WGL Holdings, Inc. Reports First Quarter Fiscal Year 2017 Financial Results; Raises Fiscal Year 2017 Guidance

February 8, 2017

February 8, 2017 - 7:48 PM EST

WGL Holdings, Inc. Reports First Quarter Fiscal Year 2017 Financial Results; Raises Fiscal Year 2017 Guidance

First quarter consolidated GAAP earnings per share down — $1.13 per
share vs. $1.36 per share
First quarter non-GAAP operating earnings per share up — $1.24 per
share vs. $1.18 per share
Dividend increase of $0.09 per share, or 5%, to an annualized level
of $2.04 per share

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 applicable to common stock determined in
accordance with generally accepted accounting principles in the United
States of America (GAAP) for the quarter ended December 31, 2016, of
$58.0 million, or $1.13 per share, compared to net income applicable to
common stock of $68.2 million, or $1.36 per share, reported for the
quarter ended December 31, 2015.

On a consolidated basis, WGL also uses non-GAAP operating earnings
(loss) to evaluate overall financial performance, and evaluates segment
financial performance based on earnings before interest and taxes (EBIT)
and adjusted EBIT. Operating earnings (loss) and adjusted EBIT are
non-GAAP financial measures, which are not recognized in accordance with
GAAP and should not be viewed as alternatives to GAAP measures of
performance. Both non-GAAP operating earnings (loss) and adjusted EBIT
adjust for the accounting recognition of certain transactions that are
not representative of the ongoing earnings of the company. Additionally,
we believe that adjusted EBIT enhances the ability to evaluate segment
performance because it excludes interest and income tax expense, which
are affected by corporate-wide strategies such as capital financing and
tax sharing allocations. Refer to “Reconciliation of Non-GAAP Financial
Measures,” attached to this news release, for a more detailed discussion
of management’s use of these measures and for reconciliations to GAAP
financial measures.

For the quarter ended December 31, 2016, operating earnings were $63.6
million, or $1.24 per share, an increase of $4.4 million, or $0.06 per
share, compared to operating earnings of $59.2 million, or $1.18 per
share, for the same quarter of the prior fiscal year.

"On January 25, 2017, we announced our agreement to be acquired by
AltaGas, Ltd. (AltaGas)," said Terry D. McCallister, Chairman and Chief
Executive Officer. "Our leadership team and Board of Directors are
convinced that we have found exactly the right partner in AltaGas, and
we believe this combination represents a great outcome for our
shareholders and an excellent opportunity to drive long-term value well
into the future. Together with AltaGas, we will become stronger and a
more diverse company that will open up new and exciting opportunities to
provide value for all of our stakeholders.

"I am also pleased to announce a 9-cent increase in our dividend to an
annual rate of $2.04 per share. The 5% increase reflects a dedication to
delivering sustainable dividend growth for investors and a firm
commitment to our strategic vision. This represents 41 consecutive years
that we have raised the cash dividend on our common stock. We have now
paid a dividend without interruption for 166 years, which is one of the
longest dividend payment records on the New York Stock Exchange."

Results by Business Segment


Regulated Utility
	Three Months Ended December 31,				Increase/
(In millions)	2016		2015		(Decrease)
EBIT	$	102.7	$	99.3	$	3.4
Adjusted EBIT	$	91.4	$	86.6	$	4.8

The comparisons of EBIT and adjusted EBIT primarily reflect: (i)
increased customer growth; (ii) new base rates in Virginia; (iii)
higher realized margins associated with our asset optimization program
and (iv) higher rate recovery related to our accelerated pipe
replacement programs. These favorable variances were partially offset by
higher depreciation expense related to the growth in our utility plant
and operation and maintenance expenses.


Retail Energy-Marketing
	Three Months Ended December 31,					Increase/
(In millions)	2016		2015			(Decrease)
EBIT	$	29.2	$	(0.6	)	$	29.8
Adjusted EBIT	$	9.9	$	5.2		$	4.7

For the quarter ended December 31, 2016, the EBIT comparison primarily
reflects higher unrealized mark-to-market valuations on energy-related
derivatives.

