Oregon | 93-0256722 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Item 2.02 | Results of Operation and Financial Condition |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit | Description | |
99.1 | Press Release of Northwest Natural Gas Company issued August 2, 2017 (furnished and not filed). |
NORTHWEST NATURAL GAS COMPANY | |
(Registrant) | |
Dated: August 2, 2017 | /s/ Frank Burkhartsmeyer |
Chief Financial Officer |
Exhibit | Description | |
99.1 | Press Release of Northwest Natural Gas Company issued August 2, 2017 (furnished and not filed). |
• | Increased consolidated net income by $0.7 million to $2.7 million or $0.10 per share for the second quarter of 2017. |
• | Increased consolidated net income by $4.4 million to $43.0 million or $1.50 per share for the first six months of 2017. |
• | Connected over 12,700 utility customers during the past 12 months equating to a customer growth rate of 1.8%. |
• | Continued construction on the $128 million North Mist Gas Storage Expansion Project. |
• | Reaffirmed 2017 earnings guidance of $2.05 to $2.25 per share. |
Three Months Ended June 30, | ||||||||||||||||||||
2017 | 2016 | Change | ||||||||||||||||||
In thousands, except per share data | Amount | Per Share | Amount | Per Share | Amount | Per Share | ||||||||||||||
Net income: | ||||||||||||||||||||
Utility segment | $ | 2,137 | $ | 0.07 | $ | 507 | $ | 0.02 | $ | 1,630 | $ | 0.05 | ||||||||
Gas storage segment | 756 | 0.03 | 1,439 | 0.05 | (683 | ) | (0.02 | ) | ||||||||||||
Other | (164 | ) | — | 73 | — | (237 | ) | — | ||||||||||||
Consolidated net income | $ | 2,729 | $ | 0.10 | $ | 2,019 | $ | 0.07 | $ | 710 | $ | 0.03 | ||||||||
Diluted Shares | 28,717 | 27,632 | 1,085 |
• | a $3.1 million increase in utility margin reflecting strong customer growth and cooler weather in 2017. Weather for the second quarter of 2017 was 1% warmer than average, compared to 42% warmer than average weather for the same period in 2016; offset by |
• | a $1.2 million increase in operations and maintenance expense reflecting higher payroll and benefits due to increased headcount, general salary increases, and higher health care costs. |
• | a $0.5 million decrease in gas storage primarily from lower asset management revenues from our Mist facility and transportation capacity; and |
• | a $0.2 million increase in operating expenses from pipeline and compressor maintenance at our Gill Ranch facility. |
Six Months Ended June 30, | ||||||||||||||||||||
2017 | 2016 | Change | ||||||||||||||||||
In thousands, except per share data | Amount | Per Share | Amount | Per Share | Amount | Per Share | ||||||||||||||
Net income: | ||||||||||||||||||||
Utility segment | $ | 42,329 | $ | 1.47 | $ | 36,359 | $ | 1.32 | $ | 5,970 | $ | 0.15 | ||||||||
Gas storage segment | 817 | 0.03 | 2,175 | 0.08 | (1,358 | ) | (0.05 | ) | ||||||||||||
Other | (107 | ) | — | 126 | — | (233 | ) | — | ||||||||||||
Consolidated net income (GAAP) | $ | 43,039 | $ | 1.50 | $ | 38,660 | $ | 1.40 | $ | 4,379 | $ | 0.10 | ||||||||
Adjustment for regulatory environmental disallowance(1) | — | — | 1,996 | 0.07 | (1,996 | ) | (0.07 | ) | ||||||||||||
Adjusted net income (non-GAAP)(1) | $ | 43,039 | $ | 1.50 | $ | 40,656 | $ | 1.47 | $ | 2,383 | $ | 0.03 | ||||||||
Diluted Shares | 28,722 | 27,591 | 1,131 |
(1) | The 2016 disallowance related to the Company's compliance filing under the environmental recovery mechanism with the total pre-tax charge of $3.3 million recorded in utility other income ($2.8 million) and utility operation and maintenance expense ($0.5 million). The income tax effect of the adjustment was $1.3 million and is calculated using the combined federal and state statutory tax rate of 39.5%. |
