,124
Total Non-Utility
Operating Revenues 215,100 209,975 826,780 788,137
Operating Expenses
Non-utility operating
expenses 209,326 202,792 822,706 785,217
Income tax expense
(benefit) 2,239 2,524 1,890 (500)
Total Non-Utility
Operating Expenses 211,565 205,316 824,596 784,717
Non-Utility Operating
Income 3,535 4,659 2,184 3,420
TOTAL OPERATING INCOME 55,492 52,384 142,049 148,483
Other Income (Expenses) --
Net (999) (920) 3,082 (827)
INCOME BEFORE INTEREST
EXPENSE 54,493 51,464 145,131 147,656
Interest expense 11,031 11,591 43,585 46,073
Dividends on Washington
Gas preferred stock 330 330 1,320 1,320
NET INCOME $43,132 $39,543 $100,226 $100,263
AVERAGE COMMON SHARES
OUTSTANDING
Basic 48,669 48,624 48,653 48,599
Diluted 48,936 48,812 48,879 48,780
EARNINGS PER AVERAGE
COMMON SHARE
Basic $0.89 $0.81 $2.06 $2.06
Diluted $0.88 $0.81 $2.05 $2.06
Net Income Applicable To Common Stock -- By Segment ($000):
Regulated utility $39,803 $34,679 $94,075 $96,804
Non-utility operations:
Retail energy-marketing 4,108 4,810 7,578 4,254
Commercial HVAC (432) (498) (5,330) (1,297)
Total major non-utility 3,676 4,312 2,248 2,957
Other, principally non-utility
activities (347) 552 3,903 502
Total non-utility 3,329 4,864 6,151 3,459
NET INCOME $43,132 $39,543 $100,226 $100,263
WGL Holdings, Inc.
Consolidated Balance Sheets
December 31, 2004 and 2003
(Unaudited)
December 31,
(In thousands) 2004 2003
ASSETS
Property, Plant and Equipment
At original cost $2,690,018 $2,583,543
Accumulated depreciation and
amortization (767,771) (707,263)
Net property, plant and equipment 1,922,247 1,876,280
Current Assets
Cash and cash equivalents 10,725 9,252
Accounts receivable, net 374,120 390,312
Storage gas -- at cost (first-in,
first-out) 198,673 144,595
Other 47,659 46,887
Total current assets 631,177 591,046
Deferred Charges and Other Assets 216,487 192,626
Total Assets $2,769,911 $2,659,952
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders' equity $881,344 $842,740
Washington Gas Light Company
preferred stock 28,173 28,173
Long-term debt 573,721 637,610
Total capitalization 1,483,238 1,508,523
Current Liabilities
Notes payable and current maturities
of long-term debt 221,181 198,444
Accounts payable 236,516 218,054
Other 169,497 135,343
Total current liabilities 627,194 551,841
Deferred Credits 659,479 599,588
Total Capitalization and Liabilities $2,769,911 $2,659,952
WGL Holdings, Inc.
Consolidated Financial and Operating Statistics
For Periods Ended December 31, 2004 and 2003
(Unaudited)
COMMON STOCK DATA
December 31, 2004 52 Week
Closing Price Price Range
$30.84 $31.43 - $26.66
Earnings Per Share
Twelve Months Ended Annualized
December 31, P/E Dividend Yield
2004 2003
Basic $2.06 $2.06 15.0 $1.30 4.2%
Diluted $2.05 $2.06
FINANCIAL STATISTICS
Twelve Months Ended
December 31, December 31,
2004 2003
Return on Average Common Equity 11.6 % 12.2 %
Total Interest Coverage (times) 4.6 4.6
Book Value Per Share (end of period) $18.11 $17.33
Common Shares Outstanding -- end of
period (thousands) 48,674 48,634
UTILITY GAS STATISTICS
Three Months Ended Twelve Months Ended
December 31, December 31,
(In thousands) 2004 2003 2004 2003
Operating Revenues
Gas Sold and
Delivered
Residential --
Firm $252,237 $237,677 $807,559 $758,555
Commercial and
Industrial --
Firm 90,634 72,776 263,100 246,480
Commercial and
Industrial --
Interruptible 2,342 2,793 7,127 9,680
Electric Generation 275 142 1,100 967
345,488 313,388 1,078,886 1,015,682
Gas Delivered for
Others
Firm 43,357 45,369 148,536 157,074
Interruptible 10,020 10,339 33,754 31,594
Electric Generation 54 79 253 342
53,431 55,787 182,543 189,010
398,919 369,175 1,261,429 1,204,692
Other 10,032 6,139 40,156 96,686
Total $408,951 $375,314 $1,301,585 $1,301,378
Three Months Ended Twelve Months Ended
December 31, December 31,
(In thousands of
therms) 2004 2003 2004 2003
Gas Sales and
Deliveries
Gas Sold and
Delivered
