EX-99.1 2 a991pressreleaseq32016.htm PRESS RELEASE Exhibit
Exhibit 99.1
FOR IMMEDIATE RELEASE:
November 2, 2016
NW Natural Reports Results for the
Three and Nine Months Ended September 30, 2016
___________________________________________________
•
Reported consolidated net loss of $8.0 million, or $0.29 per share, for the third quarter of 2016, compared to a net loss of $6.7 million, or $0.24 per share, for 2015.
•
Received Notice to Proceed (NTP) for the North Mist gas storage expansion project allowing the Company to move the project forward with construction to begin this fall. Project costs are estimated to be $128 million with a target in-service date during the winter of 2018-19.
•
Continued our legacy of excellent customer service with the highest customer satisfaction score among large utilities in the West and the second highest score in the nation in the 2016 J.D. Power Gas Utility Residential Customer Satisfaction study.
•
Reduced residential rates to the lowest level in 15 years with a credit of $19.4 million to customers in June and an additional rate reduction effective Nov. 1, 2016 in both Oregon and Washington.
•
Increased the customer growth rate to 1.6% at Sept. 30, 2016 with over 11,500 customers added in the last 12 months.
•
Delivered increasing dividends for the 61st consecutive year. The Company’s current annual dividend rate is $1.88 per share.
•
Reaffirmed earnings guidance for 2016, at $1.98 to $2.18 per share or $2.05 to $2.25 per share adjusted to exclude the effects of the pre-tax charge of $3.3 million, or $0.07 per share after-tax(1), related to the final environmental implementation order received in January 2016 as described below.
___________________________________________________
PORTLAND, ORE.—Northwest Natural Gas Company, dba NW Natural (NYSE: NWN), reported a consolidated net loss of $8.0 million, or $0.29 per share for the third quarter of 2016, compared to a loss of $6.7 million, or $0.24 per share, for the same period of 2015. The Company's results typically reflect a loss during the third quarter due to the impact of decreased heating requirements during the summer months. Results included higher operations and maintenance (O&M) expense in 2016 as costs moved to more sustainable levels after implementing savings initiatives in 2015, partially offset by higher revenues from the gas storage segment.

Consolidated net income was $30.6 million, or $1.11 per share, for the first nine months of 2016, compared to net income of $24.0 million, or $0.88 per share, for the same period of 2015. Results for the nine month periods were affected by non-cash charges related to the Company's environmental regulatory proceeding in 2015 and 2016. The first quarter of 2016 included a $3.3 million pre-tax, or $0.07 per share after-tax disallowance(1), from the OPUC's 2016 Order (2016 Order), which was related to the Company's compliance filing under the environmental mechanism. The first quarter of 2015 included a $15.0 million pre-tax charge or $0.33 per share after-tax disallowance from the February 2015 OPUC Order (2015 Order) in the environmental docket.

Excluding these charges(2), consolidated net income was $32.6 million, or $1.18 per share for the first nine months of 2016, compared to $1.21 per share on net income of $33.1 million for 2015. The decrease in net income was primarily due to lower other income and higher O&M expense almost entirely offset by strong utility margin and gas storage revenues.
_________________

(1)Earnings per share (EPS) calculation based on average diluted shares outstanding of 27.6 million and an income tax rate of 39.5%.
(2)See tabular reconciliation of non-GAAP measures in Consolidated Results section below.


1



North Mist Gas Storage Expansion Project Moves Forward
The North Mist gas storage expansion project is designed to provide long-term, no-notice underground gas storage to support electric generating plants, which are integrating more wind power into the generation mix. Through our no-notice storage service, the local electric company will be able to draw on our North Mist gas storage facility to meet its fueling needs and rapidly respond to changing conditions in wind generation. Natural gas storage enables electric generation to adjust quickly when renewable energy - like wind and solar - rise and fall with natural variability. The reliability and flexibility of supporting resources like natural gas are vital to the region as we move toward 50% renewable electricity by 2040.