• | a $6.4 million increase in utility margin reflecting strong customer growth and the effects of a colder winter in 2017. Weather for the first six months of 2017 was 44% colder than 2016 and 12% colder than average. Offsetting these factors were lower gains from our gas cost incentive sharing mechanism in Oregon; |
• | a $2.1 million increase in other income mainly due to the environmental interest disallowance in the first quarter of 2016 as a result of closing out the environmental docket and implementing the environmental recovery mechanism; offset by |
• | a $1.7 million increase in operations and maintenance expense reflecting higher payroll and benefits due to increased headcount, general salary increases, and higher health care costs; and |
• | a $1.1 million increase in depreciation expense due to planned capital expenditures for system reinforcement, facilities, and technology. |
• | a $1.0 million decrease in gas storage revenues reflecting lower asset management revenues from our Mist facility and transportation capacity; and |
• | a $0.4 million increase in operating expenses from pipeline and compressor maintenance at our Gill Ranch facility. |
Date and Time: | Wednesday, August 2 8 a.m. PT (11 a.m. ET) |
Phone Numbers: | United States: 1-866-267-6789 Canada: 1-855-669-9657 International: 1-412-902-4110 |
NORTHWEST NATURAL | |||||||||||||||||||||||||
Consolidated Income Statement and Financial Highlights (Unaudited) | |||||||||||||||||||||||||
Second Quarter 2017 | |||||||||||||||||||||||||
Three Months Ended | Six Months Ended | Twelve Months Ended | |||||||||||||||||||||||
In thousands, except per share amounts, customer, and degree day data | June 30, | June 30, | June 30, | ||||||||||||||||||||||
2017 | 2016 | Change | 2017 | 2016 | Change | 2017 | 2016 | Change | |||||||||||||||||
Operating revenues | $ | 136,238 | $ | 99,183 | 37% | $ | 433,561 | $ | 354,712 | 22% | $ | 754,816 | $ | 678,558 | 11% | ||||||||||
Operating expenses: | |||||||||||||||||||||||||
Cost of gas | 53,005 | 20,871 | 154 | 196,616 | 129,282 | 52 | 327,922 | 268,706 | 22 | ||||||||||||||||
Operations and maintenance | 38,546 | 35,962 | 7 | 78,966 | 74,901 | 5 | 154,039 | 142,995 | 8 | ||||||||||||||||
Environmental remediation | 2,611 | 1,893 | 38 | 9,565 | 6,922 | 38 | 15,941 | 10,435 | 53 | ||||||||||||||||
General taxes | 7,564 | 7,438 | 2 | 16,589 | 16,122 | 3 | 31,005 | 30,022 | 3 | ||||||||||||||||
Depreciation and amortization | 21,355 | 20,413 | 5 | 42,440 | 40,807 | 4 | 83,922 | 81,389 | 3 | ||||||||||||||||
Total operating expenses | 123,081 | 86,577 | 42 | 344,176 | 268,034 | 28 | 612,829 | 533,547 | 15 | ||||||||||||||||
Income from operations | 13,157 | 12,606 | 4 | 89,385 | 86,678 | 3 | 141,987 | 145,011 | (2) | ||||||||||||||||
Other income (expense), net | 958 | 513 | 87 | 1,839 | (1,796 | ) | (202) | 3,092 | (233 | ) | (1,427) | ||||||||||||||
Interest expense, net | 9,717 | 9,718 | — | 19,593 | 19,454 | 1 | 39,267 | 41,074 | (4) | ||||||||||||||||
Income before income taxes | 4,398 | 3,401 | 29 | 71,631 | 65,428 | 9 | 105,812 | 103,704 | 2 | ||||||||||||||||
Income tax expense | 1,669 | 1,382 | 21 | 28,592 | 26,768 | 7 | 42,538 | 42,024 | 1 | ||||||||||||||||
Net income | $ | 2,729 | $ | 2,019 | 35 | $ | 43,039 | $ | 38,660 | 11 | $ | 63,274 | $ | 61,680 | 3 | ||||||||||
Common shares outstanding: | |||||||||||||||||||||||||
Average diluted for period | 28,717 | 27,632 | 28,722 | 27,591 | 28,322 | 27,519 | |||||||||||||||||||
End of period | 28,662 | 27,550 | 28,662 | 27,550 | 28,662 | 27,550 | |||||||||||||||||||
Per share information: | |||||||||||||||||||||||||
Diluted earnings per share | $ | 0.10 | $ | 0.07 | $ | 1.50 | $ | 1.40 | $ | 2.23 | $ | 2.24 | |||||||||||||
Dividends declared per share of common stock | 0.47 | 0.4675 | 0.94 | 0.9350 | 1.8775 | 1.8675 | |||||||||||||||||||
Book value per share, end of period | 30.19 | 29.04 | 30.19 | 29.04 | 30.19 | 29.04 | |||||||||||||||||||
