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
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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.
<PAGE>
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
<PAGE>
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
<PAGE>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(2) Consolidated Balance Sheets
(Thousands of Dollars)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Mar. 31, Mar. 31, Dec. 31,
1999 1998 1998
----------- ----------- -----------
<S> <C> <C> <C>
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
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(3) Consolidated Statements of Cash Flows
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
1999 1998
---- ----
<S> <C> <C>
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
===================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(4) Consolidated Statements of Capitalization
(Thousands)
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Mar. 31, 1999 Mar. 31, 1998 Dec. 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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%
========= ==== ========= ==== ========= ====
</TABLE>
See Notes to Consolidated Financial Statements.
6
<PAGE>
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
<PAGE>
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
<PAGE>
<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 (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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
EXHIBIT 3
BYLAWS
OF
NORTHWEST
NATURAL
GAS
COMPANY
AS ADOPTED BY THE BOARD OF DIRECTORS
JULY 17, 1975
AS AMENDED THROUGH FEBRUARY 25, 1999
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
<PAGE>
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.
<PAGE>
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
<PAGE>
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.
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
===== =====
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)
<TABLE>
<CAPTION>
Twelve
Months
Ended
Year Ended December 31, March 31,
-----------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 849,836
<OTHER-PROPERTY-AND-INVEST> 75,992
<TOTAL-CURRENT-ASSETS> 102,616
<TOTAL-DEFERRED-CHARGES> 97,218
<OTHER-ASSETS> 56,860
<TOTAL-ASSETS> 1,182,522
<COMMON> 78,894
<CAPITAL-SURPLUS-PAID-IN> 230,941
<RETAINED-EARNINGS> 119,443
<TOTAL-COMMON-STOCKHOLDERS-EQ> 429,278
35,569
0
<LONG-TERM-DEBT-NET> 366,683
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 51,261
<LONG-TERM-DEBT-CURRENT-PORT> 10,000
930
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 288,801
<TOT-CAPITALIZATION-AND-LIAB> 1,182,522
<GROSS-OPERATING-REVENUE> 171,049
<INCOME-TAX-EXPENSE> 13,888
<OTHER-OPERATING-EXPENSES> 126,448
<TOTAL-OPERATING-EXPENSES> 140,336
<OPERATING-INCOME-LOSS> 30,713
<OTHER-INCOME-NET> 1,498
<INCOME-BEFORE-INTEREST-EXPEN> 32,211
<TOTAL-INTEREST-EXPENSE> 8,168
<NET-INCOME> 24,043
637
<EARNINGS-AVAILABLE-FOR-COMM> 23,406
<COMMON-STOCK-DIVIDENDS> 7,583
<TOTAL-INTEREST-ON-BONDS> 6,774
<CASH-FLOW-OPERATIONS> 72,397
<EPS-PRIMARY> $0.94
<EPS-DILUTED> $0.93
</TABLE>