The estimated cost of the expansion is $128 million with a targeted in-service date during the winter of 2018-19. As of Sept. 30, 2016, the Company has invested $14 million in the expansion and expects to spend an additional $8 million to $10 million in the fourth quarter of 2016 as the Company begins construction and procuring materials. The majority of capital expenditures are anticipated in 2017 with injections and testing planned in early 2018 to meet the targeted in-service date. The expansion will be included in rates under an established tariff when it is placed into service.

Consolidated Results
For the three months ended Sept. 30, 2016, NW Natural's consolidated net loss was $0.05 per share or $1.4 million higher compared to the same period in 2015. Results were driven by a $2.8 million increase in O&M expense as well as a $0.7 million decrease in utility margin as a result of lower contributions from our gas reserve investments, which decreased due to regular amortization, offset by customer growth. These factors were partially offset by a $1.7 million increase in gas storage revenues from higher asset management revenues predominately at the Mist storage facility and slightly higher firm storage pricing at the Gill Ranch facility.

The third quarter results are summarized in the table below:
 
Three Months Ended September 30,
 
2016
 
2015
 
 
In thousands, except per share data
Amount
Per Share
 
Amount
Per Share
 
Change
Net income (loss):
 
 
 
 
 
 
 
Utility segment
$
(9,511
)
$
(0.35
)
 
$
(7,529
)
$
(0.28
)
 
$
(1,982
)
Gas storage segment
1,813

0.06

 
799

0.04

 
1,014

Other
(342
)
—

 
45

—

 
(387
)
Consolidated net income (loss)
$
(8,040
)
$
(0.29
)
 
$
(6,685
)
$
(0.24
)
 
$
(1,355
)
Utility margin
$
50,923

 
 
$
51,619

 
 
$
(696
)
Gas storage operating revenues
7,293

 
 
5,596

 
 
1,697


For the nine months ended Sept. 30, 2016, NW Natural net income increased $0.23 per share or $6.6 million compared to 2015. The increase was largely due to the non-cash charges related to the 2015 and 2016 Orders. Excluding these charges on a non-GAAP basis, net income decreased $0.5 million primarily due to several large offsetting factors including a $5.5 million decrease in other income related to the recognition of equity earnings on deferred regulatory assets and a $3.7 million increase in O&M expense. These factors were almost entirely offset by a $4.0 million increase in utility margin attributable to customer growth and gains from gas cost incentive sharing and a $3.4 million increase in gas storage revenues from the same drivers noted for the quarter. In addition, interest expense was lower by $1.8 million due to the redemption of debt for both the utility and Gill Ranch in 2015.


2



The nine month results are summarized in the table below:
 
Nine Months Ended September 30,
 
2016
 
2015
 
 
In thousands, except per share data
Amount
Per Share
 
Amount
Per Share
 
Change
Net income (loss):
 
 
 
 
 
 
 
Utility segment
$
26,848

$
0.97

 
$
23,051

$
0.84

 
$
3,797

Gas storage segment
3,988

0.14

 
827

0.04

 
3,161

Other
(216
)
—

 
120

—

 
(336
)
Consolidated net income
$
30,620

$
1.11

 
$
23,998

$
0.88

 
$
6,622

Adjustments:
 
 
 
 
 
 
 
Regulatory environmental disallowance, net of taxes ($1,304 and $5,925)(1)
1,996

0.07

 
9,075

0.33

 
(7,079
)
Adjusted consolidated net income(1)
$
32,616

$
1.18

 
$
33,073

$
1.21

 
$
(457
)
Utility margin
$
256,958

 
 
$
252,935

 
 
$
4,023

Gas storage operating revenues
19,654

 
 
16,232

 
 
3,422

(1) Regulatory environmental disallowance of $3.3 million in 2016 is recorded in utility other income and expense, net ($2.8 million) and utility O&M expense ($0.5 million). Regulatory environmental disallowance of $15.0 million in 2015 is recorded in utility O&M expense. Adjusted EPS and net income are non-GAAP financial measures based on the after-tax disallowance. EPS is calculated using the combined federal and state statutory tax rate of 39.5% and 27.6 million and 27.4 million diluted shares for the nine months ended September 30, 2016 and 2015, respectively.