Residential --
Firm 183,626 197,387 615,967 630,706
Commercial and
Industrial --
Firm 73,188 69,256 230,339 233,700
Commercial and
Industrial --
Interruptible 2,156 3,022 6,760 10,698
258,970 269,665 853,066 875,104
Gas Delivered for
Others
Firm 137,719 135,424 456,844 476,498
Interruptible 77,498 81,894 264,087 256,669
Electric Generation 9,307 10,568 39,791 55,390
224,524 227,886 760,722 788,557
Total 483,494 497,551 1,613,788 1,663,661
WASHINGTON GAS
ENERGY SERVICES
Natural Gas Sales
Therm Sales
(thousands of
therms) 204,364 207,770 713,171 710,765
Number of
Customers
(end of period) 147,100 155,500 147,100 155,500
Electricity Sales
Electricity Sales
(thousands of
kWhs) 776,828 1,714,115 5,721,639 7,339,594
Number of Accounts
(end of period) 41,600 61,000 41,600 61,000
UTILITY GAS
PURCHASED EXPENSE
(excluding off
system) 88.57 c 71.66 c 80.97 c 72.94 c
HEATING DEGREE DAYS
Actual 1,389 1,388 4,025 4,295
Normal 1,359 1,362 3,789 3,803
Percent Colder
than Normal 2.2 % 1.9 % 6.2 % 12.9 %
Number of Active
Customer Meters
(end of period) 1,006,227 978,353 1,006,227 978,353
RECONCILIATION OF REPORTED GAAP EARNINGS PER SHARE AND
ADJUSTED EARNINGS PER SHARE
(Unaudited)
February 3, 2005
The reconciliation below is provided to demonstrate management's utilization of historical earnings per share, as derived in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), and adjusted earnings per share from normal operations, a non-GAAP measure. This reconciliation is provided to more clearly identify the Company's results from normal operations and identify certain unique transactions that are not expected to repeat. This information should assist investors and analysts to track progress towards achieving the Company's five- year objectives, which are based on normal weather and uninfluenced by single, one-time, non-repeating transactions. Utilization of normal weather is an industry standard, and it is Company practice to provide estimates and guidance on the basis of normal weather. Actual performance and results may vary from normal weather projections, and the Company consistently identifies and explains this variation to assist users in the analysis of actual results versus the guidance. There may be other uses for the data, and the Company does not imply that this is the only use or the best use of this data for purposes of this analysis.
Reconciliation of Reported GAAP Earnings Per Share to
Adjusted Earnings Per Share from Normal Operations
Fiscal Year 2005 By Quarter
Actual Fiscal Year 2005 Results
Quarter Ended
Year-
Dec. Mar. Jun. Sept. To-
31 31 30 30 Date
GAAP diluted earnings per share $0.88 $0.88
Adjustments - -
Adjusted diluted earnings per
share from normal operations $0.88 $0.88
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 shares outstanding which may vary for each of those periods.
Reconciliation of Reported GAAP Earnings Per Share to
Adjusted Earnings Per Share from Normal Operations
Fiscal Year 2004 By Quarter
Actual Fiscal Year 2004 Results
Quarter Ended
Year-
Dec. Mar. Jun. Sept. To-
31 31 30 30 Date
GAAP diluted earnings per share $0.81 $0.81
Adjustments:
Retroactive depreciation related
to the period from 1/02 - 11/02,
per Virginia rate order 0.04 0.04
Adjusted diluted earnings per
share from normal operations $0.85 $0.85
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 shares outstanding which may vary for each of those periods. SOURCE WGL Holdings, Inc.
-0- 02/03/2005
/CONTACT: News Media: Tim Sargeant, +1-202-624-6043, pager:
+1-202-825-7051, or Financial Community: Melissa E. Adams, +1-202-624-6410,
both of WGL Holdings, Inc./
/Web site: http://www.wglholdings.com /
(WGL)
CO: WGL Holdings, Inc.; Washington Gas Light Company
ST: District of Columbia
IN: OIL UTI
SU: ERN ERP CCA
MV-JA
-- DCTH018 --
6595 02/03/2005 18:19 EST http://www.prnewswire.com
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