þ | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
¨ | Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Commission File Number | Exact name of registrant as specified in its charter; address of principal executive offices; registrant's telephone number, including area code | State or Other Jurisdiction of Incorporation | I.R.S. Employer Identification No. |
0-55968 | WGL Holdings, Inc. 1000 Maine Ave., S.W. Washington, D.C. 20024 (703) 750-2000 | Virginia | 52-2210912 |
0-49807 | Washington Gas Light Company 1000 Maine Ave., S.W. Washington, D.C. 20024 (703) 750-4440 | District of Columbia and Virginia | 53-0162882 |
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer þ | Smaller reporting company ¨ | ||||
(Do not check if a smaller reporting company) | |||||||
Emerging growth company ¨ | |||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ | |||||||
Large accelerated filer ¨ | Accelerated filer ¨ | Non-accelerated filer þ | Smaller reporting company ¨ | ||||
(Do not check if a smaller reporting company) | |||||||
Emerging growth company ¨ | |||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ | |||||||
PART I. Financial Information | |
Item 1. Financial Statements (Unaudited) | |
PART II. Other Information | |
INTRODUCTION |
• | the inability to meet commitments under various orders and agreements associated with regulatory approvals for the merger could have a detrimental impact on WGL’s business, financial condition, operating results and prospects; |
• | the inability to successfully be integrated into the operations of AltaGas following the merger with AltaGas and realize anticipated benefits; |
• | the effect of the consummation of the merger on the ability of WGL to retain customers and retain and hire key personnel; |
• | the effect of the consummation of the merger on the ability of WGL to maintain relationships with its suppliers; |
• | potential litigation in connection with the merger; |
• | the level and rate at which we incur costs and expenses, and the extent to which we are allowed to recover from customers, through the regulatory process, such costs and expenses relating to constructing, operating and maintaining Washington Gas’ distribution system; |
• | the availability of natural gas and electricity supply, interstate pipeline transportation and storage capacity; |
• | the outcome of new and existing matters before courts, regulators, government agencies or arbitrators, including those relating to our purchase of natural gas under the Antero gas supply contracts, and the August 2016 explosion and fire at an apartment complex in Silver Spring, Maryland; |
• | factors beyond our control that affect the ability of natural gas producers, pipeline gatherers and natural gas processors to deliver natural gas into interstate pipelines for delivery to the entrance points of Washington Gas' distribution system; |
• | security breaches of our information technology infrastructure, including cyber attacks and cyber-terrorism; |
• | leaks, mechanical problems, incidents or other operational issues in our natural gas distribution system, including the effectiveness of our efforts to mitigate the effects of receiving low-HHC natural gas; |
• | changes and developments in economic, competitive, political and regulatory conditions; |
• | unusual weather conditions and changes in natural gas consumption patterns; |
• | changes in energy commodity market conditions, including the relative prices of alternative forms of energy such as electricity, fuel oil and propane; |
• | changes in the value of derivative contracts and the availability of suitable derivative counterparties; |
• | changes in our credit ratings, disruptions in credit market and equity capital market conditions or other factors that may affect our access to and cost of capital; |
• | factors affecting the timing of construction and the effective operation of pipelines in which we have invested; |
• | the credit-worthiness of customers; suppliers and derivatives counterparties; |
• | changes in laws and regulations, including tax, environmental, pipeline integrity and employment laws and regulations, including the competitiveness of WGL Energy Systems, Inc. in securing future assets to continue its growth; |
• | legislative, regulatory and judicial mandates or decisions affecting our business operations, including interpretations of the Tax Cuts and Jobs Act (Tax Act); |
• | the timing and success of business and product development efforts and technological improvements; |
• | the level of demand from government agencies and the private sector for commercial energy systems, and delays in federal government budget appropriations; |
• | the pace of deregulation of energy markets and the availability of other competitive alternatives to our products and services; |
• | changes in accounting principles and the effect of accounting pronouncements issued periodically by accounting standard-setting bodies; |
• | our ability to manage the outsourcing of several business processes; |
• | strikes or work stoppages by unionized employees; |
• | acts of nature and catastrophic events, including terrorist acts; |