Additionally, the comparisons in EBIT and adjusted EBIT reflect higher
realized electricity margins due to lower capacity charges from the
regional power grid operator (PJM). Partially offsetting these favorable
margins were lower realized natural gas margins due to a decrease in
portfolio optimization activity and less favorable margin patterns when
compared to the same period in the prior fiscal year. Despite the
decline in natural gas margins, both retail and wholesale sales volumes
were higher compared to the same period in the prior fiscal year.


Commercial Energy Systems
	Three Months Ended December 31,				Increase/
(In millions)	2016		2015		(Decrease)
EBIT	$	4.7	$	0.9	$	3.8
Adjusted EBIT	$	6.1	$	2.2	$	3.9

Improvements in EBIT and adjusted EBIT reflect: (i) the growth in
distributed generation assets in service, including increased solar
renewable energy credit sales; (ii) higher income from state
rebate programs and (iii) higher earnings from alternative energy
investments. These improvements were partially offset by lower
revenues from the energy-efficiency contracting business due to the
completion of certain projects and higher operating and depreciation
expenses.


Midstream Energy Services
	Three Months Ended December 31,					Increase/
(In millions)	2016			2015		(Decrease)
EBIT	$	(28.5	)	$	20.8	$	(49.3	)
Adjusted EBIT	$	9.4		$	13.1	$	(3.7	)

For the quarter ended December 31, 2016, the decline in EBIT primarily
reflects: (i) lower valuations on our derivative contracts
associated with our long-term transportation strategies; (ii)
lower income related to our pipeline investments; (iii) lower
valuations and realized margins related to storage inventory and the
associated economic hedging transactions and (iv) lower realized
margins on our transportation strategies.

Lower realized margins on our transportation strategies are primarily a
result of losses associated with the index price used in certain gas
purchases from Antero Resources Corporation, which is the subject of an
arbitration proceeding. Losses realized during the current period were
$6.8 million for the quarter ended December 31, 2016. Accumulated losses
from the inception of the contract are $22.0 million. While these losses
may continue in the near term we do anticipate that they will reverse in
future periods upon completion of the arbitration proceeding. An initial
decision on the arbitration proceedings is scheduled for on or after
February 13, 2017.

The decline in adjusted EBIT for the quarter ended December 31, 2016,
primarily reflects lower income related to our pipeline investments as
well as unfavorable storage spreads when compared to the same period in
the prior fiscal year.

Earnings Outlook

We provide earnings guidance for consolidated non-GAAP operating
earnings. In providing fiscal year 2017 guidance, we note that there
will likely be differences between our reported GAAP earnings and our
non-GAAP operating earnings due to matters such as, but not limited to,
unrealized mark-to-market positions for our energy-related derivatives
and changes in the measured value of our trading inventory for WGL
Midstream. On a year-to-date basis, non-GAAP operating earnings are
higher than GAAP earnings due to $5.6 million of after-tax non-GAAP
adjustments. Non-GAAP adjustments could change significantly and are
subject to swings from period to period. As a result, WGL management is
not able to reasonably estimate the aggregate impact of these items to
derive GAAP earnings guidance and therefore is not able to provide a
corresponding GAAP equivalent for its non-GAAP operating earnings
guidance.

We are raising our consolidated non-GAAP operating earnings estimate for
fiscal year 2017 in a range of $3.40 per share to $3.60 per share. The
increase in guidance is driven by a change in assumptions for average
diluted shares outstanding from 53.6 million in original guidance to
51.5 million.

We assume no obligation to update this guidance. The absence of any
statement by us in the future should not be presumed to represent an
affirmation of this earnings guidance.