Utility Results
For the three months ended Sept. 30, 2016, utility segment net loss increased $2.0 million or $0.07 per share compared to the same period in 2015 due to a $1.6 million increase in O&M expense and a $0.7 million decrease in utility margin primarily reflecting lower contributions from our gas reserve investments, which decreased due to regular amortization, offset by strong customer growth.

For the three months ended Sept. 30, 2016, total gas sales and transportation deliveries increased 5% compared to the same period last year primarily due to greater customer usage and growth. As the third quarter is not a primary heating quarter, weather did not significantly affect volumes.

For the nine months ended Sept. 30, 2016, utility segment net income increased $3.8 million or $0.13 per share compared to the same period in 2015 due to a $4.0 million increase in utility margin reflecting customer growth and an increase in gas cost incentive sharing gains, as well as a $12.2 million decrease in O&M expense primarily due to the $15.0 million regulatory disallowance as a result of the 2015 Order offset by higher non-payroll costs. These positive factors were offset by an $8.3 million decrease in other income due to the recognition of $5.3 million of equity earnings on deferred regulatory assets as a result of the 2015 Order and a $2.8 million interest write-off as a result of the 2016 Order.

Although weather for the nine months ended Sept. 30, 2016 was comparable to the prior year, deliveries increased 5% due to comparatively colder weather in the first quarter of 2016 during our peak heating season. Temperatures for the first nine months of 2015 and 2016 were 22% warmer than average.
 
Customer Growth. NW Natural achieved a customer growth rate for the trailing 12-month period ended Sept. 30, 2016 of 1.6%, with the Company serving over 718,000 customers at quarter end.


3



Utility Volume and Margin. The following table presents key utility margin metrics:
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
Favorable/(Unfavorable)Change
 
Favorable/(Unfavorable) % Change
(Dollars and therms in thousands)
 
2016
 
2015
 
2016
 
2015
 
QTD
 
YTD
 
QTD
 
YTD
Gas sales and transportation deliveries
 
162,205


154,664

 
727,687

 
692,527

 
7,541

 
35,160

 
5
 %
 
5
 %
Weather (in heating degree days)
 
78

 
75

 
2,066

 
2,068

 
3

 
(2
)
 
4

 
—

Utility operating revenues
 
$
80,378

 
$
87,475

 
$
422,617

 
$
476,672

 
$
(7,097
)
 
$
(54,055
)
 
(8
)
 
(11
)
Less: Cost of gas
 
28,264

 
35,856

 
157,546

 
223,737

 
7,592

 
66,191

 
21

 
30

 
Environmental remediation expense
 
1,191

 
—

 
8,113

 
—

 
(1,191
)
 
(8,113
)
 
—

 
—

Utility margin(1)
 
$
50,923

 
$
51,619

 
$
256,958

 
$
252,935

 
$
(696
)
 
$
4,023

 
(1
)%
 
2
 %
(1) In November 2015 the Company began collecting revenues from customers through the environmental mechanism. These collections are included in utility operating revenues and are offset by the amortization of environmental liabilities presented in the environmental remediation expense line in the operating expense section of the income statement. Utility margin provides a key metric in assessing the performance of the utility segment.

Gas Storage Results
For the three and nine months ended Sept. 30, 2016, the Company's gas storage segment net income increased $1.0 million or $0.02 per share and $3.2 million or $0.10 per share, respectively, compared to the same periods in 2015. Results reflected an increase in revenues from our asset management agreements at both facilities but predominately our Mist storage facility. Additionally, slightly higher firm pricing at Gill Ranch for the 2016-17 gas storage year also increased revenues. Lower operating costs for the 2016 year-to-date period and lower interest expense for both the 2016 quarter and year-to-date periods at the Gill Ranch facility also contributed to the improved results.