• | decisions made by management and co-investors in non-controlled investees; and |
• | changes in AltaGas’ strategy, relationship with us or operating performance. |
(In thousands) | June 30, 2018 | September 30, 2017 | |||||
ASSETS | |||||||
Property, Plant and Equipment | |||||||
At original cost | $ | 6,320,171 | $ | 6,143,841 | |||
Accumulated depreciation and amortization | (1,570,890 | ) | (1,513,790 | ) | |||
Net property, plant and equipment | 4,749,281 | 4,630,051 | |||||
Current Assets | |||||||
Cash and cash equivalents | 33,064 | 8,524 | |||||
Receivables | |||||||
Accounts receivable | 432,278 | 398,149 | |||||
Gas costs and other regulatory assets | 3,439 | 21,705 | |||||
Unbilled revenues | 144,469 | 165,483 | |||||
Allowance for doubtful accounts | (36,257 | ) | (32,025 | ) | |||
Net receivables | 543,929 | 553,312 | |||||
Materials and supplies—principally at average cost | 18,513 | 20,172 | |||||
Storage gas | 124,767 | 243,984 | |||||
Prepaid taxes | 36,260 | 31,549 | |||||
Other prepayments | 62,258 | 86,465 | |||||
Derivatives | 12,066 | 15,327 | |||||
Other | 13,660 | 26,556 | |||||
Total current assets | 844,517 | 985,889 | |||||
Deferred Charges and Other Assets | |||||||
Regulatory assets | |||||||
Gas costs | 54,391 | 90,136 | |||||
Pension and other post-retirement benefits | 121,678 | 139,499 | |||||
Other | 116,650 | 104,596 | |||||
Prepaid post-retirement benefits | 240,577 | 231,577 | |||||
Derivatives | 19,643 | 38,389 | |||||
Investments in unconsolidated affiliates | 677,404 | 394,201 | |||||
Other | 14,144 | 11,671 | |||||
Total deferred charges and other assets | 1,244,487 | 1,010,069 | |||||
Total Assets | $ | 6,838,285 | $ | 6,626,009 | |||
CAPITALIZATION AND LIABILITIES | |||||||
Capitalization | |||||||
WGL Holdings common shareholders’ equity | $ | 1,648,553 | $ | 1,502,690 | |||
Non-controlling interest | 6,889 | 6,851 | |||||
Washington Gas Light Company preferred stock | 28,173 | 28,173 | |||||
Total equity | 1,683,615 | 1,537,714 | |||||
Long-term debt | 1,879,316 | 1,430,861 | |||||
Total capitalization | 3,562,931 | 2,968,575 | |||||
Current Liabilities | |||||||
Current maturities of long-term debt | 100,000 | 250,000 | |||||
Notes payable and project financing | 429,520 | 559,844 | |||||
Accounts payable and other accrued liabilities | 387,326 | 423,824 | |||||
Wages payable | 24,144 | 18,096 | |||||
Accrued interest | 18,353 | 7,806 | |||||
Dividends declared | 25,620 | 26,452 | |||||
Customer deposits and advance payments | 64,516 | 65,841 | |||||
Gas costs and other regulatory liabilities | 35,648 | 22,814 | |||||
Accrued taxes | 28,410 | 17,657 | |||||
Derivatives | 20,142 | 43,990 | |||||
Other | 42,609 | 52,664 | |||||
Total current liabilities | 1,176,288 | 1,488,988 | |||||
Deferred Credits | |||||||
Unamortized investment tax credits | 152,316 | 155,007 | |||||
Deferred income taxes | 444,903 | 868,067 | |||||
Accrued pensions and benefits | 189,521 | 181,552 | |||||
Asset retirement obligations | 306,603 | 296,810 | |||||
Regulatory liabilities | |||||||
Accrued asset removal costs | 272,355 | 292,173 | |||||
Other post-retirement benefits | 124,072 | 135,035 | |||||
Excess deferred taxes and other | 445,354 | 9,403 | |||||
Derivatives | 114,383 | 122,607 | |||||
Other | 49,559 | 107,792 | |||||
Total deferred credits | 2,099,066 | 2,168,446 | |||||
Commitments and Contingencies (Note 13) | |||||||
Total Capitalization and Liabilities | $ | 6,838,285 | $ | 6,626,009 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
(In thousands, except per share data) | 2018 | 2017 | 2018 | 2017 | |||||||||||
OPERATING REVENUES | |||||||||||||||
Utility | $ | 195,177 | $ | 198,968 | $ | 1,093,647 | $ | 992,301 | |||||||
Non-utility | 228,288 | 275,396 | 868,709 | 933,300 | |||||||||||
Total Operating Revenues | 423,465 | 474,364 | 1,962,356 | 1,925,601 | |||||||||||
OPERATING EXPENSES | |||||||||||||||
Utility cost of gas | 51,737 | 49,881 | 370,767 | 259,839 | |||||||||||
Non-utility cost of energy-related sales | 191,198 | 233,025 | 703,904 | 787,691 | |||||||||||
Operation and maintenance | 107,719 | 97,477 | 322,501 | 316,455 | |||||||||||
Depreciation and amortization | 40,388 | 39,094 | 122,095 | 113,487 | |||||||||||
General taxes and other assessments | 35,491 | 32,032 | 135,417 | 122,964 | |||||||||||
Total Operating Expenses | 426,533 | 451,509 | 1,654,684 | 1,600,436 | |||||||||||
OPERATING INCOME (LOSS) | (3,068 | ) | 22,855 | 307,672 | 325,165 | ||||||||||
Equity in earnings of unconsolidated affiliates | 7,065 | 7,508 | (14,457 | ) | 15,117 | ||||||||||
Other income (expenses) — net | (1,663 | ) | 884 | (2,834 | ) | (591 | ) | ||||||||
Interest expense | 20,593 | 25,062 | 48,427 | 55,552 | |||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (18,259 | ) | 6,185 | 241,954 | 284,139 | ||||||||||
INCOME TAX EXPENSE | 37,068 | 2,149 | 33,181 | 106,381 | |||||||||||
NET INCOME (LOSS) | $ | (55,327 | ) | $ | 4,036 | $ | 208,773 | $ | 177,758 | ||||||
Non-controlling interest | (6,651 | ) | (4,559 | ) | (16,801 | ) | (12,533 | ) | |||||||
Dividends on Washington Gas Light Company preferred stock | 330 | 330 | 990 | 990 | |||||||||||
