-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, fH0cgUW3kEFmynBra1Vvx7lwJiOETYTDAKcF9uUaMbgAgFUumRl5bMreiCy0tvld GUGlwB9/foadYCAwKndEkQ== 0000893877-95-000035.txt : 19950502 0000893877-95-000035.hdr.sgml : 19950502 ACCESSION NUMBER: 0000893877-95-000035 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950501 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHWEST NATURAL GAS CO CENTRAL INDEX KEY: 0000073020 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 930256722 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00994 FILM NUMBER: 95533554 BUSINESS ADDRESS: STREET 1: 220 NW SECOND AVE CITY: PORTLAND STATE: OR ZIP: 97209 BUSINESS PHONE: 5032264211 10-Q 1 FORM 10-Q Form 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission file number 0-994 NORTHWEST NATURAL GAS COMPANY (Exact name of registrant as specified in its charter) Oregon 93-0256722 ------------------------------- ------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 220 N. W. Second Avenue, Portland, Oregon 97209 - ----------------------------------------- ------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (503) 226-4211 ---------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock (or class convertible into common stock) as of the close of the period covered by this report: Common Stock, $3 1/6 par value -- 14,635,210 shares Convertible Preference Stock, $2.375 Series -- 42,449 shares NORTHWEST NATURAL GAS COMPANY March 31, 1995 Summary of Information Reported The registrant submits herewith the following information: PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements Number ------- (1) Consolidated Statements of Income for the three-month periods ended March 31, 1995 and 1994, and Consolidated Statements of Earnings Invested in the Business for the three month periods ended March 31, 1995 and 1994. 3 (2) Consolidated Balance Sheets at March 31, 1995 and 1994 and December 31, 1994. 4 (3) Consolidated Statements of Cash Flows for the three month periods ended March 31, 1995 and 1994. 5 (4) Consolidated Statements of Capitalization at March 31, 1995 and 1994 and December 31, 1994. 6 (5) Notes to Consolidated Financial Statements. 7 Independent Accountants' Report 8 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition 9 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 19 Signatures 19 NORTHWEST NATURAL GAS COMPANY PART I. FINANCIAL INFORMATION (1) Consolidated Statements of Income (Thousands, Except Per Share Amounts)
Three Months Ended March 31, -------------------- 1995 1994 --------- --------- Net Operating Revenues: Operating revenues. . . . . . . . . . . . . . . . $125,389 $128,534 Cost of sales . . . . . . . . . . . . . . . . . . 51,544 56,209 -------- -------- Net operating revenues . . . . . . . . . . . 73,845 72,325 -------- -------- Operating Expenses: Operations and maintenance. . . . . . . . . . . . 17,581 17,856 Taxes other than income taxes . . . . . . . . . . 7,454 8,053 Depreciation, depletion and amortization. . . . . 9,909 9,108 -------- -------- Total operating expenses. . . . . . . . . . . 34,944 35,017 -------- -------- Income from Operations . . . . . . . . . . . . . . . 38,901 37,308 -------- -------- Other Income (Expense) . . . . . . . . . . . . . . . (1,087) 71 -------- -------- Interest Charges - net . . . . . . . . . . . . . . . 6,562 6,177 -------- -------- Income Before Income Taxes . . . . . . . . . . . . . 31,252 31,202 Income Taxes . . . . . . . . . . . . . . . . . . . . 12,200 12,422 -------- -------- Net Income . . . . . . . . . . . . . . . . . . . . . 19,052 18,780 Preferred and preference stock dividend requirements . . . . . . . . . . . . . . . . . . 735 740 -------- -------- Earnings Applicable to Common Stock. . . . . . . . . $ 18,317 $ 18,040 ======== ======== Average Common Shares Outstanding. . . . . . . . . . 13,916 13,209 Primary Earnings Per Share of Common Stock . . . . . $1.32 $1.37 Fully-Diluted Earnings Per Share of Common Stock . . . . . . . . . . . . . . . . . . . $1.28 $1.32 Dividends Per Share of Common Stock. . . . . . . . . $0.44 $0.44 See accompanying Notes to Consolidated Financial Statements. ================================================================================== Consolidated Statements of Earnings Invested in the Business (Thousands, Three Month Periods Ended March 31) 1995 1994 -------- -------- Balance at Beginning of Period . . . . . . . . . . . $ 97,275 $ 88,497 Net Income. . . . . . . . . . . . . . . . . . . . 19,052 18,780 Cash dividends: Preferred and preference stock. . . . . . . . (737) (781) Common stock. . . . . . . . . . . . . . . . . (5,908) (5,803) Capital stock expense and other . . . . . . . . . (1,383) 70 -------- -------- Balance at End of Period . . . . . . . . . . . . . . $108,299 $100,763 ======== ======== See accompanying Notes to Consolidated Financial Statements. /TABLE NORTHWEST NATURAL GAS COMPANY PART I. FINANCIAL INFORMATION (2) Consolidated Balance Sheets (Thousands of Dollars)