Consolidated Operations
For the three months ended Sept. 30, 2016, consolidated O&M expense increased $2.8 million compared to the same period in 2015 due to higher non-payroll costs primarily from contract work as utility operational expenses increased mainly from the timing of system integrity work and other maintenance expense. Overall expense levels were elevated in the third quarter and are also expected to be comparatively higher in the fourth quarter as costs move to more sustainable levels in 2016 after implementing cost savings initiatives in the second half of 2015.

For the nine months ended Sept. 30, 2016 consolidated O&M expense decreased $11.7 million compared to the same period in 2015 primarily due to the $15.0 million pre-tax charge from the 2015 Order offset by higher costs primarily related to similar trends noted for the third quarter above.

For the three months ended Sept. 30, 2016, other income was comparable to the same period in 2015. For the nine months ended Sept. 30, 2016 other income decreased $8.1 million compared to the same period in 2015 due to the recognition of $5.3 million of equity earnings from deferred environmental expenses in the first quarter of 2015 as a result of the 2015 Order. In addition, the 2016 Order resulted in a write-off of $2.8 million of interest in the first quarter of 2016.

Cash Flows
Cash provided by operations increased $33.7 million to $206.4 million for the first nine months of 2016 due to historically low natural gas prices decreasing payables, higher collections under regulatory mechanisms and the first year of collections from our environmental mechanism. In addition, the enactment of bonus depreciation resulted in a federal tax refund in 2016 and an increase in deferred tax liabilities. These in flows were partially offset by a decrease in cash from the early credit of gas cost savings to customers in June 2016.

Cash out flows from investing activities increased $7.0 million to $95.2 million primarily due to higher capital expenditures from projects such as infrastructure upgrades in Clark County, Washington to support customer growth, the refurbishment of our liquefied natural gas facility in Newport, Oregon, the North Mist expansion, and our on-going investment in technology.


4



Cash out flows from financing activities increased $20.3 million to $109.1 million primarily due to reducing short-term debt and commercial paper balances with cash flows from operations.

2016 Earnings Guidance
The Company reaffirmed earnings guidance today in the range of $1.98 to $2.18 per share including the effects of the pre-tax charge of $3.3 million or $0.07 per share after-tax(1), related to the 2016 Order. Excluding the charge on a non-GAAP basis, earnings guidance is $2.05 to $2.25 per share. The Company’s 2016 earnings guidance assumes customer growth from the utility segment, average weather conditions, sustainable operations and maintenance expense levels and normal inflationary increases, slow recovery of the gas storage market, the impact of the five-year extension of bonus depreciation resulting from the enactment of the Federal PATH Act of 2015, and no significant changes in prevailing legislative and regulatory policies, mechanisms, or outcomes.

(1)EPS calculation based on average diluted shares outstanding of 27.6 million and an income tax rate of 39.5%.

Dividend Declaration
The board of directors of NW Natural declared a quarterly dividend of 47 cents per share on the Company’s common stock. The dividends will be paid on Nov. 15, 2016 to shareholders of record on Oct. 31, 2016. The Company’s indicated annual dividend rate is $1.88 per share.

Presentation of Results
In addition to presenting the results of operations and earnings amounts in total, certain financial measures are expressed in cents per share or exclude the after-tax regulatory charges related to the Orders implementing the SRRM in 2015 and 2016, which are non-GAAP financial measures. The Company presents net income and EPS excluding the regulatory disallowance along with the GAAP measures to illustrate the magnitude of this disallowance on ongoing business and operational results. Although the excluded amounts are properly included in the determination of these items under GAAP, the Company believes the amount and nature of such disallowance make period to period comparisons of operations difficult or potentially confusing. Financial measures are expressed in cents per share as these amounts reflect factors that directly impact earnings, including income taxes. All references in this section to EPS are on the basis of diluted shares. The Company uses such non-GAAP financial measures to analyze its financial performance because it believes they provide useful information to its investors and creditors in evaluating its financial condition and results of operations.