Other Information

During the pendency period of the acquisition agreement between WGL and
AltaGas, WGL will not conduct earnings calls. Additional information
regarding financial results and recent regulatory events can be found in
WGL's and Washington Gas' Form 10-Q for the quarter ended December 31,
2016, as filed with the Securities and Exchange Commission, and which is
also available at www.wglholdings.com.

WGL, headquartered in Washington, D.C., is a leading source for clean,
efficient and diverse energy solutions. With activities and assets
across the U.S., WGL consists of Washington Gas, WGL Energy, WGL
Midstream and Hampshire Gas. WGL provides natural gas, electricity,
green power and energy services, including generation, storage,
transportation, distribution, supply and efficiency. Our calling as a
company is to make energy surprisingly easy for our employees, our
community and all our customers. Whether you are a homeowner or renter,
small business or multinational corporation, state and local or federal
agency, WGL is here to provide Energy Answers. Ask Us. For more
information, visit us at www.wgl.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 non-GAAP financial measures.

Additional Information and Where to Find It

This communication may be deemed to be solicitation material in respect
of the proposed merger transaction. WGL Holdings, Inc. (“WGL”) intends
to file with the U.S. Securities and Exchange Commission (the “SEC”) and
mail to its shareholders a proxy statement in connection with the
proposed merger transaction. THE INVESTORS AND SECURITY HOLDERS OF WGL
ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER RELEVANT DOCUMENTS
WHEN THEY BECOME AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION about AltaGas, Ltd. (“AltaGas”), WGL and the proposed merger
transaction. Investors and security holders will be able to obtain these
materials (when they are available) and other documents filed with the
SEC free of charge at the SEC’s website, www.sec.gov.
In addition, a copy of WGL’s proxy statement (when it becomes available)
may be obtained free of charge upon request by contacting WGL Holdings,
Inc., Leslie T. Thornton, Corporate Secretary, 101 Constitution Avenue
N.W., Washington, District of Columbia, 20080. WGL’s filings with the
SEC are also available on WGL’s website at: http://wglholdings.com/sec.cfm.
Investors and security holders may also read and copy any reports,
statements and other information filed by WGL with the SEC, at the SEC
public reference room at 100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at 1-800-SEC-0330 or visit the SEC’s website for
further information on its public reference room.

Participants in the Solicitation

AltaGas, WGL and certain of their respective directors, executive
officers and other persons may be deemed to be participants in the
solicitation of proxies in respect of the proposed merger transaction.
Information regarding AltaGas’ directors and executive officers is
available in AltaGas’ Management Information Circular, filed on March
17, 2016 (in English and French) with the Canadian Securities
Administrators (the “CSA”) and in AltaGas’ Annual Information Form,
filed on March 23, 2016 (in English) and March 24, 2016 (in French) with
the CSA, each of which are available at: www.sedar.com.
Information regarding WGL’s directors and executive officers is
available in WGL’s proxy statement filed with the SEC on December 23,
2016 in connection with its 2017 annual meeting of shareholders, and its
Annual Report on Form 10-K for the fiscal year ended September 30, 2016,
each of which may be obtained from the sources indicated in Additional
Information and Where to Find It. Other information regarding
persons who may be deemed participants in the proxy solicitation and a
description of their direct and indirect interests (which may be
different than those of WGL’s investors and security holders), by
security holdings or otherwise, will be contained in the proxy statement
and other relevant materials filed or to be filed with the SEC when they
become available.

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,
dividends and other future financial business performance, strategies,
the outcome of the arbitration proceeding affecting our midstream energy
services segment, legal developments relating to the Constitution
Pipeline, AltaGas Ltd.’s proposed acquisition of us and other
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, the closing of the
AltaGas transaction may not occur or may be delayed; our stockholders
may not approve the AltaGas transaction; litigation related to the
AltaGas transaction or limitations or restrictions imposed by regulatory
authorities may delay or negatively impact the transaction and there may
be a loss of customers, employees or business partners as a result of
the transaction and the factors discussed under the “Risk Factors”
heading in our most recent annual report on Form 10-K and other
documents that we have filed with, or furnished to, the U.S. Securities
and Exchange Commission.


