-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NbCUfQuIVXrlC1ilegXDIMj8VTn/klGOntDNgbUWk9NxM4YA/W/4gTBZVPi82QNf 7rn2I3cgvTbd6+EbcUPtgQ== 0000950120-99-000162.txt : 19990518 0000950120-99-000162.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950120-99-000162 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: SEC FILE NUMBER: 000-00994 FILM NUMBER: 99625644 BUSINESS ADDRESS: STREET 1: 220 NW SECOND AVE CITY: PORTLAND STATE: OR ZIP: 97209 BUSINESS PHONE: 5032264211 10-Q 1 FORM 10-Q FOR NORTHWEST NATURAL GAS COMPANY SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q (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, 1999 --------------------------------------------- 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 [ ] At May 10, 1999, 24,922,734 shares of the registrant's Common Stock, $3-1/6 par value (the only class of Common Stock) were outstanding. NORTHWEST NATURAL GAS COMPANY March 31, 1999 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 3 periods ended March 31, 1999 and 1998, and Consoli- dated Statements of Earnings Invested in the Business for the three-month periods ended March 31, 1999 and 1998. (2) Consolidated Balance Sheets at March 31, 1999 4 and 1998 and December 31, 1998. (3) Consolidated Statements of Cash Flows for the 5 three-month periods ended March 31, 1999 and 1998. (4) Consolidated Statements of Capitalization at 6 March 31, 1999 and 1998 and December 31, 1998. (5) Notes to Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of 9 Results of Operations and Financial Condition Item 3. Quantitative and Qualitative Disclosures About Market Risk 19 PART II. OTHER INFORMATION Item 5. Other Information 19 Item 6 Exhibits and Reports on Form 8-K 20 Signature 20 2 NORTHWEST NATURAL GAS COMPANY PART I. FINANCIAL INFORMATION (1) Consolidated Statements of Income (Thousands, Except Per Share Amounts) (Unaudited) Three Months Ended March 31, -------------------- 1999 1998 ---- ---- Operating Revenues: Gross operating revenues $171,049 $135,697 Cost of sales 81,968 57,390 --------- -------- Net operating revenues 89,081 78,307 Operating Expenses: Operations and maintenance 22,523 20,259 Taxes other than income taxes 8,402 7,025 Depreciation, depletion and amortization 13,555 11,945 --------- -------- Total operating expenses 44,480 39,229 --------- -------- Income from Operations 44,601 39,078 Other Income 1,498 3,077 Interest Charges - net 8,168 8,409 --------- -------- Income Before Income Taxes 37,931 33,746 Income Taxes 13,888 10,560 --------- -------- Net Income 24,043 23,186 Redeemable preferred and preference stock dividend requirements 637 653 --------- -------- Earnings Applicable to Common Stock $ 23,406 $ 22,533 ========= ======== Average Common Shares Outstanding 24,883 22,903 Earnings per share of common stock: Basic $0.94 $0.98 Diluted $0.93 $0.97 Dividends Paid Per Share of Common Stock $0.305 $0.305 See Notes to Consolidated Financial Statements. ================================================================================ Consolidated Statements of Earnings Invested in the Business (Thousands, Three-Months Ended March 31) (Unaudited) 1999 ------------------------- Earnings invested in the business: Balance at Beginning of Period $ 106,513 Net Income 24,043 $ 24,043 Dividends declared or paid: Redeemable preferred and preference stock (637) Common stock (7,583) ---------- Balance at End of Period $ 122,336 ========= Accumulated other comprehensive income (loss): Balance at Beginning of Period $ (2,460) Other comprehensive income- Foreign currency translation adjustment (433) (433) --------- --------- Comprehensive income $ 23,610 ========= Balance at End of Period $ (2,893) ========= 1998 ------------------------- Earnings invested in the business: Balance at Beginning of Period $ 113,098 Net Income 23,186 $ 23,186 Dividends declared or paid: Redeemable preferred and preference stock (1,307) Common stock (13,970) ---------- Balance at End of Period $ 121,007 ========= Accumulated other comprehensive income (loss): Balance at Beginning of Period $ (2,235) Other comprehensive income- Foreign currency translation adjustment (40) (40) --------- --------- Comprehensive income $ 23,146 ========= Balance at End of Period $ (2,275) ========= See Notes to Consolidated Financial Statements. 3 NORTHWEST NATURAL GAS COMPANY PART I. FINANCIAL INFORMATION (2) Consolidated Balance Sheets (Thousands of Dollars)
(Unaudited) (Unaudited) Mar. 31, Mar. 31, Dec. 31, 1999 1998 1998 ----------- ----------- ----------- Assets: Plant and Property: Utility plant $ 1,263,599 $ 1,184,480 $ 1,239,690 Less accumulated depreciation 413,763 376,767 404,117 ----------- ----------- ----------- Utility plant - net 849,836 807,713 835,573 ----------- ----------- ----------- Non-utility property 91,667 77,211 89,050 Less accumulated depreciation and depletion 31,170 23,904 29,927 ----------- ----------- ----------- Non-utility property - net 60,497 53,307 59,123 ----------- ----------- ----------- Total plant and property 910,333 861,020 894,696 ----------- ----------- ----------- Investments and Other: Investments 14,910 32,361 15,898 Long-term notes receivable 585 750 816 ----------- ----------- ----------- Total investments and other 15,495 33,111 16,714 Current Assets: Cash and cash equivalents 8,921 28,525 7,383 Accounts receivable - net 53,025 48,305 47,476 Accrued unbilled revenue 16,424 12,470 34,258 Inventories of gas, materials and supplies 9,833 11,587 21,258 Prepayments and other current assets 14,413 12,784 16,105 ----------- ----------- ----------- Total current assets 102,616 113,671 126,480 Regulatory Tax Assets 56,860 56,860 56,860 Deferred Gas Costs Receivable 22,171 34,201 27,795 Deferred Debits and Other 75,047 59,304 69,191 ----------- ----------- ----------- Total Assets $ 1,182,522 $ 1,158,167 $ 1,191,736 =========== =========== =========== Capitalization and Liabilities: Capitalization: Common stock $ 309,835 $ 257,210 $ 308,351 Earnings invested in the business 122,336 121,007 106,513 Accumulated other comprehensive income (loss) (2,893) (2,275) (2,460) ----------- ----------- ----------- Total common stock equity 429,278 375,942 412,404 Redeemable preference stock 25,000 25,000 25,000 Redeemable preferred stock 11,499 12,429 11,499 Long-term debt 366,683 347,146 366,738 ----------- ----------- ----------- Total capitalization 832,460 760,517 815,641 ----------- ----------- ----------- Minority Interest 16,026 18,037 16,322 ----------- ----------- ----------- Current Liabilities: Notes payable 51,261 76,834 87,264 Accounts payable 51,981 49,457 56,039 Long-term debt due within one year 10,000 33,000 10,000 Taxes accrued 19,106 10,978 7,486 Interest accrued 10,302 10,355 6,204 Other current and accrued liabilities 23,762 29,679 23,477 ----------- ----------- ----------- Total current liabilities 166,412 210,303 190,470 Deferred Investment Tax Credits 10,725 11,498 11,248 Deferred Income Taxes 138,830 141,747 140,310 Regulatory Liabilities and Other 18,069 16,065 17,745 Commitments and Contingencies - - - ---------- ---------- ---------- Total Capitalization and Liabilities $ 1,182,522 $ 1,158,167 $ 1,191,736 =========== =========== ===========
See Notes to Consolidated Financial Statements. 4 NORTHWEST NATURAL GAS COMPANY PART I. FINANCIAL INFORMATION (3) Consolidated Statements of Cash Flows (Thousands of Dollars) (Unaudited)
Three Months Ended March 31, --------------------------- 1999 1998 ---- ---- Operating Activities: Net income $ 24,043 $ 23,186 Adjustments to reconcile net income to cash provided by operations: Depreciation, depletion and amortization 13,555 11,945 Gain on sale of assets (876) (3,542) Deferred income taxes and investment tax credits (2,003) 1,343 Equity in losses of investments 336 1,279 Allowance for funds used during construction (97) (315) Deferred gas costs receivable 5,624 (5,573) Regulatory accounts and other - net (5,532) (445) -------- -------- Cash from operations before working capital changes 35,050 27,878 Changes in operating assets and liabilities: Accounts receivable-net (5,549) (8,885) Accrued unbilled revenue 17,834 11,441 Inventories of gas, materials and supplies 11,425 5,798 Accounts payable (4,058) (9,318) Accrued interest and taxes 15,718 10,619 Other current assets and liabilities 1,977 5,529 -------- -------- Cash Provided By Operating Activities 72,397 43,062 -------- -------- Investing Activities: Acquisition and construction of utility plant assets (25,364) (20,294) Investment in non-utility plant (4,578) (3,306) Proceeds from sale of non-utility assets 1,723 - Investments and other 587 836 -------- -------- Cash Used In Investing Activities (27,632) (22,764) -------- -------- Financing Activities: Common stock issued 1,429 1,651 Long-term debt issued - 22,000 Long-term debt retired - (2,000) Change in short-term debt (36,003) (12,483) Cash dividend payments: Redeemable preferred and preference stock (637) (653) Common stock (7,583) (6,979) Foreign currency translation and capital stock expense 433 (40) --------- -------- Cash Provided By (Used For) Financing Activities (43,227) 1,496 --------- -------- Increase In Cash and Cash Equivalents 1,538 21,794 Cash and Cash Equivalents - Beginning of Period 7,383 6,731 --------- -------- Cash and Cash Equivalents - End of Period $ 8,921 $ 28,525 ======== ======== =================================================================================================================== Supplemental Disclosure of Cash Flow Information Cash paid during the period for: Interest $ 3,984 $ 4,255 Income Taxes 3,950 - =================================================================================================================== Supplemental Disclosure of Non-cash Financing Activities Conversion to common stock: 7-1/4 percent Series of Convertible Debentures $ 55 $ 157 ===================================================================================================================
See Notes to Consolidated Financial Statements. 5 NORTHWEST NATURAL GAS COMPANY PART I. FINANCIAL INFORMATION (4) Consolidated Statements of Capitalization (Thousands)