Conference Call Arrangements
As previously reported, NW Natural will conduct a conference call and webcast starting at 8 a.m. Pacific Time (11 a.m. Eastern Time) on Nov. 2, 2016 to review the Company's financial and operating results for the three and nine months ended Sept. 30, 2016.

To hear the conference call live, please dial 1-866-267-6789 within the United States and 1-855-669-9657 from Canada. International callers can dial 1-412-902-4110. To access the conference replay, please call 1-877-344-7529 and enter the conference identification pass code 10094048. To hear the replay from Canada, please dial 1-855-669-9658 and from international locations, please dial 1-412-317-0088.

To hear the conference by webcast, log on to NW Natural's corporate website at nwnatural.com.

Forward-Looking Statements
This report, and other presentations made by NW Natural from time to time, may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipates," "assumes," "intends," "plans," "seeks," "believes," "estimates," "expects" and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the following: plans, objectives, goals, strategies, future events, the economy, investments, customer growth, weather and its impacts, environmental remediation cost recoveries, levels and pricing of gas storage contracts, gas storage development or costs, events or timing related thereto, financial results and positions, operation and maintenance expense, capital expenditures, free

5



cash flow levels, revenues and earnings and the timing thereof, dividends, effects of regulatory disallowance, performance, support of renewable energy, effects of legislative policies, including bonus depreciation, timing or effects of future regulatory proceedings or future regulatory approvals, regulatory prudence reviews, effects of and recoveries under regulatory mechanisms, including, but not limited to, SRRM, and other statements that are other than statements of historical facts.

Forward-looking statements are based on the Company's current expectations and assumptions regarding its business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. The Company's actual results may differ materially from those contemplated by the forward-looking statements. The Company cautions you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future operational or financial performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed by reference to the factors described in Part I, Item 1A "Risk Factors", and Part II, Item 7 and Item 7A "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosure about Market Risk" in the Company's most recent Annual Report on Form 10-K and in Part I, Items 2 and 3 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk", and Part II, Item 1A, "Risk Factors", in the Company's quarterly reports filed thereafter.

All forward-looking statements made in this report and all subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. New factors emerge from time to time and it is not possible for the Company to predict all such factors, nor can it assess the impact of each such factor or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements.

About NW Natural
NW Natural (NYSE:NWN) is headquartered in Portland, Ore., and provides natural gas service to more than 718,000 residential, commercial, and industrial customers through approximately 14,000 miles of mains and service lines in western Oregon and southwestern Washington. It is the largest independent natural gas utility in the Pacific Northwest with $3.0 billion in total assets. NW Natural and its subsidiaries currently own and operate underground gas storage facilities with storage capacity of approximately 31 Bcf in Oregon and California. Additional information is available at nwnatural.com.

# # #
Investor Contact:
Nikki Sparley
Phone: 503-721-2530
Email: nikki.sparley@nwnatural.com

Media Contact:
Melissa Moore
Phone: 503-220-2436
Email: melissa.moore@nwnatural.com

6



 
NORTHWEST NATURAL GAS COMPANY
 
Financial Highlights (Unaudited)
 
Third Quarter - 2016
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
Twelve Months Ended
 
In thousands, except per share amounts, customer, and degree day data
 
September 30,
 
 
September 30,
 
 
September 30,
 
2016
 
2015
Change
2016
 
2015
Change
2016
 
2015
Change
Operating revenues
$
87,727

 
$
93,128

(6)%
$
442,439

 
$
493,073

(10)%
$
673,157

 
$
733,356

(8)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of gas
 
28,264

 
 
35,856

(21)
 
157,546

 
 
223,737

(30)
 
261,114

 
 
343,519

(24)
 
Operations and maintenance
 
34,870

 
 
32,031

9
 
109,771

 
 
121,458

(10)
 
145,834

 
 
155,355

(6)
 
Environmental remediation
 
1,191

 
 
—

100
 
8,113

 
 
—

100
 
11,626

 
 
—

100
 
General taxes
 
7,211

 
 
6,772

6
 
23,333

 
 
