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
<PAGE>
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
<PAGE>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(1) Consolidated Statements of Income
(Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
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
<PAGE>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(2) Consolidated Balance Sheets
(Thousands of Dollars)
<TABLE>
<CAPTION>
Mar. 31, Mar. 31, Dec. 31,
1995 1994 1994
-------- -------- --------
<S> <C> <C> <C>
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
<PAGE>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(3) Consolidated Statements of Cash Flows
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1995 1994
-------- --------
<S> <C> <C>
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
<PAGE>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(4) Consolidated Statements of Capitalization
(Thousands, except share amounts)
<TABLE>
<CAPTION>
Mar. 31, 1995 Mar. 31, 1994 Dec. 31, 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
<PAGE>
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.
<PAGE>
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<PAGE>
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.
<PAGE>
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.
<PAGE>
Results of Operations
- ---------------------
Comparison of Gas Operations
----------------------------
The following table summarizes the composition of
utility gas volumes and revenues:
<TABLE>
<CAPTION>
Three Months
Ended March 31,
-----------------
1995 1994
---- ----
<S> <C> <C>
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
<PAGE>
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).
<PAGE>
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:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1995 1994
---- ----
Consolidated Subsidiaries (Thousands):
- --------------------------------------
<S> <C> <C>
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)
======= =======
</TABLE>
<PAGE>
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.
<PAGE>
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).
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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
EXHIBIT 11
NORTHWEST NATURAL GAS COMPANY
Statement Re: Computation of Per Share Earnings
(Thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1995 1994
------- -------
<S> <C> <C>
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
======= =======
</TABLE>
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.
EXHIBIT 12
Northwest Natural Gas Company
Computation of Ratio of Earnings to Fixed Charges
January 1, 1990 - March 31, 1995
($000)
<TABLE>
<CAPTION>
Twelve
------------Year Ended December 31---------- Months Ended
March 31,
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C> <C>
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
==== ==== ==== ==== ==== ====
</TABLE>
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
<TABLE> <S> <C>
<ARTICLE>UT
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 633,945
<OTHER-PROPERTY-AND-INVEST> 59,640
<TOTAL-CURRENT-ASSETS> 106,436
<TOTAL-DEFERRED-CHARGES> 44,249
<OTHER-ASSETS> 60,430
<TOTAL-ASSETS> 904,700
<COMMON> 46,345
<CAPITAL-SURPLUS-PAID-IN> 166,563
<RETAINED-EARNINGS> 108,299
<TOTAL-COMMON-STOCKHOLDERS-EQ> 321,207
39,888
1,061
<LONG-TERM-DEBT-NET> 291,066
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 16,100
<LONG-TERM-DEBT-CURRENT-PORT> 1,000
1,062
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 233,316
<TOT-CAPITALIZATION-AND-LIAB> 904,700
<GROSS-OPERATING-REVENUE> 125,389
<INCOME-TAX-EXPENSE> 12,200
<OTHER-OPERATING-EXPENSES> 86,488
<TOTAL-OPERATING-EXPENSES> 98,688
<OPERATING-INCOME-LOSS> 26,701
<OTHER-INCOME-NET> (1,087)
<INCOME-BEFORE-INTEREST-EXPEN> 25,614
<TOTAL-INTEREST-EXPENSE> 6,562
<NET-INCOME> 19,052
735
<EARNINGS-AVAILABLE-FOR-COMM> 18,317
<COMMON-STOCK-DIVIDENDS> 5,908
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 57,433
<EPS-PRIMARY> $1.32
<EPS-DILUTED> $1.28
</TABLE>