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK | $ | (49,006 | ) | $ | 8,265 | $ | 224,584 | $ | 189,301 | ||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING | |||||||||||||||
Basic | 51,359 | 51,219 | 51,343 | 51,200 | |||||||||||
Diluted | 51,359 | 51,493 | 51,571 | 51,469 | |||||||||||
EARNINGS (LOSS) PER AVERAGE COMMON SHARE | |||||||||||||||
Basic | $ | (0.95 | ) | $ | 0.16 | $ | 4.37 | $ | 3.70 | ||||||
Diluted | $ | (0.95 | ) | $ | 0.16 | $ | 4.35 | $ | 3.68 | ||||||
DIVIDENDS DECLARED PER COMMON SHARE | $ | 0.5150 | $ | 0.5100 | $ | 1.5400 | $ | 1.5075 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
NET INCOME (LOSS) | $ | (55,327 | ) | $ | 4,036 | $ | 208,773 | $ | 177,758 | ||||||
OTHER COMPREHENSIVE INCOME, BEFORE INCOME TAXES: | |||||||||||||||
Qualified cash flow hedging instruments | 53 | 51 | 158 | 49,556 | |||||||||||
Pension and other post-retirement benefit plans | |||||||||||||||
Change in net prior service credit | (273 | ) | (217 | ) | (820 | ) | (651 | ) | |||||||
Change in actuarial net loss | 530 | 588 | 1,587 | 1,763 | |||||||||||
Total other comprehensive income before taxes | $ | 310 | $ | 422 | $ | 925 | $ | 50,668 | |||||||
INCOME TAX EXPENSE RELATED TO OTHER COMPREHENSIVE INCOME | 83 | 235 | 248 | 20,816 | |||||||||||
OTHER COMPREHENSIVE INCOME | $ | 227 | $ | 187 | $ | 677 | $ | 29,852 | |||||||
COMPREHENSIVE INCOME (LOSS) | $ | (55,100 | ) | $ | 4,223 | $ | 209,450 | $ | 207,610 | ||||||
Non-controlling interest | (6,651 | ) | (4,559 | ) | (16,801 | ) | (12,533 | ) | |||||||
Dividends on Washington Gas Light Company preferred stock | 330 | 330 | 990 | 990 | |||||||||||
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO WGL HOLDINGS | $ | (48,779 | ) | $ | 8,452 | $ | 225,261 | $ | 219,153 |
Nine Months Ended June 30, | |||||||
(In thousands) | 2018 | 2017 | |||||
OPERATING ACTIVITIES | |||||||
Net income | $ | 208,773 | $ | 177,758 | |||
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES | |||||||
Depreciation and amortization | 122,095 | 113,487 | |||||
Amortization of: | |||||||
Other regulatory assets and liabilities—net | 5,235 | 2,567 | |||||
Debt related costs | 2,211 | 1,307 | |||||
Deferred income taxes | 38,723 | 81,839 | |||||
Dividends received from equity method investments | 14,195 | 10,864 | |||||
Accrued/deferred pension and other post-retirement benefit cost | 7,943 | 16,227 | |||||
Earnings in equity interest | (19,543 | ) | (15,117 | ) | |||
Compensation expense related to stock-based awards | 12,610 | 12,114 | |||||
Provision for doubtful accounts | 16,258 | 11,601 | |||||
Impairment loss | 34,000 | — | |||||
Unrealized (gain) loss on derivative contracts | 687 | (67,083 | ) | ||||
Amortization of investment tax credits | (5,542 | ) | (5,544 | ) | |||
Other non-cash charges (credits)—net | (768 | ) | (584 | ) | |||
Changes in operating assets and liabilities (Note 16) | 132,723 | (111,053 | ) | ||||
Net Cash Provided by Operating Activities | 569,600 | 228,383 | |||||
FINANCING ACTIVITIES | |||||||
Common stock issued | — | 295 | |||||
Long-term debt issued | 550,000 | 50,000 | |||||
Long-term debt retired | (250,000 | ) | — | ||||
Debt issuance costs | (3,060 | ) | (404 | ) | |||
Notes payable issued (retired) —net | (103,000 | ) | 217,000 | ||||
Contributions from non-controlling interest | 16,697 | 17,358 | |||||
Distributions to non-controlling interest | (472 | ) | — | ||||
Project financing | 989 | 18,396 | |||||
Dividends on common stock and preferred stock | (79,824 | ) | (75,672 | ) | |||
Other financing activities—net | (6,558 | ) | (1,296 | ) | |||
Net Cash Provided by Financing Activities | 124,772 | 225,677 | |||||
INVESTING ACTIVITIES | |||||||
Capital expenditures (excluding Allowance for Funds Used During Construction) | (348,396 | ) | (352,232 | ) | |||
Investments in non-utility interests | (321,436 | ) | (110,952 | ) | |||
Distributions and receipts from non-utility interests | — | 4,126 | |||||
Proceeds from the sale of assets | — | 9,858 | |||||
Loans to external parties | — | (863 | ) | ||||
Net Cash Used in Investing Activities | (669,832 | ) | (450,063 | ) | |||
INCREASE IN CASH AND CASH EQUIVALENTS | 24,540 | 3,997 | |||||
Cash and Cash Equivalents at Beginning of Year | 8,524 | 5,573 | |||||
Cash and Cash Equivalents at End of Period | $ | 33,064 | $ | 9,570 | |||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Note 16) |
(In thousands) | June 30, 2018 | September 30, 2017 | |||||
ASSETS | |||||||
Property, Plant and Equipment | |||||||
At original cost | $ | 5,491,886 | $ | 5,310,337 | |||
Accumulated depreciation and amortization | (1,472,862 | ) | (1,422,622 | ) | |||
Net property, plant and equipment | 4,019,024 | 3,887,715 | |||||
Current Assets | |||||||
Cash and cash equivalents | 27,185 | 1 | |||||
Receivables | |||||||
Accounts receivable | 211,854 | 190,740 | |||||
Gas costs and other regulatory assets | 3,439 | 21,705 | |||||
Unbilled revenues | 91,307 | 107,967 | |||||
Allowance for doubtful accounts | (28,634 | ) | (23,741 | ) | |||
Net receivables | 277,966 | 296,671 | |||||
Materials and supplies—principally at average cost | 18,467 | 20,126 | |||||
Storage gas | 54,677 | 92,753 | |||||
Prepaid taxes | 23,004 | 23,350 | |||||
Other prepayments | 21,473 | 13,238 | |||||