Market closing price, end of period | 59.85 | 64.82 | 59.85 | 64.82 | 59.85 | 64.82 | |||||||||||||||||||
Capital structure, end of period: | |||||||||||||||||||||||||
Common stock equity | 54.6 | % | 51.7 | % | 54.6 | % | 51.7 | % | 54.6 | % | 51.7 | % | |||||||||||||
Long-term debt | 41.5 | 36.8 | 41.5 | 36.8 | % | 41.5 | 36.8 | % | |||||||||||||||||
Short-term debt (including amounts due in one year) | 3.9 | 11.5 | 3.9 | 11.5 | % | 3.9 | 11.5 | % | |||||||||||||||||
Total | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||||||||||||
Utility segment operating statistics: | |||||||||||||||||||||||||
Customers - end of period | 730,968 | 718,191 | 1.8% | 730,968 | 718,191 | 1.8% | 730,968 | 718,191 | 1.8% | ||||||||||||||||
Utility volumes - therms: | |||||||||||||||||||||||||
Residential and commercial sales | 113,869 | 82,625 | 441,392 | 325,499 | 725,115 | 592,344 | |||||||||||||||||||
Industrial sales and transportation | 120,774 | 110,308 | 260,890 | 239,983 | 496,681 | 463,887 | |||||||||||||||||||
Total utility volumes sold and delivered | 234,643 | 192,933 | 702,282 | 565,482 | 1,221,796 | 1,056,231 | |||||||||||||||||||
Utility operating revenues: | |||||||||||||||||||||||||
Residential and commercial sales | $ | 117,296 | $ | 82,509 | $ | 397,573 | $ | 320,181 | $ | 681,782 | $ | 606,185 | |||||||||||||
Industrial sales and transportation | 14,791 | 10,972 | 33,694 | 28,636 | 64,444 | 62,467 | |||||||||||||||||||
Other revenues | 1,168 | 1,102 | 2,543 | 2,513 | 3,842 | 3,890 | |||||||||||||||||||
Less: Revenue taxes | 3,160 | 2,448 | 10,989 | 9,091 | 19,009 | 17,290 | |||||||||||||||||||
Total utility operating revenues | 130,095 | 92,135 | 422,821 | 342,239 | 731,059 | 655,252 | |||||||||||||||||||
Less: Cost of gas | 53,005 | 20,871 | 196,616 | 129,282 | 327,922 | 268,706 | |||||||||||||||||||
Environmental remediation expense | 2,611 | 1,893 | 9,565 | 6,922 | 15,941 | 10,435 | |||||||||||||||||||
Utility margin, net | $ | 74,479 | $ | 69,371 | $ | 216,640 | $ | 206,035 | $ | 387,196 | $ | 376,111 | |||||||||||||
Degree days: | |||||||||||||||||||||||||
Average (25-year average) | 691 | 691 | 2,546 | 2,562 | 4,240 | 4,256 | |||||||||||||||||||
Actual | 684 | 403 | 70% | 2,853 | 1,988 | 44% | 4,416 | 3,453 | 28% | ||||||||||||||||
Percent (warmer) colder than average weather | (1 | )% | (42 | )% | 12 | % | (22 | )% | 4 | % | (19 | )% | |||||||||||||
Gas storage segment operating statistics: | |||||||||||||||||||||||||
Operating revenues | $ | 6,088 | $ | 6,992 | $ | 10,629 | $ | 12,361 | $ | 23,534 | $ | 23,081 | |||||||||||||
Operating expenses | 4,489 | 4,112 | 8,424 | 7,756 | 16,798 | 15,238 |
NORTHWEST NATURAL | ||||||||||
Consolidated Balance Sheets (Unaudited) | June 30, | |||||||||
In thousands | 2017 | 2016 | ||||||||
Assets: | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | 20,854 | $ | 5,463 | ||||||
Accounts receivable | 31,908 | 23,353 | ||||||||
Accrued unbilled revenue | 13,896 | 14,175 | ||||||||
Allowance for uncollectible accounts | (845 | ) | (570 | ) | ||||||
Regulatory assets | 37,504 | 49,004 | ||||||||
Derivative instruments | 1,530 | 7,445 | ||||||||
Inventories | 57,666 | 66,171 | ||||||||
Gas reserves | 16,072 | 15,707 | ||||||||
Other current assets | 13,419 | 21,312 | ||||||||
Total current assets | 192,004 | 202,060 | ||||||||
Non-current assets: | ||||||||||
Property, plant, and equipment | 3,333,668 | 3,146,631 | ||||||||
Less: Accumulated depreciation | 973,084 | 932,179 | ||||||||
Total property, plant, and equipment, net | 2,360,584 | 2,214,452 | ||||||||
Gas reserves | 92,020 | 108,286 | ||||||||
Regulatory assets | 348,284 | 344,969 | ||||||||
Derivative instruments | 162 | 3,541 | ||||||||
Other investments | 68,885 | 67,868 | ||||||||
Other non-current assets | 3,215 | 1,968 | ||||||||
Total non-current assets | 2,873,150 | 2,741,084 | ||||||||