(Unaudited) (Unaudited) Mar. 31, 1999 Mar. 31, 1998 Dec. 31, 1998 - ----------------------------------------------------------------------------------------------------------------------------- COMMON STOCK EQUITY: Common stock - par value $3-1/6 per share $ 78,894 $ 72,636 $ 78,701 Premium on common stock 230,941 184,574 229,650 Earnings invested in the business 122,336 121,007 106,513 Accumulated other comprehensive income (loss) (2,893) (2,275) (2,460) --------- --------- --------- Total common stock equity 429,278 52% 375,942 49% 412,404 51% --------- ---- --------- ---- --------- ---- REDEEMABLE PREFERENCE STOCK: $6.95 Series, stated value $100 per share 25,000 25,000 25,000 --------- --------- --------- Total redeemable preference stock 25,000 3% 25,000 3% 25,000 3% --------- ---- --------- ---- --------- ---- REDEEMABLE PREFERRED STOCK: Stated value $100 per share: $4.75 Series 249 429 249 $7.125 Series 11,250 12,000 11,250 --------- --------- --------- Total redeemable preferred stock 11,499 1% 12,429 2% 11,499 1% --------- ---- --------- ---- --------- ---- LONG-TERM DEBT: First Mortgage Bonds 9-3/4% Series due 2015 50,000 50,000 50,000 9-1/8% Series due 2019 - 18,000 - Medium-Term Notes First Mortgage Bonds: 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 5.55% Series B due 2002 20,000 - 20,000 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 6.80% Series B due 2007 10,000 10,000 10,000 6.50% Series B due 2008 5,000 5,000 5,000 8.26% Series B due 2014 10,000 10,000 10,000 7.00% Series B due 2017 40,000 40,000 40,000 6.60% Series B due 2018 22,000 22,000 22,000 8.31% Series B due 2019 10,000 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 6.52% Series B due 2025 10,000 10,000 10,000 7.05% Series B due 2026 20,000 20,000 20,000 7.00% Series B due 2027 20,000 20,000 20,000 6.65% Series B due 2027 20,000 20,000 20,000 6.65% Series B due 2028 10,000 - 10,000 Unsecured: 8.93% Series A due 1998 - 5,000 - 8.95% Series A due 1998 - 10,000 - 8.47% Series A due 2001 10,000 10,000 10,000 Convertible Debentures 7-1/4% Series due 2012 9,683 10,146 9,738 --------- --------- --------- 376,683 380,146 376,738 Less long-term debt due within one year 10,000 33,000 10,000 --------- --------- --------- Total long-term debt 366,683 44% 347,146 46% 366,738 45% --------- ---- --------- ---- --------- ---- TOTAL CAPITALIZATION $ 832,460 100% $ 760,517 100% $ 815,641 100% ========= ==== ========= ==== ========= ====
See Notes to Consolidated Financial Statements. 6 NORTHWEST NATURAL GAS COMPANY PART I. FINANCIAL INFORMATION (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 1998 Annual Report on Form 10-K (1998 Form 10-K). A significant part of the business of the Company is of a seasonal nature; therefore, results of operations for the interim periods are not necessarily indicative of the results for a full year. Certain amounts from prior periods have been reclassified to conform with the 1999 presentation. 2. Recently Issued Accounting Standards In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Financial Instruments and Hedging Activities." This standard is effective for all fiscal years beginning after June 15, 1999 (January 1, 2000 for the Company). SFAS No. 133 requires that all derivative instruments be recorded each period either in current earnings or in other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if so designated, what type of hedge transaction it is. The Company has not determined the impact that adoption of SFAS No. 133 will have on results of operation or its financial position. The FASB's Emerging Issues Task Force (EITF) Issue 98-10, "Accounting for Energy Trading and Risk Management Activities," which is effective for fiscal years beginning after December 15, 1998, addresses how to account for purchases and sales of energy trading contracts. The Company's purchase and sales activities do not meet the definition of trading activities, and therefore EITF Issue 98-10 is not applicable. The American Institute of Certified Public Accountants' Accounting Standards Executive Committee issued Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use," and SOP 98-5, "Reporting on the Costs of Start-Up Activities," which are effective for years beginning after December 31, 1998. The Company has adopted SOP 98-1 and SOP 98-5 with no material effect on the results of operations or financial position. 3. Segment Reporting The Company principally operates in a single line of business consisting of the distribution of natural gas. Other segments are primarily investments in oil and gas exploration properties in Canada and in alternative energy projects in California. 7 The following table presents information about reportable segments for the three months ended March 31, 1999 and 1998. Inter-segment transactions are insignificant. Thousands Utility Other Total - -------------------------------------------------------------------------------- Three Months Ended March 31, 1999 - --------------------------------- Net operating revenues $ 85,802 $ 3,279 $ 89,081 Income (loss) from operations 45,593 (992) 44,601 Depreciation expense 11,198 2,357 13,555 Net income (loss) 24,409 (366) 24,043 Assets - end of period 1,105,131 77,391 1,182,522 Three Months Ended March 31, 1998 - --------------------------------- Net operating revenues $ 76,295 $ 2,012 $ 78,307 Income (loss) from operations 39,426 (348) 39,078 Depreciation expense 10,788 1,157 11,945 Net income 20,342 2,844 23,186 Assets - end of period 1,062,755 95,412 1,158,167 4. Contingencies See Part II, Item 7., "Contingent Liabilities" and "Environmental Matters," in the 1998 Form 10-K. 8 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 (NW Natural) Non-regulated subsidiary businesses: NNG Financial Corporation (Financial Corporation), a wholly-owned subsidiary Canor Energy, Ltd. (Canor), a majority-owned subsidiary 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 1998 Annual Report on Form 10-K (1998 Form 10-K)). The following is management's assessment of the Company's financial condition including the principal factors that affect results of operations. The discussion refers to the consolidated activities of the Company for the three months ended March 31, 1999 and 1998. Forward-Looking Statements - -------------------------- This report and other presentations made by the Company from time to time may contain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and other statements which are other than statements of historical facts. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis. However, each such forward-looking statement involves uncertainties and is qualified in its entirety by reference to the following important factors that could cause the actual results of the Company to differ materially from those projected in such forward-looking statements: (i) prevailing governmental policies and regulatory actions, including those of the Oregon Public Utility Commission (OPUC) and the Washington Utilities and Transportation Commission (WUTC), with respect to allowed rates of return, industry and rate structure, purchased gas and investment recovery, acquisitions and dispositions of assets and facilities, operation and construction of plant facilities, present or prospective wholesale and retail competition, changes in tax laws and policies and changes in and compliance with environmental and safety laws and policies; (ii) weather conditions and other natural phenomena; (iii) unanticipated population growth or decline, and changes in market demand and demographic patterns; (iv) competition for retail and wholesale customers; (v) pricing of natural gas relative to other energy sources; (vi) unanticipated changes in interest or foreign currency exchange rates or in rates of inflation; (vii) unanticipated changes in operating expenses and capital expenditures; (viii) capital market conditions; (ix) competition for new energy development opportunities; (x) legal and administrative proceedings and settlements; and (xi) estimates of future costs or the effect on future operations as a result of events that could result from the Year 2000 issue described further herein. All 9 subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the Company, also 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 update any forward-looking statement to reflect events or circumstances after the date on which such statement is made or to reflect the occurrence of unanticipated events. 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 statement. Earnings and Dividends - ---------------------- Earnings from consolidated operations were 93 cents a diluted share for the quarter ended March 31, 1999, compared to 97 cents a diluted share in last year's first quarter. The Company's earnings applicable to common stock were $23.4 million in the quarter ended March 31, 1999, up 4 percent from $22.5 million in the first quarter of 1998. NW Natural earned 95 cents a diluted share from utility operations in the first quarter of 1999, compared to 85 cents a diluted share in the same period in 1998. Weather conditions in NW Natural's service territory in the first quarter of 1999 were 9 percent colder than the first quarter of 1998 and comparable to normal weather conditions. The Company estimates that the weather-related increase in gross margin revenues (margin) during the first quarter of 1999 was equivalent to about 18 cents a share compared to the first quarter of 1998. Weather conditions in the first quarter of 1998 were 8 percent warmer than average resulting in an estimated margin reduction equivalent to 22 cents a share as compared to the first quarter of 1997. These estimates are derived from the Company's internal planning model (see Part II, Item 7., "Earnings and Dividends," in the 1998 Form 10-K). The model also estimates that customer growth in the residential and commercial segments since March 31, 1998 contributed an additional $3.9 million of margin during the first quarter of 1999. NW Natural's subsidiaries lost 2 cents a share during the first quarter of 1999, compared to a loss of 3 cents in the first quarter of 1998. See "Subsidiary Operations." Dividends paid on common stock were 30.5 cents a share for each of the three-month periods ended March 31, 1999 and 1998. In April 1999, the Company's Board of Directors declared