Receivables from associated companies | 33,569 | 32,362 | |||||
Derivatives | 1,370 | 5,061 | |||||
Other | 139 | 102 | |||||
Total current assets | 457,850 | 483,664 | |||||
Deferred Charges and Other Assets | |||||||
Regulatory assets | |||||||
Gas costs | 54,391 | 90,136 | |||||
Pension and other post-retirement benefits | 120,967 | 138,573 | |||||
Other | 116,263 | 104,538 | |||||
Prepaid post-retirement benefits | 239,249 | 230,283 | |||||
Derivatives | 9,102 | 16,244 | |||||
Other | 5,196 | 3,561 | |||||
Total deferred charges and other assets | 545,168 | 583,335 | |||||
Total Assets | $ | 5,022,042 | $ | 4,954,714 | |||
CAPITALIZATION AND LIABILITIES | |||||||
Capitalization | |||||||
Common shareholder’s equity | $ | 1,351,831 | $ | 1,164,749 | |||
Preferred stock | 28,173 | 28,173 | |||||
Long-term debt | 1,084,780 | 1,134,461 | |||||
Total capitalization | 2,464,784 | 2,327,383 | |||||
Current Liabilities | |||||||
Current maturities of long-term debt | 50,000 | — | |||||
Notes payable and project financing | 15,460 | 166,772 | |||||
Accounts payable and other accrued liabilities | 185,505 | 219,827 | |||||
Wages payable | 22,026 | 16,508 | |||||
Accrued interest | 15,704 | 3,967 | |||||
Dividends declared | 21,126 | 22,098 | |||||
Customer deposits and advance payments | 64,069 | 64,194 | |||||
Gas costs and other regulatory liabilities | 35,648 | 22,814 | |||||
Accrued taxes | 23,158 | 12,808 | |||||
Payables to associated companies | 109,341 | 94,844 | |||||
Derivatives | 16,342 | 30,263 | |||||
Other | 7,105 | 7,473 | |||||
Total current liabilities | 565,484 | 661,568 | |||||
Deferred Credits | |||||||
Unamortized investment tax credits | 3,563 | 4,100 | |||||
Deferred income taxes | 514,369 | 888,385 | |||||
Accrued pensions and benefits | 187,739 | 179,814 | |||||
Asset retirement obligations | 301,075 | 291,871 | |||||
Regulatory liabilities | |||||||
Accrued asset removal costs | 272,355 | 292,173 | |||||
Other post-retirement benefits | 123,306 | 134,181 | |||||
Excess deferred taxes and other | 443,747 | 9,403 | |||||
Derivatives | 98,075 | 112,299 | |||||
Other | 47,545 | 53,537 | |||||
Total deferred credits | 1,991,774 | 1,965,763 | |||||
Commitments and Contingencies (Note 13) | |||||||
Total Capitalization and Liabilities | $ | 5,022,042 | $ | 4,954,714 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
OPERATING REVENUES | $ | 199,512 | $ | 203,186 | $ | 1,109,022 | $ | 1,012,193 | |||||||
OPERATING EXPENSES | |||||||||||||||
Utility cost of gas | 56,063 | 54,093 | 386,104 | 279,713 | |||||||||||
Operation and maintenance | 82,389 | 77,370 | 252,924 | 246,290 | |||||||||||
Depreciation and amortization | 34,043 | 32,761 | 101,157 | 96,003 | |||||||||||
General taxes and other assessments | 30,845 | 27,498 | 121,321 | 109,857 | |||||||||||
Total Operating Expenses | 203,340 | 191,722 | 861,506 | 731,863 | |||||||||||
OPERATING INCOME (LOSS) | (3,828 | ) | 11,464 | 247,516 | 280,330 | ||||||||||
Other expense — net | (2,628 | ) | (908 | ) | (5,647 | ) | (3,044 | ) | |||||||
Interest expense | 14,455 | 12,960 | 44,100 | 38,727 | |||||||||||
INCOME (LOSS) BEFORE INCOME TAXES | (20,911 | ) | (2,404 | ) | 197,769 | 238,559 | |||||||||
INCOME TAX EXPENSE (BENEFIT) | (9,412 | ) | (733 | ) | 43,258 | 91,159 | |||||||||
NET INCOME (LOSS) | $ | (11,499 | ) | $ | (1,671 | ) | $ | 154,511 | $ | 147,400 | |||||
Dividends on Washington Gas preferred stock | 330 | 330 | 990 | 990 | |||||||||||
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK | $ | (11,829 | ) | $ | (2,001 | ) | $ | 153,521 | $ | 146,410 |
Three Months Ended June 30, | Nine Months Ended June 30, | ||||||||||||||
(In thousands) | 2018 | 2017 | 2018 | 2017 | |||||||||||
NET INCOME (LOSS) | $ | (11,499 | ) | $ | (1,671 | ) | $ | 154,511 | $ | 147,400 | |||||
OTHER COMPREHENSIVE INCOME, BEFORE INCOME TAXES: | |||||||||||||||
Pension and other post-retirement benefit plans | |||||||||||||||
Change in net prior service credit | (273 | ) | (217 | ) | (820 | ) | (651 | ) | |||||||
Change in actuarial net loss | 530 | 588 | 1,587 | 1,763 | |||||||||||
Total pension and other post-retirement benefit plans | $ | 257 | $ | 371 | $ | 767 | $ | 1,112 | |||||||
INCOME TAX EXPENSE RELATED TO OTHER COMPREHENSIVE INCOME | 69 | 145 | 204 | 439 | |||||||||||
OTHER COMPREHENSIVE INCOME | $ | 188 | $ | 226 | $ | 563 | $ | 673 | |||||||
COMPREHENSIVE INCOME (LOSS) | $ | (11,311 | ) | $ | (1,445 | ) | $ | 155,074 | $ | 148,073 |
Nine Months Ended June 30, | |||||||
(In thousands) | 2018 | 2017 | |||||
OPERATING ACTIVITIES | |||||||
Net income | $ | 154,511 | $ | 147,400 | |||
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES | |||||||
Depreciation and amortization | 101,157 | 96,003 | |||||
Amortization of: | |||||||
Other regulatory assets and liabilities—net | 5,235 | 2,567 | |||||
Debt related costs | 1,195 | 1,031 | |||||
Deferred income taxes | 43,795 | 64,040 | |||||
Accrued/deferred pension and other post-retirement benefit cost | 7,888 | 16,187 | |||||
Compensation expense related to stock-based awards | 10,885 | 11,185 | |||||
Provision for doubtful accounts | 16,154 | 9,333 | |||||
Unrealized (gain) loss on derivative contracts | (7,063 | ) | (39,339 | ) | |||