23,153

1
 
30,461

 
 
30,052

1
 
Depreciation and amortization
 
20,628

 
 
20,342

1
 
61,435

 
 
60,683

1
 
81,675

 
 
80,640

1
 
Total operating expenses
 
92,164

 
 
95,001

(3)
 
360,198

 
 
429,031

(16)
 
530,710

 
 
609,566

(13)
Income (loss) from operations
 
(4,437
)
 
 
(1,873
)
137
 
82,241

 
 
64,042

28
 
142,447

 
 
123,790

15
Other income (expense), net
 
652

 
 
746

(13)
 
(1,144
)
 
 
6,930

(117)
 
(327
)
 
 
6,811

(105)
Interest expense, net
 
9,729

 
 
10,111

(4)
 
29,183

 
 
31,030

(6)
 
40,692

 
 
41,569

(2)
Income (loss) before income taxes
 
(13,514
)
 
 
(11,238
)
20
 
51,914

 
 
39,942

30
 
101,428

 
 
89,032

14
Income tax expense
 
(5,474
)
 
 
(4,553
)
20
 
21,294

 
 
15,944

34
 
41,103

 
 
36,564

12
Net income (loss)
$
(8,040
)
 
$
(6,685
)
20
 
30,620

 
 
23,998

28
$
60,325

 
$
52,468

15
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average diluted for period
 
27,554

 
 
27,363

 
 
27,629

 
 
27,399

 
 
27,590

 
 
27,370

 
 
End of period
 
27,558

 
 
27,367

 
 
27,558

 
 
27,367

 
 
27,558

 
 
27,367

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per share information:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted earnings (loss) per share
$
(0.29
)
 
$
(0.24
)
 
$
1.11

 
$
0.88

 
$
2.19

 
$
1.92

 
Dividends declared per share of common stock
 
0.4700

 
 
0.4650

 
 
1.4025

 
 
1.3950

 
 
1.8680

 
 
1.8600

 
Book value per share, end of period
 
28.27

 
 
27.74

 
 
28.27

 
 
27.74

 
 
28.27

 
 
27.74

 
Market closing price, end of period
 
60.11

 
 
45.84

 
 
60.11

 
 
45.84

 
 
60.11

 
 
45.84

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital structure, end of period:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock equity
 
49.6
 %


47.5
 %
 
 
49.6
 %


47.5
 %
 
 
49.6
 %
 
 
47.5
 %
 
 
Long-term debt
 
33.8



38.4

 
 
33.8



38.4

 
 
33.8

 
 
38.4

 
 
Short-term debt (including amounts due in one year)
 
16.6



14.1

 
 
16.6



14.1

 
 
16.6

 
 
14.1

 
 
Total
 
100.0
 %


100.0
 %
 
 
100.0
 %


100.0
 %
 
 
100.0
 %
 
 
100.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating statistics:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Customers - end of period
 
718,139



706,566

1.6%
 
718,139

 
 
706,566

1.6%
 
718,139

 
 
706,566

1.6%
Utility volumes - therms:
 
 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential and commercial sales
 
55,610



53,662

 
 
381,109

 
 
357,545

 
 
594,292

 
 
557,916

 
 
Industrial sales and transportation
 
106,595



101,002

 
 
346,578

 
 
334,982

 
 
469,480

 
 
460,902

 
Total utility volumes sold and delivered
 
162,205



154,664

 
 
727,687

 
 
692,527

 
 
1,063,772

 
 
1,018,818

 
Utility operating revenues:
 




 
 

 
 

 
 
 
 
 
 
 
 
Residential and commercial sales
$
68,508


$
73,236

 
$
388,689

 
$
432,067

 
$
601,457

 
$
652,950

 
 
Industrial sales and transportation
 
13,412



15,959

 
 
42,048

 
 
53,623

 
 
59,920

 
 
73,660

 
 
Other revenues
 
619



651

 
 
3,132

 
 
3,188

 
 
3,858

 
 
3,926

 
 
Less: Revenue taxes
 
2,161



2,371

 
 