a quarterly dividend of 30.5 cents a share on its common stock, payable May 14, 1999, to shareholders of record on April 30, 1999. The current indicated annual dividend rate is $1.22 a share. Results of Operations - --------------------- Comparison of Gas Operations ---------------------------- The following table summarizes the composition of gas utility volumes and revenues for the three months ended March 31: 10 1999 1998 ---- ---- Gas Sales and Transportation Volumes - Therms (000's): Residential and commercial sales 267,905 227,206 Unbilled volumes (30,455) (26,495) -------- -------- Weather-sensitive volumes 237,450 200,711 Industrial firm sales 27,312 25,989 Industrial interruptible sales 14,491 14,431 -------- -------- Total gas sales 279,253 241,131 Transportation deliveries 107,010 122,148 ------- -------- Total volumes sold and delivered 386,263 363,279 ======== ======== Utility Operating Revenues - Dollars (000's): Residential and commercial revenues $163,856 $125,411 Unbilled revenues (17,276) (12,543) -------- -------- Weather-sensitive revenues 146,580 112,868 Industrial firm sales revenues 11,464 9,648 Industrial interruptible sales revenues 4,667 4,515 -------- -------- Total gas sales revenues 162,711 127,031 Transportation revenues 4,806 5,331 Other revenues 213 1,271 -------- -------- Total utility operating revenues $167,730 $133,633 ======== ======== Cost of gas sold - Dollars (000's) $ 81,928 $ 57,338 ======== ======== Total number of customers (end of period) 485,297 461,485 ======== ======== Actual degree days 1,855 1,697 ======== ======== 20-year average degree days 1,848 1,854 ======== ======== Residential and Commercial -------------------------- Typically, 75 percent or more of NW Natural's annual operating revenues are derived from gas sales to weather-sensitive residential and commercial customers. Accordingly, variations in temperatures between periods will affect volumes of gas sold to these customers. Average weather conditions are calculated from the most recent 20 years of temperature data measured by heating degree days. Weather conditions were comparable to average conditions in the first quarter of 1999 and 9 percent colder than in the first quarter of 1998. NW Natural continues to experience a high level of customer growth relative to other local gas distribution companies, with 23,812 customers added since March 31, 1998 for a growth rate of 5.2 percent. In the three years ended Dec. 31, 1998, more than 67,000 customers were added to the system, representing an average annual growth rate of 5.2 percent. Volumes of gas sold to residential and commercial customers increased 36.7 million therms, or 18 percent, in the first quarter of 1999 compared to the first quarter of 1998. Related revenues increased $33.7 million, or 30 percent, due to increased volumes and rate increases effective during 1998. Effective Jan. 1, April 1 and Dec. 1, 1998, the OPUC approved rate increases averaging 11.4 percent, 6.1 percent and 3.4 percent, respectively, for NW Natural's 11 customers in Oregon. These rate changes reflected changes in NW Natural's purchased gas costs, the application of temporary rate adjustments to amortize regulatory balancing accounts and the removal of temporary rate adjustments effective in 1997. Effective Dec. 1, 1998, the WUTC approved a rate increase averaging 5.8 percent primarily to pass through to Washington customers increases in purchased gas costs. In October 1998, NW Natural filed its first general rate case in Oregon since 1989. The filing proposes a revenue increase of $14.7 million per year from Oregon operations through rate increases averaging 3.8 percent. The proposed increase is designed to cover the costs of additional gas storage at Mist, NW Natural's new customer information system, and the Year 2000 project. In November 1998, the OPUC suspended the proposed rate increase for investigation and hearings. In March 1999, the Staff of the OPUC issued its recommendations on issues in the general rate case. The Staff recommended a revenue reduction of $19.9 million per year which incorporates a recommended return on common shareholders' equity (ROE) of 8.5 percent, compared to NW Natural's proposed ROE of 11.25 percent. NW Natural's currently authorized ROE is 13.25 percent. The OPUC Staff is considered to be an independent party in the rate case. Its position is not binding on either the administrative law judge who will preside over hearings in the case or on the Commission when it makes its decisions on the issues. The OPUC is expected to extend its order suspending the filing for investigation and hearing until Sept. 1, 1999. In order to match revenues with related purchased gas costs, NW Natural records unbilled revenues for gas delivered but not yet billed to customers through the end of the period. Industrial Sales, Transportation and Other Revenues --------------------------------------------------- Total volumes delivered to industrial firm, industrial interruptible, and transportation customers were 13.8 million therms, or 8 percent, lower in the first quarter of 1999 than in the same period of 1998. Margin from these customers decreased by 8 percent to $12.6 million in the first quarter of 1999 from $13.7 million in the first quarter of 1998, reflecting some large interruptible customers' use of oil rather than gas during the quarter, lower margins from industrial schedules where rates are tied to oil prices, and the loss of one industrial customer to bypass. (See Part II, Item 7., "Results of Operations - Industrial Sales, Transportation and Other Revenues," in the 1998 Form 10-K.) Other revenues, which relate primarily to accumulations or amortizations of regulatory accounts (see Part II, Item 8., Note 1, "Notes to Consolidated Financial Statements," in the 1998 Form 10-K), decreased $1.1 million, or 83 percent, during the first quarter of 1999 compared to the first quarter of 1998. The principal factors were a decrease in amortizations of property tax savings ($2.6 million), offset by the conclusion of amortizations of revenue reductions negotiated with the OPUC as part of the Jan. 1, 1998 rate change ($0.8 million) and the refund of 1996-97 excise taxes ($0.4 million). Cost of Gas ----------- The cost per therm of gas sold was 23 percent higher during the first quarter of 1999 than in the first quarter of 1998. The cost per therm of gas sold includes current gas purchases, gas drawn from storage, demand cost equalization and regulatory deferrals, less Company use. The cost of gas sold was reduced by non-regulated net gas sales of $0.4 million and $0.8 million for the first quarters of 1999 and 1998, respectively. Under an agreement with the OPUC, 12 revenues from these sales are treated as a reduction of gas costs. The average cost per therm of gas purchased in the first quarter of 1999 was 7 percent higher than in the first three months of 1998, due to higher prevailing prices in the natural gas commodity market. NW Natural has a Purchased Gas Adjustment (PGA) tariff in Oregon, under which its net income from Oregon operations is affected only within defined limits by changes in purchased gas costs. Effective Jan. 1, 1998, NW Natural recognizes 33 percent of the difference between actual and projected gas costs in current operating results while the remaining 67 percent is deferred for recovery from or refund to customers in future rates. (See Part II, Item 5, Other Information, "Regulatory Developments.") Subsidiary Operations --------------------- The following table summarizes financial information for the Company's consolidated subsidiaries: Three Months Ended March 31, 1999 1998 ---- ---- Consolidated Subsidiaries (Thousands): Net Operating Revenues $ 3,279 $ 2,012 Operations and Maintenance Expense 1,914 1,203 Depreciation 2,357 1,157 ------- ------- Income (Loss) from Operations $ (992) $ (348) Income (Loss) from Financial Investments (631) (1,279) Other Income (Expense) and Interest Charges 886 281 Minority Interest 73 - ------- ------- Income (Loss) Before Income Taxes (664) (1,346) Income Tax Expense (Benefit) (255) (626) ------- ------- Net Income (Loss) $ (409) $ (720) ======= ======= Results of operations for the individual subsidiaries for the first quarter of 1999 were a net loss of $0.1 million for Canor compared to a negligible net loss for the first quarter of 1998, and a net loss of $0.3 million for Financial Corporation compared to a net loss of $0.7 million for the first quarter of 1998. Canor's operations have been adversely affected by low oil prices during the first quarter of 1999, while Financial Corporation normally incurs a loss in the first quarter due to the seasonality of revenues from its investments in solar and windpower generating plants in California. In the first quarter of 1998 NW Natural recorded a $3.5 million gain, equivalent to 15 cents a share, from the combination of Canor with Southlake Energy, Inc. (Southlake), an indirect subsidiary of NIPSCO Industries, Inc. Canor purchased Southlake's stock in exchange for shares of Canor, with the resulting company owned 66 percent by NW Natural and 34 percent by an indirect subsidiary of NIPSCO. The resulting gain was not subject to U.S. income tax. Canor had managed Southlake's assets since 1995 under a previous agreement. The following discussion summarizes operating expenses, other income (expense), interest charges - net, and income taxes. 