Total assets | $ | 3,065,154 | $ | 2,943,144 | ||||||
Liabilities and equity: | ||||||||||
Current liabilities: | ||||||||||
Short-term debt | $ | — | $ | 152,800 | ||||||
Current maturities of long-term debt | 61,991 | 24,987 | ||||||||
Accounts payable | 95,761 | 57,756 | ||||||||
Taxes accrued | 6,906 | 6,237 | ||||||||
Interest accrued | 5,966 | 5,793 | ||||||||
Regulatory liabilities | 28,041 | 27,300 | ||||||||
Derivative instruments | 4,734 | 3,471 | ||||||||
Other current liabilities | 31,683 | 35,289 | ||||||||
Total current liabilities | 235,082 | 313,633 | ||||||||
Long-term debt | 658,118 | 570,045 | ||||||||
Deferred credits and other non-current liabilities: | ||||||||||
Deferred tax liabilities | 577,176 | 554,400 | ||||||||
Regulatory liabilities | 359,205 | 341,259 | ||||||||
Pension and other postretirement benefit liabilities | 219,718 | 219,049 | ||||||||
Derivative instruments | 3,466 | 474 | ||||||||
Other non-current liabilities | 146,960 | 144,285 | ||||||||
Total deferred credits and other non-current liabilities | 1,306,525 | 1,259,467 | ||||||||
Equity: | ||||||||||
Common stock | 444,058 | 388,967 | ||||||||
Retained earnings | 428,049 | 417,857 | ||||||||
Accumulated other comprehensive loss | (6,678 | ) | (6,825 | ) | ||||||
Total equity | 865,429 | 799,999 | ||||||||
Total liabilities and equity | $ | 3,065,154 | $ | 2,943,144 |
NORTHWEST NATURAL | |||||||||||
Consolidated Statements of Cash Flows (Unaudited) | Six Months Ended June 30, | ||||||||||
In thousands | 2017 | 2016 | |||||||||
Operating activities: | |||||||||||
Net income | $ | 43,039 | $ | 38,660 | |||||||
Adjustments to reconcile net income to cash provided by operations: | |||||||||||
Depreciation and amortization | 42,440 | 40,807 | |||||||||
Regulatory amortization of gas reserves | 8,031 | 7,647 | |||||||||
Deferred income taxes | 22,170 | 27,022 | |||||||||
Qualified defined benefit pension plan expense | 2,615 | 2,737 | |||||||||
Contributions to qualified defined benefit pension plans | (7,250 | ) | (6,120 | ) | |||||||
Deferred environmental (expenditures) recoveries, net | (6,817 | ) | (5,521 | ) | |||||||
Regulatory disallowance of prior environmental cost deferrals | — | 3,273 | |||||||||
Amortization of environmental remediation | 9,565 | 6,922 | |||||||||
Other | 1,268 | 2,121 | |||||||||
Changes in assets and liabilities: | |||||||||||
Receivables, net | 86,065 | 87,271 | |||||||||
Inventories | (3,537 | ) | 4,525 | ||||||||
Income taxes | (5,243 | ) | 3,710 | ||||||||
Accounts payable | (22,063 | ) | (17,141 | ) | |||||||
Interest accrued | — | (80 | ) | ||||||||
Deferred gas costs | 15,325 | (9,295 | ) | ||||||||
Other, net | 8,623 | 13,022 | |||||||||
Cash provided by operating activities | 194,231 | 199,560 | |||||||||
Investing activities: | |||||||||||
Capital expenditures | (94,318 | ) | (62,153 | ) | |||||||
Other | (404 | ) | 2,453 | ||||||||
Cash used in investing activities | (94,722 | ) | (59,700 | ) | |||||||
Financing activities: | |||||||||||
Repurchases related to stock-based compensation | (2,034 | ) | (1,042 | ) | |||||||
Proceeds from stock options exercised | 1,309 | 5,374 | |||||||||
Change in short-term debt | (53,300 | ) | (117,235 | ) | |||||||
Cash dividend payments on common stock | (26,919 | ) | (25,677 | ) | |||||||
Other | (1,232 | ) | (28 | ) | |||||||
Cash used in financing activities | (82,176 | ) | (138,608 | ) | |||||||
Increase in cash and cash equivalents | 17,333 | 1,252 | |||||||||
Cash and cash equivalents, beginning of period | 3,521 | 4,211 | |||||||||
Cash and cash equivalents, end of period | $ | 20,854 | $ | 5,463 | |||||||
Supplemental disclosure of cash flow information: | |||||||||||
Interest paid, net of capitalization | $ | 18,011 | $ | 18,124 | |||||||
Income taxes paid (refunded) | 9,081 | (7,900 | ) |