WGL Holdings, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)

(In thousands)	December 31, 2016			September 30, 2016
ASSETS
Property, Plant and Equipment
At original cost	$	5,664,221		$	5,542,916
Accumulated depreciation and amortization	(1,440,438		)	(1,415,679		)
Net property, plant and equipment	4,223,783			4,127,237
Current Assets
Cash and cash equivalents	12,884			5,573
Accounts receivable, net	691,117			491,020
Storage gas	208,841			207,132
Derivatives and other	182,368			139,749
Total current assets	1,095,210			843,474
Deferred Charges and Other Assets	1,156,397			1,078,739
Total Assets	$	6,475,390		$	6,049,450
CAPITALIZATION AND LIABILITIES
Capitalization
WGL Holdings common shareholders’ equity	$	1,439,465		$	1,375,561
Non-controlling interest	5,205			409
Washington Gas Light Company preferred stock	28,173			28,173
Total Equity	1,472,843			1,404,143
Long-term debt	1,435,247			1,435,045
Total capitalization	2,908,090			2,839,188
Current Liabilities
Notes payable and project financing	634,392			331,385
Accounts payable and other accrued liabilities	447,467			405,351
Derivatives and other	340,181			290,190
Total current liabilities	1,422,040			1,026,926
Deferred Credits	2,145,260			2,183,336
Total Capitalization and Liabilities	$	6,475,390		$	6,049,450


WGL Holdings, Inc.
Condensed Consolidated Statements of Income
(Unaudited)

	Three Months Ended
	December 31,
(In thousands, except per share data)	2016			2015
OPERATING REVENUES
Utility	$	327,063		$	288,153
Non-utility	282,424			325,231
Total Operating Revenues	609,487			613,384
OPERATING EXPENSES
Utility cost of gas	75,500			50,025
Non-utility cost of energy-related sales	252,886			282,487
Operation and maintenance	100,717			95,419
Depreciation and amortization	35,283			31,412
General taxes and other assessments	40,388			36,532
Total Operating Expenses	504,774			495,875
OPERATING INCOME	104,713			117,509
Equity in earnings of unconsolidated affiliates	265			1,263
Other income — net	478			979
Interest expense	16,235			12,760
INCOME BEFORE TAXES	89,221			106,991
INCOME TAX EXPENSE	33,454			38,490
NET INCOME	$	55,767		$	68,501
Less non-controlling interest	(2,535		)	—
Dividends on Washington Gas Light Company preferred stock	330			330
NET INCOME APPLICABLE TO COMMON STOCK	$	57,972		$	68,171
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic	51,172			49,807
Diluted	51,445			50,030
EARNINGS PER AVERAGE COMMON SHARE
Basic	$	1.13		$	1.37
Diluted	$	1.13		$	1.36


The following table reconciles EBIT by operating segment to net income applicable to common stock.

	Three Months Ended
	December 31,
(In thousands)	2016			2015
EBIT:
Regulated utility	$	102,717		$	99,289
Retail energy-marketing	29,185			(567		)
Commercial energy systems	4,663			943
Midstream energy services	(28,484		)	20,839
Other activities	(1,198		)	(780		)
Intersegment eliminations	1,108			27
Total	$	107,991		$	119,751
Interest expense	16,235			12,760
Income tax expense	33,454			38,490
Dividends on Washington Gas preferred stock	330			330
Net income applicable to common stock	$	57,972		$	68,171


WGL Holdings, Inc.
Consolidated Financial and Operating Statistics
(Unaudited)

FINANCIAL STATISTICS
	Twelve Months Ended
	December 31,
	2016	2015
Closing Market Price — end of period	$76.28	$62.99
52-Week Market Price Range	$79.79 - $58.69	$65.55 - $50.89
Price Earnings Ratio	24.6	23.2
Annualized Dividends Per Share	$1.95	$1.85
Dividend Yield	2.6%	2.9%
Return on Average Common Equity	11.5%	10.7%
Total Interest Coverage (times)	5.3	5.1
Book Value Per Share — end of period	$28.11	$25.87
Common Shares Outstanding — end of period (thousands)	51,211	49,833