13 Operating Expenses ------------------ Operations and Maintenance -------------------------- Operations and maintenance expenses were $2.3 million, or 11 percent, higher in the first quarter of 1999 compared to the same period in 1998. NW Natural's expenses increased $1.6 million, or 8 percent, in the first quarter of 1999, primarily due to costs of a special voluntary early retirement program ($0.8 million) and higher accruals for bad debts ($0.6 million). Subsidiary operating expenses increased $0.7 million, or 59 percent, as compared to the first quarter of 1998, due to the inclusion in this category of expenses of Southlake following the Canor/Southlake amalgamation at the end of the first quarter of 1998. Taxes Other than Income ----------------------- Taxes other than income increased $1.4 million, or 20 percent. Franchise tax expense increased $0.9 million in the first quarter of 1999 compared to the first quarter of 1998 as a result of the higher revenues reflecting rate increases and increased sales due to colder weather. Property taxes increased $0.3 million due to more utility plant in service, while regulatory commission fees and local business taxes each increased $0.1 million. Depreciation, Depletion and Amortization ---------------------------------------- The Company's depreciation expense increased $1.6 million, or 13 percent, compared to the first quarter of 1998. NW Natural's depreciation expense increased by $0.4 million primarily due to the placement into service in November 1998 of an expansion of its underground gas storage facility (Mist Phase II) ($0.3 million) and other additional utility plant. Subsidiary depreciation expense increased $1.2 million in the first quarter of 1999 compared to 1998 due to an increase in Canor's total assets following its amalgamation with Southlake. Other Income (Expense) ---------------------- The Company's other income decreased $1.6 million in the first quarter of 1999 compared to the same period in 1998. Results from the first quarter of 1998 included the one-time $3.5 million gain from the combination of Canor with Southlake (see "Subsidiary Operations," above). The first quarter of 1999 included a gain on the sale of assets by Canor ($0.6 million); a smaller loss from Financial Corporation's alternative energy investments ($0.6 million); an increase in net income from merchandise sales ($0.4 million); and increased interest income ($0.1 million). Interest Charges - net ---------------------- The Company's net interest expense decreased $0.2 million, or 3 percent, in the first quarter of 1999 compared to the same period in 1998. Long-term debt decreased $3.5 million from March 31, 1998 and average interest rates on outstanding debt declined due to the redemption or maturity of $33.0 million of long-term debt bearing interest rates of 8.93 percent to 9.125 percent in the second and third quarters of 1998. 14 Income Taxes ------------ The effective corporate income tax rates for the three months ended March 31, 1999 and 1998 were 37 percent and 31 percent, respectively. The lower 1998 rate was due in part to the $3.5 million gain from the Canor combination with Southlake that was not subject to income tax. (See Part II, Item 8., Note 7, "Notes to Consolidated Financial Statements," in the 1998 Form 10-K). Financial Condition - ------------------- Capital Structure ----------------- NW Natural's capital expenditures are primarily related to utility construction resulting from customer growth and system improvements. NW 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 revenue derived from gas usage by NW Natural's residential and commercial customers influences the Company's 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 1998 Form 10-K). The Company's long-term goal is to maintain a capital structure comprised of 45 to 50 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, the Company issues debt or equity securities depending upon both the target capital structure and 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 1998 Form 10-K). Cash Flows ---------- Operating Activities --------------------- Operating activities provided net cash of $72.4 million in the three months ended March 31, 1999 compared to $43.1 million in the first three months of 1998. The 68 percent increase was due to increased cash from operations ($7.2 million) and lower working capital requirements ($22.2 million). The increase in cash from operations compared to 1998 was primarily due to lower deferred gas costs receivable ($11.2 million), a decrease in non-cash gains on the sale of assets ($2.7 million) and an increase in depreciation, depletion and amortization expense ($1.6 million); offset by a reduction in deferred income taxes and investment tax credits ($3.3 million) and higher regulatory account debit balances ($5.1 million). The decrease in working capital requirements was due to greater decreases in accrued unbilled revenue ($6.4 million) and inventory balances ($5.6 million), a smaller decrease in accounts payable ($5.3 million) and a greater increase in accrued interest and taxes ($5.1 million). A non-cash gain of $3.5 million was recognized in the first quarter of 1998 from Canor's amalgamation with Southlake. The Company has lease and purchase commitments relating 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 1998 Form 10-K). 15 Investing Activities -------------------- Cash requirements for utility construction in the first quarter of 1999 totaled $25.4 million, up $5.1 million, or 25 percent, from the first quarter of 1998. The increase was primarily due to higher expenditures for the development of additional underground storage facilities ($4.6 million). NW Natural's construction expenditures are estimated at $110 million for 1999. Over the five year period 1999 through 2003, these expenditures are estimated at between $450 million and $500 million. The projected level of capital expenditures during the next five years reflects projected customer growth, a major system reinforcement project and the development of additional underground storage facilities. It is anticipated that approximately 50 percent of the funds required for these expenditures will be internally generated, and that the remainder will be funded through the sale of long-term debt and equity securities with short-term debt providing liquidity and bridge financing. In the first quarter of 1999, non-utility expenditures totaled $4.6 million. Canor invested $2.1 million in Canadian exploration and production properties and NW Natural's non-utility expenditures were $2.5 million for the construction of the Port of Portland building (see "Lines of Credit," below). During the first quarter of 1998, NW Natural converted to equity $11.8 million of intercompany loans to Canor. (See Part II, Item 7., Financial Condition, "Investing Activities," in the 1998 Form 10-K.) Financing Activities -------------------- In the first quarter of 1999, internally generated cash was used to reduce short-term debt by $36.0 million. In the first quarter of 1998, proceeds from the issuance of Medium-Term Notes were used to reduce short term debt by $12.5 million and long-term debt by $2.0 million. Lines of Credit --------------- NW Natural has available through Sept. 30, 1999, committed lines of credit with five commercial banks totaling $100 million, consisting of a primary fixed amount of $50 million plus an excess amount of up to $50 million available as needed, at NW Natural's option, on a monthly basis. Financial Corporation has available through Sept. 30, 1999, committed lines of credit with two commercial banks totaling $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 NW Natural. Under the terms of these lines of credit, which are used as backup lines for commercial paper programs, NW 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 on either the NW Natural or Financial Corporation lines of credit as of March 31, 1999 or 1998. In April 1998, NW Natural entered into an additional $18 million line of credit with a commercial bank for the purpose of constructing the new headquarters building for the Port of Portland on land currently owned by NW Natural (see "Investing Activities," above). This line of credit is available through Nov. 30, 1999, and the outstanding balance at March 31, 1999 was $8.6 million. 16 Canor has a $30 million (Canadian) revolving credit facility available for its normal business operations through a Canadian commercial bank. The amount of the facility declines by $1.2 million per quarter beginning April 1, 1999 and is subject to a re-setting annually either upward or downward, based upon an analysis of Canor's gas and oil reserves as of March 31 each year. Canor had the U.S. dollar equivalent of $4.8 million outstanding on this line of credit at March 31, 1999. Commercial Paper ---------------- The Company's primary source of short-term funds is commercial paper. Both NW Natural and Financial Corporation issue commercial paper under agency agreements with a commercial bank. Financial Corporation's commercial paper is supported by the guaranty of NW Natural (see Part II, Item 8., Note 6, "Notes to Consolidated Financial Statements," in the 1998 Form 10-K). Ratios of Earnings to Fixed Charges ----------------------------------- For the 12 months ended March 31, 1999 and Dec. 31, 1998, the Company's ratios of earnings to fixed charges, computed using the Securities and Exchange Commission method, were 2.26 and 2.12, respectively. For this purpose, earnings consist of net income before taxes plus fixed charges. Fixed charges consist of interest on all indebtedness, the amortization of debt expense and discount or premium, and the estimated interest portion of rentals charged to income. Contingent Liabilities - ---------------------- Year 2000 Readiness ------------------- Overview -------- The Company has identified and is in the process of correcting the information technology (IT) and non-IT systems within its control that could be affected by the Year 2000 issue. In early 1997, NW Natural established a Year 2000 Project Office with technical specialists experienced in the Year 2000 issue, sponsored by two senior executives. The Company's objective in its Year 2000 program is to reduce the risk of business disruption or serious financial loss due to IT and non-IT systems failures relating to the Year 2000 issue. In November 1997, NW Natural replaced its largest operating system, its customer information system for residential and small commercial customers incorporating billing, customer order, credit and other programs, with a fully Year 2000-ready system. Additional project work includes maintaining and managing the inventory of its date-sensitive IT and non-IT systems; researching and managing the degree of Year 2000 readiness of IT and non-IT systems of the suppliers and vendors with whom it has material relationships; identifying and assessing the cost of renovating or replacing non-IT systems within its control that could be affected by the Year 2000 issue; assigning risk ratings to its IT and non-IT systems in order to prioritize renovation and replacement efforts; and developing contingency plans for high-risk systems or vendor products where products are known to be non-compliant or readiness levels cannot be independently verified. 