Mar. 31, Mar. 31, Dec. 31, 1995 1994 1994 -------- -------- -------- Assets: Plant and Property in Service: Utility plant in service . . . . . . . . . $920,863 $857,970 $908,238 Less accumulated depreciation. . . . . . . 286,918 262,152 279,112 -------- -------- -------- Utility plant - net . . . . . . . . . . 633,945 595,818 629,126 Non-utility property . . . . . . . . . . . 50,067 45,100 49,586 Less accumulated depreciation and depletion . . . . . . . . . . . . . . . . 25,249 21,607 24,456 -------- -------- -------- Non-utility property - net. . . . . . . 24,818 23,493 25,130 -------- -------- -------- Total plant and property in service . . 658,763 619,311 654,256 -------- -------- -------- Investments and Other: Investments. . . . . . . . . . . . . . . . 31,885 31,345 34,183 Long-term notes receivable . . . . . . . . 2,937 1,347 2,914 -------- -------- -------- Total investments and other . . . . . . 34,822 32,692 37,097 -------- -------- -------- Current Assets: Cash and cash equivalents. . . . . . . . . 41,950 5,909 8,068 Accounts receivable - net. . . . . . . . . 35,789 39,125 42,152 Accrued unbilled revenue . . . . . . . . . 11,708 11,906 20,320 Inventories of gas, materials and supplies. . . . . . . . . . . . . . . . . 9,659 6,653 14,958 Prepayments and other current assets . . . 7,330 13,037 10,041 -------- -------- -------- Total current assets . . . . . . . . . 106,436 76,630 95,539 -------- -------- -------- Regulatory Tax Assets. . . . . . . . . . . . 60,430 62,130 60,430 -------- -------- -------- Deferred Debits and Other. . . . . . . . . . 44,249 38,030 41,982 -------- -------- -------- Total Assets. . . . . . . . . . . . . . $904,700 $828,793 $889,304 ======== ======== ======== Capitalization and Liabilities: Capitalization: Common stock . . . . . . . . . . . . . . . $212,908 $172,208 $177,133 Earnings invested in the business. . . . . 108,299 100,763 97,275 -------- -------- -------- Total common stock equity . . . . . . . 321,207 272,971 274,408 Preference stock . . . . . . . . . . . . . 26,061 26,617 26,252 Redeemable preferred stock . . . . . . . . 15,950 17,033 15,950 Long-term debt . . . . . . . . . . . . . . 291,066 272,330 291,076 -------- -------- -------- Total capitalization. . . . . . . . . . 654,284 588,951 607,686 -------- -------- -------- Current Liabilities: Notes payable. . . . . . . . . . . . . . . 16,100 35,585 53,654 Accounts payable . . . . . . . . . . . . . 41,728 31,578 48,517 Long-term debt due within one year . . . . 1,000 - 1,000 Taxes accrued. . . . . . . . . . . . . . . 8,396 6,967 6,584 Interest accrued . . . . . . . . . . . . . 7,473 6,913 4,570 Other current and accrued liabilities. . . 11,710 10,470 11,757 -------- -------- -------- Total current liabilities . . . . . . . 86,407 91,513 126,082 -------- -------- -------- Deferred Investment Tax Credits. . . . . . . 12,979 13,980 13,530 -------- -------- -------- Deferred Income Taxes. . . . . . . . . . . . 118,241 114,127 112,433 -------- -------- -------- Regulatory Balancing Accounts and Other. . . 32,789 20,222 29,573 -------- -------- -------- Commitments and Contingent Liabilities . . . - - - -------- -------- -------- Total Capitalization and Liabilities. . $904,700 $828,793 $889,304 ======== ======== ======== See accompanying Notes to Consolidated Financial Statements. /TABLE NORTHWEST NATURAL GAS COMPANY PART I. FINANCIAL INFORMATION (3) Consolidated Statements of Cash Flows (Thousands of Dollars)
Three Months Ended March 31, ------------------- 1995 1994 -------- -------- Operating Activities: Net income . . . . . . . . . . . . . . . . . . . . . . . . . $ 19,052 $ 18,780 Adjustments to reconcile net income to net cash provided by (used for) operations: Depreciation, depletion and amortization. . . . . . . . . 9,909 9,108 Deferred income taxes and investment tax credits. . . . . 5,257 9,240 Equity in losses of investments . . . . . . . . . . . . . 1,518 1,099 Allowance for funds used during construction. . . . . . . (116) (61) Regulatory balancing accounts and other - net . . . . . . 949 3,590 -------- -------- Cash from operations before working capital changes. . 36,569 41,756 Changes in operating assets and liabilities: Accounts receivable. . . . . . . . . . . . . . . . . . 6,363 4,847 Accrued unbilled revenue . . . . . . . . . . . . . . . 8,612 13,984 Inventories of gas, materials and supplies . . . . . . 5,299 10,185 Accounts payable . . . . . . . . . . . . . . . . . . . (6,789) (12,740) Accrued interest and taxes . . . . . . . . . . . . . . 4,715 2,685 Other current assets and liabilities . . . . . . . . . 2,664 3,665 -------- -------- Cash Provided By Operating Activities . . . . . . . . . . 57,433 64,382 -------- -------- Investing Activities: Acquisition and construction of utility plant assets. . . . . . . . . . . . . . . . . . . . . . . . . . . (13,617) (19,132) Investment in non-utility plant. . . . . . . . . . . . . . . (683) (2,360) Investments and other. . . . . . . . . . . . . . . . . . . . 757 783 -------- -------- Cash Used In Investing Activities . . . . . . . . . . . . (13,543) (20,709) -------- -------- Financing Activities: Common stock issued. . . . . . . . . . . . . . . . . . . . . 35,584 1,523 Preferred stock retired. . . . . . . . . . . . . . . . . . . - (8) Long-term debt retired . . . . . . . . . . . . . . . . . . . (10) - Change in short-term debt . . . . . . . . . . . . . . . . . (37,554) (36,963) Cash dividend payments: Preferred and preference stock. . . . . . . . . . . . . . (737) (781) Common stock. . . . . . . . . . . . . . . . . . . . . . . (5,908) (5,803) Capital stock expense and other. . . . . . . . . . . . . . . (1,383) 70 -------- -------- Cash Used For Financing Activities. . . . . . . . . . . . (10,008) (41,962) -------- -------- Increase In Cash and Cash Equivalents. . . . . . . . . . . . . 