UTILITY GAS STATISTICS
	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
(In thousands)	2016			2015			2016			2015
Operating Revenues
Gas Sold and Delivered
Residential — Firm	$	204,348		$	167,689		$	652,041		$	740,621
Commercial and Industrial — Firm	45,299			36,609			145,396			168,129
Commercial and Industrial — Interruptible	553			518			2,217			2,378
Electric Generation	275			275			1,100			1,100
	250,475			205,091			800,754			912,228
Gas Delivered for Others
Firm	56,075			61,903			200,880			210,986
Interruptible	14,770			11,505			49,566			50,246
Electric Generation	99			176			778			597
	70,944			73,584			251,224			261,829
	321,419			278,675			1,051,978			1,174,057
Other	5,644			9,478			31,049			35,428
Total	$	327,063		$	288,153		$	1,083,027		$	1,209,485

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
(In thousands of therms)	2016			2015			2016			2015
Gas Sales and Deliveries
Gas Sold and Delivered
Residential — Firm	207,482			152,924			645,183			670,740
Commercial and Industrial — Firm	57,721			44,892			180,661			183,257
Commercial and Industrial — Interruptible	814			720			2,865			1,736
	266,017			198,536			828,709			855,733
Gas Delivered for Others
Firm	161,582			133,278			529,333			531,397
Interruptible	64,163			62,535			240,642			245,139
Electric Generation	23,599			43,225			271,627			196,032
	249,344			239,038			1,041,602			972,568
Total	515,361			437,574			1,870,311			1,828,301
Utility Gas Purchase Expense (excluding asset optimization)	35.14		¢	36.26		¢	35.15		¢	50.91		¢
HEATING DEGREE DAYS
Actual	1,196			956			3,581			3,630
Normal	1,318			1,331			3,717			3,746
Percent Colder (Warmer) than Normal	(9.3		)%	(28.2		)%	(3.7		)%	(3.1		)%
Average Active Customer Meters	1,148,917			1,135,765			1,145,572			1,133,059
WGL ENERGY SERVICES
Natural Gas Sales
Therm Sales (thousands of therms)	220,500			189,500			781,600			701,500
Number of Customers (end of period)	126,400			141,300			126,400			141,300
Electricity Sales
Electricity Sales (thousands of kWhs)	3,103,200			2,926,400			13,267,400			12,314,900
Number of Accounts (end of period)	122,600			135,000			122,600			135,000
WGL ENERGY SYSTEMS
Megawatts in service	176			119			202			119
Megawatt hours generated	44,274			33,448			220,280			137,271

WGL Holdings, Inc.
Reconciliation of Non-GAAP Financial
Measures
(Unaudited)

The tables below reconcile operating earnings (loss) on a consolidated
basis to GAAP net income (loss) applicable to common stock and adjusted
EBIT on a segment basis to EBIT. Management believes that operating
earnings (loss) and adjusted EBIT provide a meaningful representation of
our earnings from ongoing operations on a consolidated and segment
basis, respectively. These measures facilitate analysis by providing
consistent and comparable measures to help management, investors and
analysts better understand and evaluate our operating results and
performance trends, and assist in analyzing period-to-period
comparisons. Additionally, we use these non-GAAP measures to report to
the board of directors and to evaluate management’s performance.

To derive our non-GAAP measures, we adjust for the accounting
recognition of certain transactions (non-GAAP adjustments) based on at
least one of the following criteria:

To better match the accounting recognition of transactions with their
economics;
To better align with regulatory view/recognition;
To eliminate the effects of:
i. Significant out of period
adjustments;
ii. Other significant items that may obscure
historical earnings comparisons and are not indicative of performance
trends; and
iii. For adjusted EBIT, other items which may obscure
segment comparisons.