Amortization of investment tax credits | (537 | ) | (569 | ) | |||
Other non-cash charges (credits)—net | (768 | ) | (583 | ) | |||
Changes in operating assets and liabilities (Note 16) | 33,719 | (88,642 | ) | ||||
Net Cash Provided by Operating Activities | 366,171 | 218,613 | |||||
FINANCING ACTIVITIES | |||||||
Capital contributions from WGL Holdings, Inc. | 100,000 | — | |||||
Debt issuance costs | (337 | ) | (399 | ) | |||
Notes payable issued (retired) —net | (123,000 | ) | 119,000 | ||||
Project financing | — | 7,324 | |||||
Dividends on common stock and preferred stock | (66,622 | ) | (65,020 | ) | |||
Other financing activities—net | (6,197 | ) | (1,226 | ) | |||
Net Cash (Used in) Provided by Financing Activities | (96,156 | ) | 59,679 | ||||
INVESTING ACTIVITIES | |||||||
Capital expenditures (excluding Allowance for Funds Used During Construction) | (242,831 | ) | (278,292 | ) | |||
Net Cash Used In Investing Activities | (242,831 | ) | (278,292 | ) | |||
INCREASE IN CASH AND CASH EQUIVALENTS | 27,184 | — | |||||
Cash and Cash Equivalents at Beginning of Year | 1 | 1 | |||||
Cash and Cash Equivalents at End of Period | $ | 27,185 | $ | 1 | |||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION (Note 16) |
ACCOUNTING STANDARDS ADOPTED IN FISCAL YEAR 2018 | ||||||
Standard | Description | Date of adoption | Effect on the financial statements or other significant matters | |||
ASU 2018-05, Income Taxes (Topic 740)—Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 | This standard adds to the Codification various SEC paragraphs pursuant to the Issuance of Staff Accounting Bulletin (SAB) No. 118. and addresses the specific situation in which the initial accounting for certain income tax effects of the Tax Act will not be complete at the time that financial statements were issued covering the reporting period that includes the enactment date of December 22, 2017. | October 1, 2017 | Quarterly disclosures were incorporated in the Income Tax footnote in the first quarter FY 2018 10-Q filed with the SEC on February 8, 2018, which will be updated each quarter until the end of the measurement period. See Note 7, Income Taxes, of the Notes to Condensed Consolidated Financial Statements for additional information. | |||
ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting | This standard simplifies several aspects of the accounting for share-based payment transactions, including accounting for income taxes, forfeitures, statutory tax withholding requirements and classification in the statement of cash flows. | October 1, 2017 | Forfeitures - WGL has elected to continue to estimate forfeitures for its share-based payment awards rather than account for forfeitures when they occur. Income Taxes - On October 1, 2017, WGL and Washington Gas recorded $4.3 million and $4.2 million, respectively, on a modified retrospective basis, as a cumulative effect adjustment to retained earnings. For the nine months ended June 30, 2018, WGL and Washington Gas recorded $3.4 million and $3.2 million, respectively, to current tax expense for excess tax benefits related to performance shares that vested in the period. Cash Flows - WGL and Washington Gas reclassified $3.6 million and $3.5 million, respectively, retroactively on the statement of cash flows for the nine months ended June 30, 2017 from operating to financing activities related to shares withheld to pay for employee taxes. For the presentation of excess tax benefits in the statement of cash flow as in the operating activities, WGL elected to present the change prospectively. Statutory Tax Withholding - No changes were made. |
ASU 2016-06, Derivatives and Hedging (Topic 815) - Contingent Put and Call Options in Debt Instruments | The amendments in this update clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. The guidance states that for contingent call (put) options to be considered clearly and closely related, they can be indexed only to interest rates or credit risk. An entity is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. | October 1, 2017 | The implementation of this standard did not have an effect on WGL or Washington Gas' financial statements. | |||
ASU 2015-11, Inventory (Topic 330) - Simplifying the Measurement of Inventory | This standard reduces the complexity in the current measurement of inventory. This ASU requires inventory to be measured at the lower of cost and net realizable value, where net realizable value is the estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal and transportation (no change to the definition of net realizable value). The amendment eliminates the guidance that requires inventory to be stated at the lower of cost or market, which includes consideration of the replacement cost of inventory and the net realizable value of inventory, less an approximately normal profit margin. | October 1, 2017 | The implementation of this standard did not have a material effect on WGL or Washington Gas' financial statements. |
OTHER NEWLY ISSUED ACCOUNTING STANDARDS | ||||||
Standard | Description | Required date of adoption | Effect on the financial statements or other significant matters | |||