17 Readiness of Systems -------------------- The Year 2000 project office has achieved various stages of correction for impacted IT systems and non-IT equipment and, overall, NW Natural has maintained and expects to continue its planned schedule for correction. NW Natural plans to complete renovations of its internal applications with the highest risk ratings by June 30, 1999, and to evaluate and develop appropriate plans to renovate or address risks of failure in its remaining lower-risk systems by the end of 1999. Among 29 high-priority applications originally identified for internal renovation, 38 percent had been completed through construction, testing and implementation as of March 31, 1999. NW Natural has been developing a new billing system for industrial and large commercial (I&C) customers to replace an existing system that is not Year 2000 compliant. The development project for the new I&C system is on schedule, but NW Natural has implemented a contingency plan for the renovation of the existing system so that it could be ready by year-end. This effort may be terminated at any time if it appears that the I&C replacement project is reaching its key milestones on schedule for completion by October 1999. Suppliers and Vendors --------------------- NW Natural is evaluating the status of Year 2000 compliance efforts of critical suppliers and vendors. These contacts include written communication or face-to-face meetings with providers of interstate capacity and storage, natural gas suppliers, financial institutions and electric and telephone companies. In addition, the project office is currently investigating 588 vendor-supplied products. Of these products, as of March 31, 1999, 443 products either have been determined to be compliant or have been represented by the vendors to be compliant if used in connection with other compliant systems. Another 89 products were deemed non-compliant and 56 products were under active investigation. If warranted, the Company will identify alternative vendor sources to the extent alternatives are available, and develop contingency plans for any critical vendor products considered at risk where alternatives are not available. Risks and Contingency Planning ------------------------------ The Company has not quantified its worst-case exposure from the Year 2000 issue, but the project office intends to make such estimates while prioritizing the highest-risk systems for correction. With respect to its internal operations, NW Natural believes its most significant risks are its ability to render timely bills to its industrial and large commercial customers, its ability to use electronic devices to control and operate its distribution system and its ability to maintain continuous operation of its computer systems. In the event that any Year 2000-related problems may occur, the Company intends to implement contingency plans to mitigate the impact of such failures to the extent possible. These plans will include options for manual control and operation of the gas distribution system. With respect to external factors, NW Natural relies on the suppliers of natural gas and interstate transportation to deliver natural gas to NW Natural's distribution system. External infrastructure such as electric and telephone service is necessary for NW Natural's basic operation as well as the 18 operations of many of its customers. A failure by any of these critical vendors could challenge NW Natural's ability to meet the demands of its customers. As part of its normal business practice, however, NW Natural maintains plans to follow during emergency circumstances. These plans are incorporated into its contingency plan for potential Year 2000-related problems. Financial Impact ---------------- NW Natural's total estimated cost for its Year 2000 readiness program is $6.9 million. This amount includes its costs of assessment, planning, vendor management, project management and other project costs as well as the costs of renovating and testing internal applications. NW Natural's costs from 1997 through March 31, 1999 for Year 2000 activities totaled $4.9 million. Neither the total estimated cost nor the costs to date include the costs incurred in replacing NW Natural's customer information system or costs for other IT systems that are being replaced rather than renovated. In accordance with an order of the OPUC, NW Natural's incremental operating costs for Year 2000 readiness are being deferred and will be amortized over a five-year period. Disclaimer ---------- As a result of its Year 2000 program and the replacement of the residential and small commercial customer information system, the Company does not believe that, in the aggregate, Year 2000 issues will be material to its business, operations or financial condition. However, despite the Company's efforts, there can be no assurance that all material Year 2000 risks relating to systems within its control will have been adequately identified and corrected before the end of 1999. In addition, while the Company is in the process of researching the Year 2000 readiness of its suppliers and vendors, the Company can make no assurances regarding the Year 2000 compliance status of systems or parties outside its control, and currently cannot assess the effect on it of any non-compliance by such systems or parties. The Year 2000 statements in this report are Year 2000 Readiness Disclosures under the Year 2000 Information and Readiness Disclosure Act and are made to the best knowledge and belief of the Company. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes to the information provided in Part II, Item 7A., "Quantitative and Qualitative Disclosures About Market Risk," in the 1998 Form 10-K. PART II. OTHER INFORMATION Item 5. OTHER INFORMATION Regulatory Developments ----------------------- On April 19, 1999 the OPUC issued its order addressing the future treatment of NW Natural's purchased gas costs. In its order, the OPUC formalized a process that tests for "excessive earnings" in connection with gas utilities' annual PGA filings of rate changes due to increases or decreases in gas commodity costs. Under the order, NW Natural is authorized to retain all of its earnings up to a threshold level equal to its authorized return on equity plus 300 basis points. Until a decision is made on NW Natural's authorized ROE in the 19 pending Oregon general rate case (see Part I, Item 2., "Results of Operations"), NW Natural can earn up to a 12.6 percent ROE. One-third of any "excess" above that level will be refunded to customers. The OPUC order also confirmed NW Natural's ability to pass through 100 percent of its prudently incurred gas costs into rates. Gas Storage ----------- On March 30, 1999, the Oregon Energy Facility Siting Council approved NW Natural's application to amend its site certificate for the South Mist Feeder, its pipeline connecting the Mist gas storage field with NW Natural's distribution system in metropolitan Portland. The amendment authorizes construction of 29 miles of 24-inch pipeline parallel to the original 16-inch pipeline built in the late 1980s. The new pipeline, together with additional underground storage reservoirs and gas compression capacity, will increase gas deliverability from Mist to 190 million cubic feet per day, representing about 30 percent of NW Natural's firm gas load on its most recent peak day. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 3 - Bylaws of Northwest Natural Gas Company as amended Feb. 25, 1999 Exhibit 11 - Statement re: Computation of Per Share Earnings. Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges. Exhibit 27 - Financial Data Schedule. (b) Reports on Form 8-K No Current Reports on Form 8-K were filed during the quarter ended March 31, 1999. SIGNATURE 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 17, 1999 /s/ Stephen P. Feltz --------------------- Stephen P. Feltz Principal Accounting Officer, Controller and Treasurer NORTHWEST NATURAL GAS COMPANY EXHIBIT INDEX To Quarterly Report on Form 10-Q For Quarter Ended March 31, 1999 Exhibit Document Number - -------- ------- Bylaws of Northwest Natural Gas Company as amended February 25, 1999 3 Statement re: Computation of Per Share Earnings 11 Computation of Ratio of Earnings to Fixed Charges 12 Financial Data Schedule 27 EX-3 2 EXHIBIT 3 EXHIBIT 3 BYLAWS OF NORTHWEST NATURAL GAS COMPANY AS ADOPTED BY THE BOARD OF DIRECTORS JULY 17, 1975 AS AMENDED THROUGH FEBRUARY 25, 1999 CONTENTS Page ---- ARTICLE I. OFFICES: Section 1. Office............................ 1 Section 2. Registered Office................. 1 ARTICLE II. MEETINGS OF SHAREHOLDERS: Section 1. Annual Meeting.................... 1 Section 2. Special Meetings.................. 1 Section 3. Notice............................ 1 Section 4. Fixing Record Date................ 1 Section 5. Record of Shareholders............ 2 Section 6. Quorum............................ 2 Section 7. Voting............................ 2 Section 8. Conduct of Meetings............... 2 ARTICLE III. BOARD OF DIRECTORS: Section 1. Directors......................... 2 Section 2. Chairman of the Board............. 2 Section 3. Lead Director..................... 3 Section 4. Retired Directors................. 3 Section 5. Compensation...................... 3 ARTICLE IV. MEETINGS OF THE BOARD OF DIRECTORS: Section 1. Regular Meetings.................. 3 Section 2. Special Meetings.................. 3 Section 3. Waiver of Notice.................. 3 Section 4. Quorum............................ 3 Section 5. Manner of Acting.................. 3 Section 6. Action Without a Meeting.......... 4 ARTICLE V. COMMITTEES OF THE BOARD: Section 1. Executive Committee............... 4 Section 2. Audit Committee................... 4 Section 3. Retirement Committee.............. 4 Section 4. Pension Committee................. 4 Section 5. Organization and Executive Compensation Committee............ 