There are limits in using operating earnings (loss) and adjusted EBIT to
analyze our consolidated and segment results, respectively, as they are
not prepared in accordance with GAAP and may be different than non-GAAP
financial measures used by other companies. In addition, using operating
earnings (loss) and adjusted EBIT to analyze our results may have
limited value as they exclude 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
the most directly comparable GAAP financial measures.

The following tables represent the reconciliation of non-GAAP operating
earnings to GAAP net income (loss) applicable to common stock
(consolidated by quarter):


Fiscal Year 2017
	Quarterly Period Ended*
(In thousands, except per share data)	Dec. 31			Mar. 31	Jun. 30	Sept. 30	Fiscal Year
Operating earnings	$	63,606					$	63,606
Non-GAAP adjustments^**	(9,102		)				(9,102		)
Income tax effect of non-GAAP adjustments^***	3,468						3,468
Net income applicable to common stock	$	57,972					$	57,972
Diluted average common shares outstanding	51,445						51,445
Operating earnings per share	$	1.24					$	1.24
Per share effect of non-GAAP adjustments	(0.11		)				(0.11		)
Diluted earnings per average common share	$	1.13					$	1.13
Fiscal Year 2016
	Quarterly Period Ended*
(In thousands, except per share data)	Dec. 31			Mar. 31	Jun. 30	Sept. 30	Fiscal Year
Operating earnings	$	59,205					$	59,205
Non-GAAP adjustments^**	13,312						13,312
Income tax effect of non-GAAP adjustments^***	(4,346		)				(4,346		)
Net income applicable to common stock	$	68,171					$	68,171
Diluted average common shares outstanding	50,030						50,030
Operating earnings per share	$	1.18					$	1.18
Per share effect of non-GAAP adjustments	0.18						0.18
Diluted earnings per average common share	$	1.36					$	1.36

* Quarterly earnings per share may not sum to year-to-date or
annual earnings per share as quarterly calculations are based on
weighted average common and common equivalent shares outstanding,
which may vary for each of those periods.

** Refer to the reconciliations of adjusted EBIT to EBIT below
for further details on our non-GAAP adjustments.

*** Non-GAAP adjustments are presented on a gross basis and the
income tax effects of those adjustments are presented separately.
The income tax effects of non-GAAP adjustments, both current and
deferred, are calculated at the individual company level based on
the applicable composite tax rate for each period presented, with
the exception of transactions not subject to income taxes.
Additionally, the income tax effect of non-GAAP adjustments
includes investment tax credits related to distributed generation
assets.

WGL Holdings, Inc. (Consolidated by Quarter)
Reconciliation
of Non-GAAP Financial Measures
(Unaudited)

The following tables summarize non-GAAP adjustments by operating segment
and present a reconciliation of adjusted EBIT to EBIT. EBIT is defined
as earnings before interest and taxes from continuing operations. Items
we do not include in EBIT are interest expense, inter-company financing
activity, dividends on Washington Gas preferred stock, and income taxes.


Three Months Ended December 31, 2016
				Retail			Commercial			Midstream
	Regulated			Energy-			Energy			Energy			Other
(In thousands)	Utility			Marketing			Systems			Services			Activities^(g)			Eliminations^(h)			Total
Adjusted EBIT	$	91,380		$	9,895		$	6,072		$	9,439		$	(1,198	)	$	1,505		$	117,093
Non-GAAP adjustments:
Unrealized mark-to-market valuations on energy-related derivatives(a)	15,436			19,290			—			(9,677		)	—			(397		)	24,652
Storage optimization program(b)	(664		)	—			—			—			—			—			(664		)
DC weather impact(c)	(3,435		)	—			—			—			—			—			(3,435		)
Distributed generation asset related investment tax credits(d)	—			—			(1,409		)	—			—			—			(1,409		)
Change in measured value of inventory(e)	—			—			—			(21,468		)	—			—			(21,468		)
Losses associated with Antero contract(f)	—			—			—			(6,778		)	—			—			(6,778		)
Total non-GAAP adjustments	$	11,337		$	19,290		$	(1,409	)	$	(37,923	)	$	—		$	(397	)	$	(9,102	)
EBIT	$	102,717		$	29,185		$	4,663		$	(28,484	)	$	(1,198	)	$	1,108		$	107,991