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the FASB Emerging Issues Task Force) | This standard requires restricted cash and restricted cash equivalents to be included in the cash and cash equivalents balances when reconciling the statement of cash flows. Presentation of restricted cash balances should be applied retrospectively to the statement of cash flows. Early adoption is permitted. | October 1, 2018* | In July 2018, pursuant to the Merger Agreement, WGL contributed $61.8 million to fund multiple rabbi trusts. Amounts in the rabbi trusts deemed to be restricted cash or restricted cash equivalents will be included in the cash and cash equivalents balances in the statement of cash flows. Early adoption is expected to occur in the fourth quarter of fiscal year 2018. | |||
ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost | This standard requires entities to report the service cost component in the same financial statement line item as other compensation costs arising from services rendered by the pertinent employees during the period. The other components of net benefit cost are to be presented separately from service cost and outside of operating income. In addition, only the service cost component of net benefit cost is eligible for capitalization. Changes to the presentation of service costs and other components of net benefit cost should be applied retrospectively. Changes in capitalization practices should be implemented prospectively. | October 1, 2018 | We are currently evaluating the interaction of this standard with the various regulatory provisions concerning pensions and post-retirement benefit costs. We anticipate that the change in capitalization of retirement benefits will not have a material impact on WGL or Washington Gas' financial statements. | |||
ASU 2016-15, Statement of Cash Flows (Topic 230)—Classification of Certain Cash Receipts and Cash Payments (a consensus of the FASB Emerging Issues Task Force) | This update provides guidance on the classification of certain cash receipts and payments in the statement of cash flows. | October 1, 2018* | We are in the process of evaluating the impact the adoption of this standard will have on our financial statements. We do not anticipate that adoption of this standard will have a material effect on WGL or Washington Gas' financial statements. |
ASU 2014-09, Revenue from Contracts with Customers (Topic 606), including subsequent ASUs clarifying the guidance. | ASU 2014-09 establishes a comprehensive revenue recognition model clarifying the method used to determine the timing and requirements for revenue recognition from contracts with customers. The disclosure requirements under the new standard will enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. | October 1, 2018 | An implementation team is currently evaluating all revenue streams and reviewing contracts with customers, as well as, related financial statement disclosures to determine the impact the adoption of this standard will have on our financial statements. WGL has performed assessments and contract reviews of its revenue streams under the new revenue recognition model. WGL is finalizing its review and developing the new disclosures required by the standard. Currently, WGL does not expect adoption of this standard to have a material effect to its Consolidated Statements of Income or require a cumulative adjustment to retained earnings upon adoption of the standard. WGL will adopt using the modified retrospective approach. | |||
ASU 2016-01, Financial Instruments (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities including subsequent ASUs clarifying the guidance. | The new standard amends certain disclosure requirements associated with the fair value of financial instruments, and significantly revises an entity’s accounting related to the classification and measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities measured at fair value. Early adoption is permitted. | October 1, 2018* | We have performed a preliminary evaluation and the adoption of this standard will primarily impact the disclosure of our financial instruments in our Fair Value Measurements Footnote however, we do not expect the impact to be material. | |||
ASU 2018-02, Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income | This update provides an option to reclassify the stranded tax effects resulting from the enactment of the Tax Act from accumulated other comprehensive income to retained earnings. The amendment only relates to the reclassification of the income tax effects of the Tax Act and the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. Election to reclassify the income tax effects in accumulated other comprehensive income (AOCI) to retained earnings is voluntary and should be disclosed if AOCI is not adjusted. Early adoption is permitted and can be applied either at the beginning of the period adopted or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax is recognized. | October 1, 2019* | WGL applied the effect of the change in the U.S. federal corporate income tax rate due to the Tax Act in the first quarter of fiscal year 2018. The updates were recorded to the deferred tax asset and liability accounts and the income statement. Tax entries recorded to AOCI for the employee benefit plans, stock compensation and the cash flow hedge were not adjusted to the new rate. We are performing an analysis to determine the amount to adjust to the new tax rate. Early adoption is expected to occur in fourth quarter of fiscal year 2018. |