4 Section 6. Environmental Policy Committee......................... 4 Section 7. Finance Committee................. 5 Section 8. Other Committees.................. 5 Section 9. Changes of Size and Function...... 5 Section 10. Conduct of Meetings.............. 5 Section 11. Compensation..................... 5 ARTICLE VI. NOTICES: Page Section 1. Form and Manner................... 5 Section 2. Waiver............................ 5 ARTICLE VII. OFFICERS: Section 1. Election.......................... 6 Section 2. Compensation...................... 6 Section 3. Term.............................. 6 Section 4. Removal........................... 6 Section 5. President......................... 6 Section 6. Vice Presidents................... 6 Section 7. Secretary ........................ 6 Section 8. Treasurer......................... 6 ARTICLE VIII. CONTRACTS, LOANS, CHECKS AND DEPOSITS: Section 1. Contracts......................... 7 Section 2. Loans............................. 7 Section 3. Checks and Drafts................. 7 Section 4. Deposits.......................... 7 ARTICLE IX. CERTIFICATES FOR SHARES AND THEIR TRANSFER: Section 1. Certificates for Shares........... 7 Section 2. Transfer.......................... 7 Section 3. Owner of Record................... 7 ARTICLE X. INDEMNIFICATION AND INSURANCE: Section 1. Indemnification.................. 7 Section 2. Insurance........................ 8 ARTICLE XI. SEAL........................................ 8 ARTICLE XII. AMENDMENTS.................................. 8 The following Bylaws were adopted by Northwest Natural Gas Company on July 17, 1975 superseding amended Bylaws originally adopted in conformity with an order of the District Court of the United States for the District of Oregon enforcing a plan for rearrangement of the Company's capital structure effective December 31, 1951, and subsequently amended by the stockholders on May 17, 1954, May 20, 1957, May 21, 1973, and May 20, 1974. BYLAWS OF NORTHWEST NATURAL GAS COMPANY ARTICLE I. OFFICES SECTION 1. OFFICE. The principal office of the company shall be located in the City of Portland, Oregon. The company also may have offices at such other places both within and without the State of Oregon as the board of directors from time to time may determine. SECTION 2. REGISTERED OFFICE. The registered office of the company required by law to be maintained in the state shall be at the same location as the principal office unless otherwise designated by resolution of the board of directors. ARTICLE II. MEETINGS OF SHAREHOLDERS SECTION 1. ANNUAL MEETING. The annual meeting of shareholders of the company for the election of directors and for the transaction of other business shall be held at the company's office in the City of Portland, Oregon, or such other place in that City as shall be determined by the board of directors, on the fourth Thursday of May in each year, unless such day shall be a legal holiday, in which event such meeting shall be held on the next business day. If such meeting shall not be held on such day in any year, it shall be held within 60 days thereafter on such day as shall be fixed by the board of directors and be specified in the notice of the meeting. Every such meeting shall be held at the hour of two o'clock p.m., or at such other hour as shall be fixed by the board and specified in such notice. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders of the company may be called by the board of directors or the holders of not less than one-tenth of all shares entitled to vote at the meeting. Each special meeting shall be held for such purposes, at such place in the City of Portland, Oregon, and at such time as shall be specified in the notice thereof. SECTION 3. NOTICE. Written or printed notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 50 days before the date of the meeting, either personally or by mail, by or at the direction of the board of directors or the persons calling the meeting, to each shareholder of record entitled to vote at such meeting. SECTION 4. FIXING RECORD DATE. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 50 days and, in the case of a meeting of shareholders, not less than 10 days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. SECTION 5. RECORD OF SHAREHOLDERS. The officer or agent having charge of the transfer books for shares of the company shall make, at least 10 days before each meeting of shareholders, a complete record of the shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order with the address of and the number of shares held by each, which record, for a period of 10 days prior to such meeting, shall be kept on file at the registered office of the company and shall be subject to inspection by any shareholder at any time during usual business hours. Such record also shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original transfer books for shares shall be prima facie evidence as to who are the shareholders entitled to examine such record or transfer books or to vote at any meeting of the shareholders. SECTION 6. QUORUM. A majority of the shares of the company entitled to vote, represented in person or by proxy, shall constitute a quorum at all meetings of shareholders. If a quorum is present, in person or by proxy, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater number, or voting by classes, is required by law or the Restated Articles of Incorporation. If a quorum shall not be represented at any meeting of shareholders, the shareholders represented may adjourn the meeting from time to time without further notice. At such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders represented at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 7. VOTING. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders, except to the extent that the voting rights of the shares of any class or classes are limited or denied by law or the Restated Articles of Incorporation. At each election of directors holders of shares of common stock have the right to cumulative voting as provided for in the Restated Articles of Incorporation. A shareholder may vote either in person or by proxy executed in writing by the shareholder or by his or her duly authorized attorney-in-fact. Such proxy shall be filed with the secretary of the company before or at the time of the meeting. SECTION 8. CONDUCT OF MEETINGS. Every meeting of shareholders shall be presided over by the chairman of the board, in his or her absence by the president, in their absence by a vice president or, if none be present, by a chairman appointed by the shareholders present at the meeting. The minutes of such meeting shall be recorded by the secretary or an assistant secretary but, if neither be present, by a secretary appointed for that purpose by the chairman of the meeting. ARTICLE III. BOARD OF DIRECTORS SECTION 1. DIRECTORS. The business and affairs of the company shall be managed by its board of directors. The number of members of the board, their classification and terms of office, and the manner of their election and removal shall be determined as provided by the Restated Articles of Incorporation. Directors need not be residents of the State of Oregon or shareholders of the company. No person who has reached the age of 72 years shall be eligible to be elected a director, but a director may serve until the next annual meeting of shareholders after reaching that age. SECTION 2. CHAIRMAN OF THE BOARD. The board of directors may elect one of its members as chairman of the board. The chairman of the board, if that position be filled, shall preside at all meetings of the shareholders and the board of directors and shall have such other duties and responsibilities as may be prescribed by the board of directors. If there shall be no chairman of the board, or in his or her absence or disability, the president also shall exercise the duties and responsibilities of that position. SECTION 3. LEAD DIRECTOR. The board of directors shall elect one of its members as lead director. The lead director shall, in the absence of the chairman of the board and the president, preside at meetings of the board of directors and shall preside at all meetings of the executive committee. The lead director shall have such other duties and responsibilities as may be prescribed by the board of directors. SECTION 4. RETIRED DIRECTORS. Any person who, upon retirement as a director after reaching age 72, shall have served as a director of the company for ten or more years shall be appointed a retired director of the company for life. Any other person who shall have served as a director of the company may be elected by the board as a retired director of the company for one or more terms of one year or less. A retired director may attend meetings of the board but shall not have the right to vote at such meetings. SECTION 5. COMPENSATION. Directors shall receive such reasonable compensation for their services as may be fixed from time to time by resolution of the board of directors, and shall be reimbursed for their expenses properly incurred in the performance of their duties as directors. No such payment shall preclude any director from serving the company in any other capacity and receiving such reasonable compensation for such services as may be fixed by resolution of the board. Retired directors who retired prior to January 1, 1998 shall receive such compensation as from time to time may be fixed by resolution of the board of directors as the annual retainer for members of the board of directors. Directors who retire subsequent to December 31, 1997 shall not be entitled to receive such compensation. ARTICLE IV. MEETINGS OF THE BOARD OF DIRECTORS SECTION 1. REGULAR MEETINGS. Regular meetings of the board of directors shall be held in the company's offices at two o'clock p.m., Pacific Time, on the fourth Thursday of February, April, May, July and September, and on the third Thursday of December, or on such other date or at such other hour and place as shall be specified in the notice of meeting. The date, time and place for holding regular meetings of the board of directors may be changed upon the giving of notice to all directors by or at the request