11,252

 
 
12,206

 
 
17,080

 
 
18,217

 
Total utility operating revenues
 
80,378



87,475

 
 
422,617

 
 
476,672

 
 
648,155

 
 
712,319

 
 
Less: Cost of gas
 
28,264



35,856

 
 
157,546

 
 
223,737

 
 
261,114

 
 
343,519

 
 
Environmental remediation expense
 
1,191



—

 
 
8,113

 
 
—

 
 
11,626

 
 
—

 
Utility margin, net
$
50,923


$
51,619

 
 
256,958

 
$
252,935

 
$
375,415

 
$
368,800

 
Degree days:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Average (25-year average)
 
95

 
 
95

 
 
2,657

 
 
2,641

 
 
4,256

 
 
4,240

 
 
Actual
 
78

 
 
75

4%
 
2,066

 
 
2,068

—%
 
3,456

 
 
3,422

1%
Percent colder (warmer) than average weather
 
(18
)%
 
 
(21
)%
 
 
(22
)%
 
 
(22
)%
 
 
(19
)%
 
 
(19
)%
 


7



NORTHWEST NATURAL GAS COMPANY
 
 
 
 
 
 
Consolidated Balance Sheets (Unaudited)
 
 
September 30,
 
 
September 30,
In thousands
 
 
2016
 
 
2015
Assets:
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
6,230

 
$
5,227

 
Accounts receivable
 
 
25,506

 
 
29,800

 
Accrued unbilled revenue
 
 
15,537

 
 
15,752

 
Allowance for uncollectible accounts
 
 
(289
)
 
 
(308
)
 
Regulatory assets
 
 
55,280

 
 
82,712

 
Derivative instruments
 
 
4,857

 
 
2,956

 
Inventories
 
 
67,470

 
 
80,974

 
Gas reserves
 
 
16,257

 
 
17,822

 
Income taxes receivable
 
 
2,257

 
 
—

 
Deferred tax assets
 
 
—

 
 
15,663

 
Other current taxes
 
 
17,480

 
 
25,972

 
 
Total current assets
 
 
210,585

 
 
276,570

Non-current assets:
 
 
 
 
 
 
 
Property, plant, and equipment
 
 
3,177,196

 
 
3,072,998

 
Less: Accumulated depreciation
 
 
943,334

 
 
905,137

 
 
Total property, plant, and equipment, net
 
 
2,233,862

 
 
2,167,861

 
Gas reserves
 
 
103,976

 
 
117,784

 
Regulatory assets
 
 
341,188

 
 
333,953

 
Derivative instruments
 
 
1,151

 
 
299

 
Other investments
 
 
67,853

 
 
68,503

 
Restricted cash
 
 
—

 
 
4,500

 
Other non-current assets
 
 
1,269

 
 
1,248

 
 
Total non-current assets
 
 
2,749,299

 
 
2,694,148

 
 
Total assets
 
$
2,959,884

 
$
2,970,718

Liabilities and equity:
 
 
 
 
 
 
Current liabilities:
 
 
 
 
 
 
 
Short-term debt
 
$
194,900

 
$
225,200

 
Current maturities of long-term debt
 
 
64,994

 
 
—

 
Accounts payable
 
 
55,933

 
 
54,425

 
Taxes accrued
 
 
11,954

 
 
11,854

 
Interest accrued
 
 
9,671

 
 
9,800

 
Regulatory liabilities
 
 
27,921

 
 
34,127

 
Derivative instruments
 
 
5,334

 
 
21,949

 
Other current liabilities
 
 
31,997

 
 
27,924

 
 
Total current liabilities
 
 
402,704

 
 
385,279

Long-term debt
 
 
530,219

 
 
614,053

Deferred credits and other non-current liabilities:
 
 
 
 
 
 

 
Deferred tax liabilities
 
 
544,575

 
 
527,336

 
Regulatory liabilities
 
 
342,143

 
 
334,490

 
Pension and other postretirement benefit liabilities
 
 
216,909

 
 