ASU 2016-02, Leases (Topic 842) including subsequent ASUs with additional guidance. | This standard requires recognition of a right-to-use asset and lease liability on the statement of financial position and disclosure of key information about leasing arrangements. The standard requires application using a modified retrospective approach. | October 1, 2019 | WGL is performing a scoping exercise by gathering a complete inventory of lease contracts in order to evaluate the impact of adopting ASC 842 on its consolidated financial statements, but expects that the new standard will have an impact on the Company’s balance sheet as all operating leases will need to be reflected on the balance sheet upon adoption. In addition, WGL currently expects to utilize the transition practical expedients which allow entities to not have to reassess whether an arrangement contains a lease under the provisions of ASC 842. | |||
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments | For credit losses on financial instruments, this standard changes the current incurred loss impairment methodology to an expected loss methodology and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. | October 1, 2020 | We are in the process of evaluating the impact the adoption of this standard will have on our financial statements. | |||
ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted improvements to Accounting for Hedging Activities | The new standard amends the hedge accounting and recognition requirements by expanding an entity's ability to hedge non-financial and financial risk components and reduce the complexity in fair value hedges of interest rate risk. Additionally, this standard eliminates the requirement to separately measure and disclose the ineffective portion of the hedge with the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item. | October 1, 2020* | It is not expected that the adoption of this standard will have a material effect on our financial statements. |
WGL Holdings, Inc. | |||||||
(In millions) | June 30, 2018 | September 30, 2017 | |||||
Accounts payable—trade | $ | 339.6 | $ | 361.6 | |||
Employee benefits and payroll accruals | 29.6 | 35.0 | |||||
Other accrued liabilities | 18.1 | 27.2 | |||||
Total | $ | 387.3 | $ | 423.8 |
Washington Gas Light Company | |||||||
(In millions) | June 30, 2018 | September 30, 2017 | |||||
Accounts payable—trade | $ | 149.2 | $ | 174.9 | |||
Employee benefits and payroll accruals | 27.5 | 32.4 | |||||
Other accrued liabilities | 8.8 | 12.5 | |||||
Total | $ | 185.5 | $ | 219.8 |
Committed Credit Available ($ In millions) | |||||||||||
June 30, 2018 | WGL(b) | Washington Gas | Total Consolidated | ||||||||
Committed credit agreements | |||||||||||
Unsecured revolving credit facility, expires December 19, 2019(a) | $ | 650.0 | $ | 350.0 | $ | 1,000.0 | |||||
Less: Commercial Paper | (402.0 | ) | — | (402.0 | ) | ||||||
Net committed credit available | $ | 248.0 | $ | 350.0 | $ | 598.0 | |||||
Weighted average interest rate | 2.57 | % | — | % | 2.57 | % | |||||
September 30, 2017 | |||||||||||
Committed credit agreements | |||||||||||
Unsecured revolving credit facility, expires December 19, 2019(a) | $ | 650.0 | $ | 350.0 | $ | 1,000.0 | |||||
Less: Commercial Paper | (382.0 | ) | (123.0 | ) | (505.0 | ) | |||||
Net committed credit available | $ | 268.0 | $ | 227.0 | $ | 495.0 | |||||
Weighted average interest rate | 1.52 | % | 1.22 | % | 1.45 | % |
Long-Term Debt Outstanding | |||||||||||
($ In millions) | WGL(a) | Washington Gas | Total Consolidated | ||||||||
June 30, 2018 | |||||||||||
Long-term debt (b) | $ | 850.0 | $ | 1,146.0 | $ | 1,996.0 | |||||
Unamortized discount | (1.4 | ) | (3.0 | ) | (4.4 | ) | |||||
Unamortized debt expense | (4.0 | ) | (8.3 | ) | (12.3 | ) | |||||
Total Long-Term Debt | $ | 844.6 | $ | 1,134.7 | $ | 1,979.3 | |||||
Weighted average interest rate | 3.06 | % | 4.89 | % | 4.11 | % | |||||
September 30, 2017 | . | ||||||||||
Long-term debt (b) | $ | 550.0 | $ | 1,146.0 | $ | 1,696.0 | |||||
Unamortized discount | (1.5 | ) | (3.0 | ) | (4.5 | ) | |||||
Unamortized debt expense | (2.1 | ) | (8.5 | ) | (10.6 | ) | |||||
Total Long-Term Debt | $ | 546.4 | $ | 1,134.5 | $ | 1,680.9 | |||||
Weighted average interest rate | 2.81 | % | 4.89 | % | 4.21 | % |
WGL Long-Term Debt Issuances and Retirements(a) | |||||||||||
($ In millions) | Principal(b) | Interest Rate (f) | Effective Cost (f) | Nominal Maturity Date | |||||||
Nine Months Ended June 30, 2018 | |||||||||||
Issuances: | |||||||||||
11/29/2017 | $ | 300.0 | 1.88 | % | (c) | 2.01 | % | 11/29/2019 | |||
03/14/2018 | $ | 250.0 | 2.66 | % | (d) | 2.79 | % | 03/12/2020 | |||
Total consolidated issuances | $ | 550.0 | |||||||||
Retirements: | $ | 250.0 | 1.24 | % | 1.24 | % | 02/18/2018 | ||||
Total | $ | 250.0 | |||||||||
Nine Months Ended June 30, 2017 | |||||||||||