of the chairman of the board or the president. The board may provide by resolution the time and place either within or without the State of Oregon for holding of meetings or may omit the holding of any meeting without other notice than such resolution. SECTION 2. SPECIAL MEETINGS. Special meetings of the board of directors may be called by or at the request of the chairman of the board, the lead director, the president or any two directors. The person or persons authorized to call special meetings of the board may fix any place, either within or without the State of Oregon, as the place for holding any special meeting of the board called by them. Notice of the time and place of special meetings shall be given to each director at least one day in advance by the secretary or other officer performing his or her duties. SECTION 3. WAIVER OF NOTICE. Any director may waive notice of any meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Except as otherwise provided by law or the Restated Articles of Incorporation, neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. SECTION 4. QUORUM. A majority of the number of directors at any time fixed by resolution adopted by the affirmative vote of a majority of the entire board of directors shall constitute a quorum for the transaction of business. If a quorum shall not be present at any meeting of directors, the directors present may adjourn the meeting from time to time without further notice until a quorum shall be present. SECTION 5. MANNER OF ACTING. Except as otherwise provided by law or the Restated Articles of Incorporation, the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors. SECTION 6. ACTION WITHOUT A MEETING. Any action required or permitted to be taken at a meeting of the board of directors may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the directors entitled to vote with respect to the subject matter thereof. ARTICLE V. COMMITTEES OF THE BOARD SECTION 1. EXECUTIVE COMMITTEE. The board of directors at any time, by resolution adopted by a majority of the board of directors, may appoint an executive committee composed of the chairman of the board, the lead director, and such other number of directors as the board may from time to time determine. The lead director, or in his or her absence, the chairman of the board, shall act as chairman. The committee shall have and may exercise all of the authority of the board of directors in the management of the company, except with respect to matters upon which by law only the board of directors may act. The duties of the committee shall include recommending to the board nominees for election as directors, the conduct of periodic reviews of board effectiveness and the performance of such other functions as the board by resolution from time to time may direct. SECTION 2. AUDIT COMMITTEE. The board of directors at any time, by resolution adopted by a majority of the board of directors, may appoint an audit committee composed of three or more directors, none of whom shall be an officer of the company. The board shall designate one member of the committee as chairman. The duties of the committee shall be to discuss and review with the company's independent auditors the annual audit of the company, including the scope of the audit, and report the results of this review to the board; to meet with the independent auditors at such other times as the committee shall deem to be advisable; and to perform such other functions as the board by resolution from time to time may direct. SECTION 3. RETIREMENT COMMITTEE. The board of directors at any time, by resolution adopted by a majority of the board of directors, shall appoint a retirement committee composed of three or more directors, a majority of whom shall not be members under the company's Non-Bargaining Unit Employees Retirement Plan established by the board. Any action required or permitted to be taken by the committee must be approved by both (a) a majority of the committee members present at a meeting at which a quorum is present, and (b) a majority of the total number of committee members who are not members under said Plan. The chairman of the committee shall not be a member under said Plan. The duties of the committee shall be to monitor the general administration of the company's Non-Bargaining Unit Employees Retirement Plan and the committee shall be responsible for monitoring the carrying out of its provisions as more fully set forth under the terms of the Plan. SECTION 4. PENSION COMMITTEE. The board of directors at any time, by resolution adopted by a majority of the board of directors, shall appoint three or more directors to serve on the pension committee provided for in the company's Bargaining Unit Employees Retirement Plan established by the board. The duties of the committee shall be to monitor the general administration of the Bargaining Unit Employees Retirement Plan and the committee shall be responsible for monitoring the carrying out of its provisions as more fully set forth under the terms of the Plan. SECTION 5. ORGANIZATION AND EXECUTIVE COMPENSATION COMMITTEE. The board of directors at any time, by resolution adopted by a majority of the board of directors, may appoint an organization and executive compensation committee composed of three or more directors, none of whom shall be an officer of the company. The board shall designate one member of the committee as chairman. The duties of the committee shall be to discuss and review the management of the affairs of the company relating to its organization and to executive personnel and their compensation, and to perform such other functions as the board by resolution from time to time may direct. SECTION 6. ENVIRONMENTAL POLICY COMMITTEE. The board of directors at any time, by resolution adopted by a majority of the board of directors, may appoint an environmental policy committee composed of three or more directors, a majority of whom shall not be officers or retired officers of the company. Any action required or permitted to be taken by the committee must be approved by both (a) a majority of the committee members present at a meeting at which a quorum is present, and (b) a majority of the total number of committee members who are not officers or retired officers of the company. The board shall designate one member of the committee who is not an officer or retired officer of the company as chairman. The duties of the committee shall be to develop and recommend to the board appropriate environmental policies and to perform such other functions as the board by resolution from time to time may direct. SECTION 7. FINANCE COMMITTEE. The board of directors at any time, by resolution adopted by a majority of the board of directors, may appoint a finance committee composed of three or more directors, a majority of whom shall not be officers or retired officers of the company. Any action required or permitted to be taken by the committee must be approved by both (a) a majority of the committee members present at a meeting at which a quorum is present, and (b) a majority of the total number of committee members who are not officers or retired officers of the company. The board shall designate one member of the committee who is not an officer or retired officer of the company as chairman. The duties of the committee shall be to discuss and review the management of the affairs of the company relating to financing, including the development of long-range financial planning goals and financial policy, and to perform such other functions as the board by resolution from time to time may direct. SECTION 8. OTHER COMMITTEES. The board of directors at any time, by resolution adopted by a majority of the board of directors, may appoint from among its members such other committees and the chairmen thereof as it may deem to be advisable. Each such committee shall have such powers and authority as are set forth in the resolutions pertaining thereto from time to time adopted by the board. SECTION 9. CHANGES OF SIZE AND FUNCTION. Subject to the provisions of law, the board of directors shall have the power at any time to increase or decrease the number of members of any committee, to fill vacancies thereon, to change any members thereof and to change the functions and terminate the existence thereof. SECTION 10. CONDUCT OF MEETINGS. Each committee shall conduct its meetings in accordance with the applicable provisions of these bylaws relating to the conduct of meetings of the board of directors. Each committee shall adopt such further rules and regulations regarding its conduct, keep such minutes and other records and appoint such subcommittees and assistants as it shall deem to be appropriate. SECTION 11. COMPENSATION. Persons serving on any committee shall receive such reasonable compensation for their services on such committee as may be fixed by resolution of the board of directors, provided that no person shall receive compensation for his or her services on any committee while serving as an officer of the company. ARTICLE VI. NOTICES SECTION 1. FORM AND MANNER. Whenever, under the provisions of law or the Restated Articles of Incorporation, notice is required to be given to any director or shareholder, unless otherwise specified, it shall be given in writing by mail addressed to such director or shareholder at his or her address as it appears on the stock transfer books or other records of the company, with postage thereon prepaid, and such notice shall be deemed to be delivered when deposited in the United States Mail. Notice to directors also may be given by telephone or in any other manner which is reasonably calculated to give adequate notice. SECTION 2. WAIVER. Whenever any notice whatever is required to be given under the provisions of law, the Restated Articles of Incorporation or these bylaws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. ARTICLE VII. OFFICERS SECTION 1. ELECTION. The board of directors, at its first meeting following the annual meeting of shareholders each year, shall elect one of its members as president and shall elect a secretary. At such meeting, or at any other time it shall deem appropriate, the board may elect one or more vice presidents