33,882 1,711 Cash and Cash Equivalents - Beginning of Period. . . . . . . . 8,068 4,198 -------- -------- Cash and Cash Equivalents - End of Period. . . . . . . . . . . $ 41,950 $ 5,909 ======== ======== ==================================================================================== Supplemental Disclosure of Cash Flow Information Cash paid during the period for: Interest. . . . . . . . . . . . . . . . . . . . . . . . . $ 3,556 $ 3,541 Income Taxes. . . . . . . . . . . . . . . . . . . . . . . $ 3,500 $ 2,000 ==================================================================================== Supplemental Disclosure of Noncash Financing Activities Conversion to common stock: $2.375 Series of Convertible Preference Stock . . . . . . $ 191 $ 16 7-1/4 percent Series of Convertible Debentures. . . . . . $ - $ 601 ==================================================================================== See accompanying Notes to Consolidated Financial Statements. /TABLE NORTHWEST NATURAL GAS COMPANY PART I. FINANCIAL INFORMATION (4) Consolidated Statements of Capitalization (Thousands, except share amounts)
Mar. 31, 1995 Mar. 31, 1994 Dec. 31, 1994 - ----------------------------------------------------------------------------------------------------- COMMON STOCK EQUITY: Common stock - par value $3-1/6 per share . . . . . . . . . . . . . . . . $ 46,345 $ 41,939 $ 42,492 Premium on common stock . . . . . . . . . . 166,563 130,269 134,641 Earnings invested in business . . . . . . . 108,299 100,763 97,275 -------- -------- -------- Total common stock equity . . . . . . . . 321,207 49% 272,971 46% 274,408 45% -------- ---- -------- ---- -------- ---- PREFERENCE STOCK: $2.375 Series, convertible, stated value $25 per share. . . . . . . . 1,061 1,617 1,252 $6.95 Series, stated value $100 per share. . . . . . . . . . . . . . 25,000 25,000 25,000 -------- -------- -------- Total preference stock. . . . . . . . . . 26,061 4% 26,617 5% 26,252 4% -------- ---- -------- ---- -------- ---- REDEEMABLE PREFERRED STOCK, stated value $100 per share: $4.68 Series . . . . . . . . . . . . . . . 732 922 732 $4.75 Series . . . . . . . . . . . . . . . 968 1,111 968 $7.125 Series . . . . . . . . . . . . . . . 14,250 15,000 14,250 -------- -------- -------- Total redeemable preferred stock. . . . . . . . . . . . . 15,950 2% 17,033 3% 15,950 3% -------- ---- -------- ---- -------- ---- LONG-TERM DEBT: First Mortgage Bonds -------------------- 9-3/4% Series due 2015. . . . . . . . . . 50,000 50,000 50,000 9-1/8% Series due 2019. . . . . . . . . . 25,000 25,000 25,000 Medium-Term Notes ----------------- First Mortgage Bonds: 4.80% Series A due 1996 . . . . . . . . . 5,000 5,000 5,000 7.38% Series A due 1997 . . . . . . . . . 20,000 20,000 20,000 7.69% Series A due 1999 . . . . . . . . . 10,000 10,000 10,000 5.96% Series B due 2000 . . . . . . . . . 5,000 5,000 5,000 5.98% Series B due 2000 . . . . . . . . . 5,000 5,000 5,000 8.05% Series A due 2002 . . . . . . . . . 10,000 10,000 10,000 6.40% Series B due 2003 . . . . . . . . . 20,000 20,000 20,000 6.34% Series B due 2005 . . . . . . . . . 5,000 5,000 5,000 6.38% Series B due 2005 . . . . . . . . . 5,000 5,000 5,000 6.45% Series B due 2005 . . . . . . . . . 5,000 5,000 5,000 6.50% Series B due 2008 . . . . . . . . . 5,000 5,000 5,000 8.26% Series B due 2014 . . . . . . . . . 10,000 - 10,000 8.31% Series B due 2019 . . . . . . . . . 10,000 - 10,000 9.05% Series A due 2021 . . . . . . . . . 10,000 10,000 10,000 7.25% Series B due 2023 . . . . . . . . . 20,000 20,000 20,000 7.50% Series B due 2023 . . . . . . . . . 4,000 4,000 4,000 7.52% Series B due 2023 . . . . . . . . . 11,000 11,000 11,000 Unsecured: 4.90% Series A due 1996 . . . . . . . . . 10,000 10,000 10,000 8.69% Series A due 1996 . . . . . . . . . 5,000 5,000 5,000 7.40% Series A due 1997 . . . . . . . . . 5,000 5,000 5,000 8.93% Series A due 1998 . . . . . . . . . 5,000 5,000 5,000 8.95% Series A due 1998 . . . . . . . . . 10,000 10,000 10,000 8.47% Series A due 2001 . . . . . . . . . 10,000 10,000 10,000 Convertible Debentures ---------------------- 7-1/4% Series due 2012. . . . . . . . . . 12,066 12,330 12,076 -------- -------- -------- 292,066 272,330 292,076 Less long-term debt due within one-year . . . . . . . . . . . . . . . 1,000 - 1,000 -------- -------- -------- Total long-term debt. . . . . . . . . . . 291,066 45% 272,330 46% 291,076 48% -------- ---- -------- ---- -------- ---- TOTAL CAPITALIZATION. . . . . . . . . . . $654,284 100% $588,951 100% $607,686 100% ======== ==== ======== ==== ======== ==== - ---------------------------------------------------------------------------------------------------- See accompanying Notes to Consolidated Financial Statements. /TABLE NORTHWEST NATURAL GAS COMPANY (5) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of financial statements The information presented in the consolidated financial statements is unaudited, but includes all adjustments, consisting of only normal recurring accruals, which the management of the Company considers necessary for a fair presentation of the results of such periods. These consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company's 1994 Annual Report on Form 10-K. A significant part of the business of the Company is of a seasonal nature; therefore, results of operations for the three-month periods ended March 31, 1995 and 1994 are not indicative of the results for a full year. Certain amounts from prior periods have been reclassified to conform with the 1995 presentation. 