228,861

 
Derivative instruments
 
 
1,682

 
 
3,540

 
Other non-current liabilities
 
 
142,450

 
 
117,950

 
 
Total deferred credits and other non-current liabilities
 
 
1,247,759

 
 
1,212,177

Equity:
 
 
 
 
 
 
 
Common stock
 
 
389,834

 
 
380,208

 
Retained earnings
 
 
396,938

 
 
388,082

 
Accumulated other comprehensive loss
 
 
(7,570
)
 
 
(9,081
)
 
 
Total equity
 
 
779,202

 
 
759,209

 
 
Total liabilities and equity
 
$
2,959,884

 
$
2,970,718


8



NORTHWEST NATURAL GAS COMPANY
 
 
 
 
 
 
Consolidated Statements of Cash Flows (Unaudited)
 
 
Nine Months Ended September 30,
In thousands
 
 
2016
 
 
2015
Operating activities:
 
 
 
 
 
 
 
Net income
 
$
30,620

 
$
23,998

 
Adjustments to reconcile net income to cash provided by operations:
 
 
 
 
 
 
 
 
Depreciation and amortization
 
 
61,435

 
 
60,683

 
 
Regulatory amortization of gas reserves
 
 
11,403

 
 
13,606

 
 
Deferred tax liabilities, net
 
 
17,810

 
 
7,153

 
 
Qualified defined benefit pension plan expense
 
 
3,989

 
 
4,238

 
 
Contributions to qualified defined benefit pension plans
 
 
(11,250
)
 
 
(11,780
)
 
 
Deferred environmental expenditures
 
 
(8,302
)
 
 
(8,063
)
 
 
Regulatory disallowance of prior environmental cost deferrals
 
 
3,287

 
 
15,000

 
 
Interest income on deferred environmental expenses
 
 
—

 
 
(5,322
)
 
 
Amortization of environmental remediation
 
 
8,113

 
 
—

 
 
Other
 
 
4,817

 
 
669

 
 
Changes in assets and liabilities:
 
 
 
 
 
 
 
 
 
Receivables
 
 
83,377

 
 
82,586

 
 
 
Inventories
 
 
3,226

 
 
(3,142
)
 
 
 
Taxes accrued
 
 
7,170

 
 
2,823

 
 
 
Accounts payable
 
 
(17,612
)
 
 
(36,230
)
 
 
 
Interest accrued
 
 
3,798

 
 
3,721

 
 
 
Deferred gas costs
 
 
(10,470
)
 
 
27,042

 
 
 
Other, net
 
 
14,988

 
 
(4,237
)
 
 
Cash provided by operating activities
 
 
206,399

 
 
172,745

Investing activities:
 
 
 
 
 
 
 
Capital expenditures
 
 
(98,111
)
 
 
(86,923
)
 
Restricted cash
 
 
—

 
 
(1,500
)
 
Other
 
 
2,868

 
 
181

 
 
Cash used in investing activities
 
 
(95,243
)
 
 
(88,242
)
Financing activities:
 
 
 
 
 
 
 
Common stock issued, net
 
 
4,832

 
 
1,252

 
Long-term debt retired
 
 
—

 
 
(40,000
)
 
Change in short-term debt
 
 
(75,135
)
 
 
(9,500
)
 
Cash dividend payments on common stock
 
 
(38,556
)
 
 
(38,122
)
 
Other
 
 
(278
)
 
 
(2,440
)
 
 
Cash used in financing activities
 
 
(109,137
)
 
 
(88,810
)
Increase (decrease) in cash and cash equivalents
 
 
2,019

 
 
(4,307
)
Cash and cash equivalents, beginning of period
 
 
4,211

 
 
9,534

Cash and cash equivalents, end of period
 
$
6,230

 
$
5,227

 
 
 
 
 
 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
Interest paid, net of capitalization
 
$
23,271

 
$
25,264

 
Income taxes paid (refunded)
 
 
(6,900
)
 
 
10,631

 
 
 
 


9