and a treasurer. The board also may elect or appoint such other officers and agents as it may deem necessary. Any two or more offices may be held by the same person, except the offices of president and secretary. SECTION 2. COMPENSATION. The officers of the company shall receive such reasonable compensation for their services as from time to time may be fixed by resolution of the board of directors. SECTION 3. TERM. The term of office of all officers shall commence upon their election or appointment and shall continue until the first meeting of the board of directors following the annual meeting of shareholders and thereafter until their successors shall be elected or until their resignation or removal. A vacancy occurring in any office of the company for whatever reason may be filled by the board. SECTION 4. REMOVAL. Any officer or agent elected or appointed by the board of directors may be removed by the board whenever in its judgment the best interests of the company will be served thereby but such removal shall be without prejudice to the contract rights, if any, of the officer or agent so removed. SECTION 5. PRESIDENT. Unless otherwise determined by the board of directors, the president shall be the chief executive officer of the company and, subject to the control of the board of directors, shall be responsible for the general administration and operation of the company. He shall have such other duties and responsibilities as may pertain to such office or be prescribed by the board of directors. In the absence or disability of the president, an officer designated by the board shall exercise the duties and responsibilities of the president. SECTION 6. VICE PRESIDENTS. Each vice president shall have such duties and responsibilities as may be prescribed by the board of directors and the president. The board or the president may confer a special title upon a vice president. SECTION 7. SECRETARY. The secretary shall record and keep the minutes of the shareholders in one or more books provided for that purpose; see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; and perform such other duties as may be prescribed by the board or the president. The secretary shall have custody of the corporate seal of the company and shall affix the seal to any instrument requiring it and attest the same by his or her signature. The assistant secretaries shall have such duties as may be prescribed from time to time by the board, the president or the secretary. In the absence or disability of the secretary, his or her duties shall be performed by an assistant secretary. SECTION 8. TREASURER. The treasurer shall have charge and custody and be responsible for all funds and securities of the company; deposit all moneys and other valuable effects in the name and to the credit of the company in such depositories as may be designated by the board of directors; and disburse the funds of the company as may be authorized by the board and take proper vouchers for such disbursements. The treasurer shall have such other duties as may be prescribed from time to time by the board or the president. In the absence or disability of the treasurer, his or her duties shall be performed by an assistant treasurer. ARTICLE VIII. CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. CONTRACTS. The board of directors by resolution may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the company, and such authority may be general or confined to specific instances. SECTION 2. LOANS. No loans shall be contracted on behalf of the company and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the board of directors. Such authority may be general or confined to specific instances. SECTION 3. CHECKS AND DRAFTS. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the company shall be signed by such officer or officers, agent or agents of the company and in such manner as shall from time to time be determined by resolution of the board of directors. SECTION 4. DEPOSITS. All funds of the company not otherwise employed shall be deposited from time to time to the credit of the company in such banks, trust companies or other depositories as the board of directors or officers of the company designated by the board may select, or be invested as authorized by the board. ARTICLE IX. CERTIFICATES FOR SHARES AND THEIR TRANSFER SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the company shall be issued only for whole numbers of shares and shall be in such form as the board of directors may, from time to time, prescribe in accordance with the laws of the State of Oregon. Such certificates shall be signed by the president or a vice president and by the secretary or an assistant secretary and sealed with the corporate seal or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles thereof. In case of a lost, destroyed or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the company as the board may authorize. SECTION 2. TRANSFER. Shares of stock of the company shall be transferable on the books of the company by the holder of record thereof, or by his or her legal representative who shall furnish proper evidence of authority to transfer, or by his or her attorney thereunto authorized by duly executed power of attorney, and on surrender for cancellation of the certificates for such shares. The board of directors may appoint one or more transfer agents and registrars of stock of the company. SECTION 3. OWNER OF RECORD. The company shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. ARTICLE X. INDEMNIFICATION AND INSURANCE SECTION 1. INDEMNIFICATION. The company shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he or she is or was director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee, agent or fiduciary of another corporation, partnership, joint venture, trust or other enterprise or any employee benefit plan, against expenses (including attorney's fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the defense or settlement of such action, suit or proceeding to the fullest extent permissible under the Oregon Business Corporation Act or the indemnification provisions of any successor Act. The foregoing rights of indemnification shall not be exclusive of any other rights to which any such person so indemnified may be entitled, under any agreement, vote of shareholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in another capacity while holding such office; shall continue as to a person who has ceased to be a director, officer, employee or agent; and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 2. INSURANCE. The company may purchase and maintain insurance (and pay the entire premium therefor) on behalf of any person who is or was a director, officer, employee or agent of the company, or is or was serving at the request of the company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity or arising out of his or her status as such, whether or not the company would have the power to indemnify him or her against such liability under the provisions of the Oregon Business Corporation Act or any successor Act; and on behalf of any person who is or was a fiduciary under the Employee Retirement Income Security Act of 1974 with regard to an employee benefit plan of the company against any liability asserted against him or her and incurred by him or her in his or her fiduciary capacity. ARTICLE XI. SEAL The corporate seal of the company shall be circular in form and shall bear an inscription containing the name of the company, the year of its organization, the state of its incorporation and the words "Corporate Seal." ARTICLE XII. AMENDMENTS These bylaws, or any of them, may be altered, amended or repealed, or new bylaws adopted, by resolution of a majority of the board of directors, subject to repeal or change by action of the shareholders. EX-11 3 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, 1999 1998 Earnings Applicable to Common Stock $23,406 $22,533 Debenture Interest Less Taxes 107 112 ------- ------- Earnings Applicable to Diluted Common Stock $23,513 $22,645 ======= ======= Average Common Shares Outstanding 24,883 22,903 Stock Options 19 46 Convertible Debentures 487 510 ------- ------- Diluted Average Common Shares Outstanding 25,389 23,459 ======= ======= Diluted Earnings Per Share of Common Stock $0.93 $0.97 ===== ===== EX-12 4 EXHIBIT 12 EXHIBIT 12 NORTHWEST NATURAL GAS COMPANY Computation of Ratio of Earnings to Fixed Charges January 1, 1994 - March 31, 1999 (Thousands, except ratio of earnings to fixed charges) (Unaudited)
Twelve Months Ended Year Ended December 31, March 31, ----------------------------------------------------------------------- 1994 1995 1996 1997 1998 1999 ------------------------------------------------------------------------------------- Fixed Charges, as defined: Interest on Long- Term Debt $21,921 $23,141 $23,176 $24,918 $27,567 $27,612 Other Interest 2,473 2,252 3,448 4,500 4,902 4,387 Amortization of Debt Discount and Expense 850 882 865 730 714 725 Interest Portion of Rentals 1,697 1,764 1,798 2,111 1,986 1,986 ------- ------- ------- ------- ------- ------- Total Fixed Charges, as defined $26,941 $28,039 $29,287 $32,259 $35,169 $34,710 ======= ======= ======= ======= ======= ======= Earnings, as defined: Net Income $35,461 $38,065 $46,793 $43,059 $27,301 $28,158 Taxes on Income 20,473 22,120 27,347 21,106 12,254 15,582 Fixed Charges, as above 26,941 28,039 29,287 32,259 35,169 34,710 ------- ------- ------- ------- ------- ------- Total Earnings, as defined $82,875 $88,224 $103,427 $96,424 $74,724 $78,450 ======= ======= ======= ======= ======= ======= Ratio of Earnings to Fixed Charges 3.08 3.15 3.53 2.99 2.12 2.26 ======= ======= ======= ======= ======= =======
EX-27 5 EXHIBIT 27
UT This schedule contains summary financial information extracted from the consolidated financial statements and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1998 MAR-31-1999 PER-BOOK 849,836 75,992 102,616 97,218 56,860 1,182,522 78,894 230,941 119,443 429,278 35,569 0 366,683 0 0 51,261 10,000 930 0 0 288,801 1,182,522 171,049 13,888 126,448 140,336 30,713 1,498 32,211 8,168 24,043 637 23,406 7,583 6,774 72,397 $0.94 $0.93
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