2. Capital stock In the first quarter of 1995, Northwest Natural Gas Company (Northwest Natural) sold 1.15 million shares of its Common Stock. The net proceeds of $33.0 million received from the offering were added to the general funds of the Company and are being used for corporate purposes, primarily to fund, in part, Northwest Natural's construction program, and to repay short-term debt incurred for such purpose. The projected dilution of earnings per share resulting from this sale is estimated at five percent. 3. Contingencies See Part II, Item 7., "Environmental Matters" in the Company's 1994 Annual Report on Form 10-K. DELOITTE & TOUCHE LLP - ----------------------------------------------------------------- 3900 US Bancorp Tower Telephone: (503) 222-1341 111 SW Fifth Avenue Facsimile: (503) 224-2172 Portland, Oregon 97204-3698 INDEPENDENT ACCOUNTANTS' REPORT - ------------------------------- Northwest Natural Gas Company Portland, Oregon We have made a review of the accompanying consolidated balance sheets and statements of capitalization of Northwest Natural Gas Company and subsidiaries as of March 31, 1995 and 1994, and the related consolidated statements of income for the three-month periods ended March 31, 1995 and 1994, and the consolidated statements of earnings invested in the business and cash flows for the three-month periods ended March 31, 1995 and 1994. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to such consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet and statement of capitalization of Northwest Natural Gas Company and subsidiaries as of December 31, 1994, and the related consolidated statements of income, earnings invested in the business, and cash flows for the year then ended (not presented herein), and in our report dated February 22, 1995, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet and consolidated statement of capitalization as of December 31, 1994 is fairly stated in all material respects in relation to the consolidated financial statements from which it has been derived. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP April 28, 1995 NORTHWEST NATURAL GAS COMPANY PART I. FINANCIAL INFORMATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The consolidated financial statements include: Regulated utility: Northwest Natural Gas Company (Northwest Natural) Non-regulated wholly-owned businesses: Oregon Natural Gas Development Corporation (Oregon Natural) NNG Energy Systems, Inc. (Energy Systems) NNG Financial Corporation (Financial Corporation) Pacific Square Corporation (Pacific Square) Together these businesses are referred to herein as the "Company" (see "Subsidiary Operations" below and Part II, Item 8., Note 2, "Notes to Consolidated Financial Statements" in the Company's 1994 Annual Report on Form 10-K). The following is management's assessment of the Company's financial condition including the principal factors that impact results of operations. The discussion refers to the consolidated activities of the Company for the three months ended March 31, 1995 and 1994. Earnings and Dividends - ---------------------- The Company earned $1.32 per share for its first quarter ended March 31, 1995, compared to $1.37 per share in last year's first quarter. Utility results were comparable while subsidiary results were lower by $0.9 million, equivalent to $0.06 per share. The Company earned $1.40 per share from utility operations in the first quarter of 1995, compared to $1.39 per share in the same period in 1994. Despite warmer weather, gas sales volumes increased due to a 5.2 percent gain in customers. Weather conditions in Northwest Natural's service territory were three percent warmer in the first quarter of 1995 compared to the same period in 1994 and 10 percent warmer than average. The Company estimates that the weather-related reduction in net operating revenues (margin) during the first quarter of 1995 was equivalent to about $0.29 per share compared to a similar period with average weather, and about $0.14 compared to actual conditions during the first quarter of 1994 when weather conditions were eight percent warmer than average. These estimates are derived from the Company's internal planning model (see Part II, Item 7., "Earnings and Dividends" in the Company's 1994 Annual Report on Form 10-K). The model also indicates that customer growth in 1994 contributed the equivalent of about $0.16 per share of margin revenues during the first quarter of 1995. Subsidiary results were a loss of $1.1 million for the first quarter ended March 31, 1995, compared to a loss of $0.2 million in last year's first quarter. Financial Corporation's earnings were $0.2 million lower, and Oregon Natural's earnings were $0.3 million lower, each compared to the first quarter of 1994. Energy Systems had earnings of $0.4 million in the first quarter of 1994, principally resulting from the sale of assets. It no longer has any significant operating activities and, therefore, had no earnings in the first quarter of 1995. Pacific Square, which sold its partnership interests in two office buildings during the second quarter of 1994, also no longer has any significant operating activities. Pacific Square had $0.1 million of earnings in both the first quarter of 1995 and 1994. Dividends paid on common stock were $0.44 per share for the three-month periods ended March 31, 1995 and 1994. In April 1995, the Board of Directors of the Company declared a quarterly dividend of $0.44 per share on its common stock, payable May 15, 1995, to shareholders of record on April 28, 1995. The current indicated annual dividend rate is $1.76 per share. Results of Operations - --------------------- Comparison of Gas Operations ---------------------------- The following table summarizes the composition of utility gas volumes and revenues:
Three Months Ended March 31, ----------------- 1995 1994 ---- ---- Gas Sales and Transportation Volumes - Therms (000's): Residential and commercial sales. . . . . . 191,887 194,241 Unbilled volumes. . . . . . . . . . . . . . (15,566) (24,222) ------- ------- Weather-sensitive volumes . . . . . . . . 176,321 170,019 Industrial firm sales . . . . . . . . . . . 23,732 23,443 Industrial interruptible sales. . . . . . . 24,019 23,628 ------- ------- Total gas sales . . . . . . . . . . . . . 224,072 217,090 Transportation deliveries . . . . . . . . . 97,830 88,849 ------- ------- Total volumes sold and delivered. . . . . . 321,902 305,939 ======= ======= Utility Operating Revenues - Dollars (000's): Residential and commercial revenues . . . . . $109,477 $118,417 Unbilled revenues . . . . . . . . . . . . . . (8,611) (13,985) -------- -------- Weather-sensitive revenues. . . . . . . . . 100,866 104,432 Industrial firm sales revenues. . . . . . . . 9,122 10,161 Industrial interruptible sales revenues . . . 6,864 7,049 -------- -------- Total gas sales revenues. . . . . . . . . . 116,852 121,642 Transportation revenues . . . . . . . . . . . 3,813 3,466 Other revenues. . . . . . . . . . . . . . . . 2,607 235 -------- -------- Total utility operating revenues. . . . . . . $123,272 $125,343 ======== ======== Cost of gas . . . . . . . . . . . . . . . . . . $ 51,544 $ 56,209 ======== ======== Total number of customers (end of period) . . . 396,600 377,100 ======== ======== Actual degree days. . . . . . . . . . . . . . . 1,690 1,749 ======== ======== 20-year average degree days . . . . . . . . . . 1,874 1,891 ======== ======== /TABLE Residential and Commercial -------------------------- Typically, 75 percent or more of Northwest Natural's annual operating revenues are derived from gas sales to weather- sensitive residential and commercial customers. Accordingly, shifts in temperatures from one period to the next will impact volumes of gas sold to these customers. Normal weather conditions are based upon a 20-year average measured by heating degree days. Weather conditions were 10 percent warmer than average in the first quarter of 1995, and three percent warmer than the first quarter of 1994. The effect of the warmer weather on volumes of gas sold was more than offset by the addition of 19,500 new customers. Despite the four percent increase in volumes of gas sold attributable to these customers, related revenues declined three percent due to rate decreases reflecting lower gas costs effective in December 1994 which averaged 6.7 percent in Oregon and 7.0 percent in Washington. Northwest Natural's residential and commercial customer growth continued at a rapid pace. The 19,500 residential and commercial customers added since March 31, 1994 represent a growth rate of 5.2 percent. In the three years ended December 31, 1994, over 55,000 of these customers have been added to the system, representing an average growth rate of 5.2 percent. Unbilled revenues are a recognition of revenues for all gas consumption by customers through the end of the period, regardless of the meter reading date, in order to better match revenues with related gas costs. Industrial, Transportation and Other ------------------------------------ Total volumes delivered to industrial firm, industrial interruptible and transportation customers were 9.7 million therms, or seven percent, higher in the first quarter of 1995 than in the same period of 1994. The volume increase was primarily due to increased transportation deliveries to two high volume interruptible customers. Net operating revenues (margin) from industrial firm and interruptible sales and transportation customers increased by 10 percent to $13.2 million in the first quarter of 1995 from $12.0 million in the first quarter of 1994, primarily due to the termination of the Interruptible Sales Adjustment (ISA) tariff schedule in Oregon which became effective December 1, 1994 (see Part I, Item 1., "Regulation and Rates" in the Company's 1994 Annual Report on Form 10-K). Other revenues are primarily related to accumulations or amortizations of regulatory balancing accounts (see Part II, Item 8., Note 1, "Notes to Consolidated Financial Statements" in the Company's 1994 Annual Report on Form 10-K). In the first quarter of 1995, the primary components of other revenue were $1.0 million relating to amortizations from the ISA and $1.3 million resulting from other cumulative amortizations. Cost of Gas ----------- The cost of gas sold during the first quarter of 1995 was eight percent lower than in the first quarter of 1994. The primary contributing factor was a 10 percent decrease in the average cost of gas per therm offset by a three percent increase in total gas sales volumes. Subsidiary Operations --------------------- The following table summarizes financial information for the Company's consolidated wholly-owned subsidiaries:
Three Months Ended March 31, ------------------ 1995 1994 ---- ---- Consolidated Subsidiaries (Thousands): - -------------------------------------- Net Operating Revenues . . . . . . . . . . . . . . . $ 2,117 $ 3,247 Operating Expenses . . . . . . . . . . . . . . . . . 2,336 3,172 ------- ------- Income(Loss) from Operations . . . . . . . . . . . . (219) 75 Income(Loss) from Financial Investments. . . . . . . (1,538) (1,151) Other Income(Expense) and Interest Charges . . . . . . . . . . . . . . . . . 58 670 ------- ------- Income (Loss) Before Income Taxes. . . . . . . . . . (1,699) (406) Income Tax Expense(Benefit). . . . . . . . . . . . . (575) (184) ------- ------- Net Income (Loss). . . . . . . . . . . . . . . . . . $(1,124) $ (222) ======= =======
Consolidated subsidiary results for the three months ended March 31, 1995 and 1994, were losses equivalent to $0.08 per share, and $0.02 per share, respectively. Results of operations for the individual subsidiaries for the first quarter of 1995 were net income of $0.1 million for Pacific Square; a net loss of $0.9 million for Financial Corporation; and a net loss of $0.3 million for Oregon Natural. Energy Systems realized neither a gain nor a loss for the first quarter of 1995. Due to the nature of Financial Corporation's investments, which are primarily electric generation projects in California, results tend to be relatively weaker in the first and fourth calendar quarters and relatively stronger in the second and third quarters. The following discussion summarizes operating expenses, other income (expense), interest charges - net, and income taxes. Operating Expenses ------------------ Operations and Maintenance -------------------------- Operations and maintenance expenses were $0.3 million, or two percent, lower in the first quarter of 1995 compared to the same period in 1994. Northwest Natural's expenses increased $0.6 million primarily due to the timing of advertising expenses ($0.2 million) and increased plant maintenance charges ($0.2 million). Subsidiary expenses decreased $0.9 million primarily due to a decline in Oregon Natural's production costs. Taxes Other than Income ----------------------- Taxes other than income decreased $0.6 million, or seven percent, in the first three months of 1995 compared to the same period in 1994 primarily due to a net reduction in accrued property tax expense. This expense reflects a decrease in deferred credits to customers to pass through property tax savings resulting from the voter approval of an Oregon initiative measure which reduced such taxes. Depreciation, Depletion and Amortization ---------------------------------------- The Company's depreciation expense increased $0.8 million, or nine percent, in the first quarter of 1995 compared to the first quarter of 1994. This increase was due to additional utility plant in service. Other Income (Expense) --------------------- The Company's other income decreased $1.2 million primarily as a result of a non-recurring $0.7 million gain recorded in the first quarter of 1994 related to a sale of assets by Agrico Cogeneration Corporation (Agrico), a subsidiary of Energy Systems (see Part II, Item 7., "Results of Operations - Other Income" and Part II, Item 8., Note 2, "Notes to Consolidated Financial Statements" in the Company's 1994 Annual Report on Form 10-K). Interest Charges - net ---------------------- The Company's interest expense increased $0.4 million, or six percent, in the first quarter of 1995 compared to the same period in 1994 due to the sale of $20 million of Northwest Natural's Medium-Term Notes during the third quarter of 1994. Income Taxes ------------ The effective corporate income tax rates for the three months ended March 31, 1995 and 1994 were 39 percent and 40 percent, respectively, which approximate the Company's statutory tax rates for these periods. Financial Condition - ------------------- Capital Structure ----------------- Northwest Natural's capital expenditures are required for utility construction resulting from customer growth and system improvements. Northwest Natural finances these expenditures from cash provided by operations, and from short- term borrowings which are periodically refinanced through the sale of long-term debt or equity securities. In addition to its capital expenditures, the weather-sensitive nature of gas usage by Northwest Natural's residential and commercial customers influences the Company's financial condition, including its financing requirements, from one quarter to the next. Short-term liquidity is satisfied primarily through the sale of commercial paper, which is supported by commercial bank lines of credit (see Part II, Item 8., Note 6, "Notes to Consolidated Financial Statements" in the Company's 1994 Annual Report on Form 10-K). The Company's long-term goal is to maintain a capital structure comprised of 40 to 45 percent common stock equity, 5 to 10 percent preferred and preference stock and 45 to 50 percent short-term and long-term debt. When additional capital is required, this target structure is managed by issuing new debt or equity depending upon market conditions. The Company also uses these sources to meet long-term debt and preferred stock redemption requirements (see Part II, Item 8., Notes 3 and 5, "Notes to Consolidated Financial Statements" in the Company's 1994 