Three Months Ended December 31, 2015
				Retail			Commercial			Midstream
	Regulated			Energy-			Energy			Energy			Other
(In thousands)	Utility			Marketing			Systems			Services			Activities^(g)			Eliminations			Total
Adjusted EBIT	$	86,623		$	5,245		$	2,195		$	13,129		$	(780	)	$	27		$	106,439
Non-GAAP adjustments:
Unrealized mark-to-market valuations on energy-related derivatives(a)	19,423			(5,812		)	—			10,836			—			—			24,447
Storage optimization program (b)	475			—			—			—			—			—			475
DC weather impact(c)	(7,232		)	—			—			—			—			—			(7,232		)
Distributed generation asset related investment tax credits(d)	—			—			(1,252		)	—			—			—			(1,252		)
Change in measured value of inventory(e)	—			—			—			(3,126		)	—			—			(3,126		)
Total non-GAAP adjustments	$	12,666		$	(5,812	)	$	(1,252	)	$	7,710		$	—		$	—		$	13,312
EBIT	$	99,289		$	(567	)	$	943		$	20,839		$	(780	)	$	27		$	119,751

Footnotes:
(a)		Adjustments to eliminate unrealized mark-to-market gains (losses) for our energy-related derivatives for our regulated utility and retail energy-marketing operations as well as certain derivatives related to the optimization of transportation capacity for the midstream energy services segment. With the exception of certain transactions related to the optimization of system capacity assets as discussed in footnote (b) below, when these derivatives settle, the realized economic impact is reflected in our non-GAAP results, as we are only removing interim unrealized mark-to-market amounts.
(b)		Adjustments to shift the timing of storage optimization margins for the regulated utility segment 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 because the margins will be recognized for regulatory purposes when the withdrawals are made at the unadjusted historical cost of storage inventory.
(c)		Eliminates the estimated financial effects of warm or cold weather in the District of Columbia, as measured consistent with our regulatory tariff. Washington Gas has regulatory weather protection mechanisms in Maryland and Virginia designed to neutralize the estimated financial effects of weather. Utilization of normal weather is an industry standard, and it is our practice to evaluate our rate-regulated revenues by utilizing normal weather and to provide estimates and guidance on the basis of normal weather.
(d)		To reclassify the amortization of deferred investment tax credits from income taxes to operating income for the commercial energy systems segment. These credits are a key component of the operating success of this segment and therefore are included within adjusted EBIT to help management and investors better assess the segment's performance.
(e)		For our midstream energy services segment, 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. Adjusting our storage optimization inventory in this fashion better aligns 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. Additionally, this adjustment also includes the net effect of certain sharing mechanisms on the difference between the changes in our non-GAAP storage inventory valuations and the unrealized gains and losses on derivatives not subject to non-GAAP adjustments.
(f)		Adjustment to eliminate losses associated with the index price used in certain gas purchases from Antero, which are the subject of arbitration. These losses are expected to reverse in future periods upon completion of the arbitration proceedings.
(g)		Activities and transactions that are not significant enough on a standalone basis to warrant treatment as an operating segment and that do not fit into one of our four operating segments.
(h)		Activities and transactions between segments that are eliminated in consolidation.

View source version on businesswire.com: http://www.businesswire.com/news/home/20170208006365/en/

WGL Holdings, Inc.
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Bernie
Tylor, 202-624-6778
or
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Community
Douglas Bonawitz, 202-624-6129

Source: Business Wire
(February 8, 2017 - 7:48 PM EST)

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