Issuances: | |||||||||||
1/26/2017 | $ | 50.0 | 1.57 | % | (e) | 1.57 | % | 1/26/2019 | |||
Total consolidated issuances | $ | 50.0 |
WGL Holdings, Inc. Components of Total Equity | |||||||||||||||||||||||||||||||||
(In thousands, except shares) | Common Stock | Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss), Net of Taxes | WGL Holdings Common Shareholders' Equity | Non-controlling Interest | Washington Gas Light Company Preferred Stock | Total Equity | |||||||||||||||||||||||||
Shares | Amount | ||||||||||||||||||||||||||||||||
Balance at September 30, 2017 | 51,219,000 | $ | 582,716 | $ | 10,149 | $ | 915,822 | $ | (5,997 | ) | $ | 1,502,690 | $ | 6,851 | $ | 28,173 | $ | 1,537,714 | |||||||||||||||
Net income (loss) | — | — | — | 224,584 | — | 224,584 | (16,801 | ) | 990 | 208,773 | |||||||||||||||||||||||
Contributions from non-controlling interest | — | — | — | — | — | — | 16,697 | — | 16,697 | ||||||||||||||||||||||||
Distributions to non-controlling interest | — | — | — | — | — | — | (472 | ) | — | (472 | ) | ||||||||||||||||||||||
Business combination(a) | — | — | — | — | — | — | 614 | — | 614 | ||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | 677 | 677 | — | — | 677 | ||||||||||||||||||||||||
Stock-based compensation(b) | 140,182 | 12,390 | (17,618 | ) | 3,832 | — | (1,396 | ) | — | — | (1,396 | ) | |||||||||||||||||||||
Dividends declared: | |||||||||||||||||||||||||||||||||
Common stock | — | — | — | (78,002 | ) | — | (78,002 | ) | — | — | (78,002 | ) | |||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | — | (990 | ) | (990 | ) | ||||||||||||||||||||||
Balance at June 30, 2018(d) | 51,359,182 | $ | 595,106 | $ | (7,469 | ) | $ | 1,066,236 | $ | (5,320 | ) | $ | 1,648,553 | $ | 6,889 | $ | 28,173 | $ | 1,683,615 | ||||||||||||||
Balance at September 30, 2016 | 51,080,612 | $ | 574,496 | $ | 12,519 | $ | 827,085 | $ | (38,539 | ) | $ | 1,375,561 | $ | 409 | $ | 28,173 | $ | 1,404,143 | |||||||||||||||
Net income (loss) | — | — | — | 189,301 | — | 189,301 | (12,533 | ) | 990 | 177,758 | |||||||||||||||||||||||
Contributions from non-controlling interest | — | — | — | — | — | — | 17,358 | — | 17,358 | ||||||||||||||||||||||||
Other comprehensive income | — | — | — | — | 29,852 | 29,852 | — | — | 29,852 | ||||||||||||||||||||||||
Stock-based compensation(b) | 112,146 | 6,564 | (3,971 | ) | (468 | ) | — | 2,125 | — | — | 2,125 | ||||||||||||||||||||||
Issuance of common stock(c) | 26,242 | 1,657 | — | — | — | 1,657 | — | — | 1,657 | ||||||||||||||||||||||||
Dividends declared: | |||||||||||||||||||||||||||||||||
Common stock | — | — | — | (77,213 | ) | — | (77,213 | ) | — | — | (77,213 | ) | |||||||||||||||||||||
Preferred stock | — | — | — | — | — | — | — | (990 | ) | (990 | ) | ||||||||||||||||||||||
Balance at June 30, 2017 | 51,219,000 | $ | 582,717 | $ | 8,548 | $ | 938,705 | $ | (8,687 | ) | $ | 1,521,283 | $ | 5,234 | $ | 28,173 | $ | 1,554,690 |
Washington Gas Light Company Components of Total Equity | |||||||||||||||||||||
(In thousands, except shares) | Common Stock | Paid-In Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss), Net of Taxes | Total | ||||||||||||||||
Shares | Amount | ||||||||||||||||||||
Balance at September 30, 2017 | 46,479,536 | $ | 46,479 | $ | 492,101 | $ | 630,691 | $ | (4,522 | ) | $ | 1,164,749 | |||||||||
Net income | — | — | — | 154,511 | — | 154,511 | |||||||||||||||
Other comprehensive income | — | — | — | — | 563 | 563 | |||||||||||||||
Stock-based compensation(a) | — | — | (6,539 | ) | 4,197 | — | (2,342 | ) | |||||||||||||
Capital contributed by WGL Holdings | — | — | 100,000 | — | — | 100,000 | |||||||||||||||
Dividends declared: | |||||||||||||||||||||
Common stock | — | — | — | (64,660 | ) | — | (64,660 | ) | |||||||||||||
Preferred stock | — | — | — | (990 | ) | — | (990 | ) | |||||||||||||
Balance at June 30, 2018 | 46,479,536 | $ | 46,479 | $ | 585,562 | $ | 723,749 | $ | (3,959 | ) | $ | 1,351,831 | |||||||||
Balance at September 30, 2016 | 46,479,536 | $ | 46,479 | $ | 488,135 | $ | 586,662 | $ | (7,830 | ) | $ | 1,113,446 | |||||||||
Net income | — | — | — | 147,400 | — | $ | 147,400 | ||||||||||||||
Other comprehensive income | — | — | — | — | 673 | $ | 673 | ||||||||||||||
Stock-based compensation(a) | — | — | 2,319 | — | — | $ | 2,319 | ||||||||||||||
Dividends declared: | |||||||||||||||||||||
Common stock | — | — | — | (64,675 | ) | — | $ | (64,675 | ) | ||||||||||||
Preferred stock | — | — | — | (990 | ) | — | $ | (990 | ) | ||||||||||||
Balance at June 30, 2017 | 46,479,536 | $ | 46,479 | $ | 490,454 | $ | 668,397 | $ | (7,157 | ) | $ | 1,198,173 |
Basic and Diluted EPS | ||||||||||
(In thousands, except per share data) | Net Income (Loss) Applicable to Common Stock | Shares | Per Share Amount | |||||||
Three Months Ended June 30, 2018 | ||||||||||
Basic EPS | $ | (49,006 | ) | 51,359 | $ | (0.95 | ) | |||
Stock-based compensation plans | — | — | ||||||||
Diluted EPS | $ | (49,006 | ) | 51,359 | $ | (0.95 | ) | |||
Three Months Ended June 30, 2017 | ||||||||||
Basic EPS | $ | 8,265 | 51,219 | $ | 0.16 | |||||
Stock-based compensation plans | — | 274 | ||||||||
Diluted EPS | $ | 8,265 | 51,493 | $ | 0.16 | |||||
Nine Months Ended June 30, 2018 |