Annual Report on Form 10-K). Cash Flows ---------- Operating Activities -------------------- Cash provided by operating activities was $6.9 million, or 11 percent, lower in the first quarter of 1995 compared to the same period in 1994, primarily due to deferred income tax adjustments. Also contributing was the effect of weather conditions from period to period on accounts receivable, unbilled revenue, inventories of gas, and accounts payable. The Company has lease and purchase commitments related to its operating activities which are financed with cash flows from operations (see Part II, Item 8., Note 12, "Notes to Consolidated Financial Statements" in the Company's 1994 Annual Report on Form 10-K). Investing Activities -------------------- Cash requirements for utility construction in the first quarter of 1995, primarily related to system improvements and customer growth, totalled $13.6 million, down $5.5 million, or 29 percent, from the first quarter of 1994. The decrease resulted largely from a $1.9 million reduction in costs to construct new mains and services. In addition, last year's first quarter results included $1.7 million in additional long-term storage gas and $1.6 million in additional expenditures related to a project initiated in 1993 to replace the existing customer information system. Northwest Natural's construction expenditures are estimated at $76 million for 1995. Over the five year period 1995 through 1999, these expenditures are estimated at between $350 and $375 million. It is anticipated that approximately 60 percent of the funds required for these expenditures will be internally generated, and that the remainder will be funded through short-term borrowings which will be refinanced periodically through the sale of long-term debt and equity securities. In the first quarter of 1994, non-utility expenditures were primarily for Canadian exploration and production totalling $1 million and for improvements related to the Mist gathering system totalling $0.7 million. Oregon Natural anticipates investing up to $10 million, in addition to internally generated cash, in its Canadian gas exploration and production program during the three years 1995 through 1997. During the first quarter of 1995, the Company invested an additional $4 million in Oregon Natural for such activities. (See Part II, Item 7. Financial Condition, "Investing Activities," in the Company's 1994 Annual Report on Form 10-K.) Financing Activities -------------------- Cash used for financing activities in the first quarter of 1995 totalled $10.0 million, down $32.0 million, or 76 percent, from the first quarter of 1994, due to the sale by Northwest Natural of 1.15 million shares of its Common Stock in February 1995. The net proceeds of $33.0 million received from the offering were added to the general funds of the Company and are being used for corporate purposes, primarily to fund, in part, Northwest Natural's construction program, and to repay short-term debt incurred for such purpose. The projected dilution of earnings per share resulting from this sale is estimated at five percent. Lines of Credit --------------- Northwest Natural has available through September 30, 1995, committed lines of credit totalling $80 million, consisting of a primary fixed amount of $40 million plus an excess amount of up to $40 million available as needed, at Northwest Natural's option, on a monthly basis. Financial Corporation has available through September 30, 1995, committed lines of credit with two commercial banks totalling $20 million, consisting of a primary fixed amount of $15 million plus an excess amount of up to $5 million available as needed, at Financial Corporation's option, on a monthly basis. Financial Corporation's lines are supported by the guaranty of Northwest Natural. Under the terms of these lines of credit, Northwest Natural and Financial Corporation pay commitment fees but are not required to maintain compensating bank balances. The interest rates on borrowings under these lines of credit are based on current market rates as negotiated. There were no outstanding balances under either the Northwest Natural or the Financial Corporation lines of credit as of March 31, 1995 or March 31, 1994. Commercial Paper ---------------- The Company's primary source of short-term funds is commercial paper. Both Northwest Natural and Financial Corporation issue domestic commercial paper, which is supported by the committed bank lines discussed above, under agency agreements with a commercial bank. Financial Corporation's commercial paper is supported by the guaranty of Northwest Natural (see Part II, Item 8., Note 6, "Notes to Consolidated Financial Statements" in the Company's 1994 Annual Report on Form 10-K). Ratios of Earnings to Fixed Charges ---------------------------------- For the 12 months ended March 31, 1995 and December 31, 1994, the Company's ratios of earnings to fixed charges, computed by the Securities and Exchange Commission method, were 3.04 and 3.08, respectively. Earnings consist of net income to which has been added taxes on income and fixed charges. Fixed charges consist of interest on all indebtedness, amortization of debt expense and discount or premium, and the estimated interest portion of rentals charged to income. PART II. OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 11 - Statement re: Computation of Per Share Earnings. Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges. Exhibit 15 - Letter re: unaudited interim financial information. Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K On January 23, 1995, the Company filed a Current Report on Form 8-K containing the text of its press release announcing the Company's 1994 earnings and its plans to issue approximately 1.1 million shares of common stock. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NORTHWEST NATURAL GAS COMPANY (Registrant) Dated: May 1, 1995 /s/ D. JAMES WILSON -------------------------------- D. James Wilson Principal Accounting Officer, Corporate Controller and Treasurer NORTHWEST NATURAL GAS COMPANY EXHIBIT INDEX To Quarterly Report on Form 10-Q For Quarter Ended March 31, 1995 Exhibit Document Number -------- ------- Statement re computation of per share earnings 11 Statement re computation of ratios 12 Letter re unaudited interim financial information 15 Financial Data Schedule 27 EX-11 2 EXHIBIT 11 EXHIBIT 11 NORTHWEST NATURAL GAS COMPANY Statement Re: Computation of Per Share Earnings (Thousands, except per share amounts) (Unaudited)
Three Months Ended March 31, ------------------ 1995 1994 ------- ------- Earnings Applicable to Common Stock. . . . . . . $18,317 $18,040 Preference Stock Dividends . . . . . . . . . . 25 39 Debenture Interest Less Taxes. . . . . . . . . 134 136 ------- ------- Net Income Available for Fully-Diluted Common Stock. . . . . . . . . . . . . . . . . . $18,476 $18,215 ======= ======= Average Common Shares Outstanding. . . . . . . . 13,916 13,209 Stock Options. . . . . . . . . . . . . . . . . 9 23 Convertible Preference Stock . . . . . . . . . 70 107 Convertible Debentures . . . . . . . . . . . . 404 413 ------- ------- Fully-Diluted Common Shares. . . . . . . . . . . 14,399 13,752 ======= ======= Fully-Diluted Earnings Per Share of Common Stock . . . . . . . . . . . . . . . . . . . . . $1.28 $1.32 ======= =======
Note: Primary earnings per share are computed on the weighted daily average number of common shares outstanding each period. Outstanding stock options are common stock equivalents but are excluded from primary earnings per share computations due to immateriality. EX-12 3 EXHIBIT 12 EXHIBIT 12 Northwest Natural Gas Company Computation of Ratio of Earnings to Fixed Charges January 1, 1990 - March 31, 1995 ($000)
Twelve ------------Year Ended December 31---------- Months Ended March 31, 1990 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- ----------- Fixed Charges, as defined: Interest on Long-Term Debt . . . $22,244 $21,977 $23,001 $22,578 $21,921 $22,324 Other Interest . . . . . . . . . 2,853 4,266 3,223 1,906 2,473 2,513 Amortization of Debt Discount and Expense. . . . . . 363 348 511 775 850 847 Interest Portion of Rentals . . . . . . . . . . . . 1,546 1,485 1,439 1,701 1,697 1,697 ------- ------- ------- ------- ------- ------- Total Fixed Charges, as defined . . . . . . . . . $27,006 $28,076 $28,174 $26,960 $26,941 $27,381 ======= ======= ======= ======= ======= ======= Earnings, as defined: Net Income . . . . . . . . . . . $30,724 $14,377 $15,775 $37,647 $35,461 $35,733 Taxes on Income. . . . . . . . . 13,629 2,321 6,951 22,096 20,473 20,251 Fixed Charges, as above. . . . . 27,006 28,076 28,174 26,960 26,941 27,381 ------- ------- ------- ------- ------- ------- Total Earnings, as defined . . . $71,359 $44,774 $50,900 $86,703 $82,875 $83,365 ======= ======= ======= ======= ======= ======= Ratio of Earnings to Fixed Charges . . . . . . . . . . 2.64 1.59 1.81 3.22 3.08 3.04 ==== ==== ==== ==== ==== ====
EX-15 4 EXHIBIT 15 EXHIBIT 15 DELOITTE & TOUCHE LLP - ---------------------------------------------------------------- 3900 US Bancorp Tower Telephone: (503) 222-1341 111 SW Fifth Avenue Facsimile: (503) 224-2172 Portland, Oregon 97204-3698 April 28, 1995 Northwest Natural Gas Company 220 N.W. Second Avenue Portland, Oregon 97209 We have made a review, in accordance with standards established by the American Institute of Certified Public Accountants, of the unaudited interim financial information of Northwest Natural Gas Company and subsidiaries for the periods ended March 31, 1995 and 1994, as indicated in our report dated April 28, 1995; because we did not perform an audit, we expressed no opinion on that information. We are aware that our report referred to above, which is included in your quarterly report on Form 10-Q for the quarter ended March 31, 1995, is incorporated by reference in Registration Statement No. 33-34724, Post-Effective Amendment No. 1 to Registration Statement No. 2-76276, and Post-Effective Amendments No. 2 to Registration Statement Nos. 2-77195 and 33-19354 on Form S-8 and in Registration Statement Nos. 33-44827, 33-64014, 33-51271, and 33-53795 and Post-Effective Amendments No. 1 to Registration Statement Nos. 33-1304 and 33-20384 on Form S-3. We also are aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act. /s/ DELOITTE & TOUCHE LLP DELOITTE & TOUCHE LLP EX-27 5 FINANCIAL DATA SCHEDULE
UT THIS SECTION OF THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1995 MAR-31-1995 PER-BOOK 633,945 59,640 106,436 44,249 60,430 904,700 46,345 166,563 108,299 321,207 39,888 1,061 291,066 0 0 16,100 1,000 1,062 0 0 233,316 904,700 125,389 12,200 86,488 98,688 26,701 (1,087) 25,614 6,562 19,052 735 18,317 5,908 0 57,433 $1.32 $1.28
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