SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
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 No. 0-994
[LOGO] NW NATURAL
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 November 6, 2000, 25,175,410 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
September 30, 2000
Summary of Information Reported
The registrant submits herewith the following information:
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Number
------
(1) Consolidated Statements of Income for the three and
nine-month periods ended Sept. 30, 2000 and 1999 3
(2) Consolidated Statements of Earnings Invested in the
Business for the nine-month periods ended Sept. 30,
2000 and 1999 4
(3) Consolidated Balance Sheets at Sept. 30, 2000 and
1999 and Dec. 31, 1999 5
(4) Consolidated Statements of Cash Flows for the
nine-month periods ended Sept. 30, 2000 and 1999 6
(5) Consolidated Statements of Capitalization at Sept.
30, 2000 and 1999 and Dec. 31, 1999 7
(6) Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 10
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 19
Signature 20
2
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(1) Consolidated Statements of Income
(Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
---------------------------- ---------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating Revenues:
Gross operating revenues $ 61,187 $ 55,737 $ 333,900 $ 317,862
Cost of sales 25,689 22,132 159,500 143,111
--------- --------- --------- ---------
Net operating revenues 35,498 33,605 174,400 174,751
Operating Expenses:
Operations and maintenance 18,756 17,986 56,283 54,903
Taxes other than income taxes 5,305 4,971 19,691 18,986
Depreciation, depletion and amortization 12,173 11,406 35,391 33,932
--------- --------- --------- ---------
Total operating expenses 36,234 34,363 111,365 107,821
--------- --------- --------- ---------
Income (Loss) from Operations (736) (758) 63,035 66,930
Other Income 1,322 2,012 3,459 3,946
Interest Charges - net 8,399 7,786 24,900 22,464
--------- --------- --------- ---------
Income (Loss) Before Income Taxes (7,813) (6,532) 41,594 48,412
--------- --------- --------- ---------
Income Tax (Benefit) Expense (2,945) (2,924) 14,772 17,307
Net Income (Loss) from Continuing Operations (4,868) (3,608) 26,822 31,105
Discontinued Segment:
Income from discontinued segment -
net of tax - 48 - 162
Gain (loss) on sale of discontinued segment -
net of tax (17) - 2,418 -
--------- --------- --------- ---------
Net Income (Loss) (4,885) (3,560) 29,240 31,267
Redeemable Preferred and Preference Stock
Dividend Requirements 604 623 1,848 1,893
--------- --------- --------- ---------
Earnings (Loss) Applicable to Common Stock $ (5,489) $ (4,183) $ 27,392 $ 29,374
========= ========= ========= =========
Average Common Shares Outstanding 25,203 25,007 25,175 24,946
Basic Earnings (Loss) Per Share of Common Stock:
From continuing operations $ (0.22) $ (0.17) $ 0.99 $ 1.17
From discontinued segment - - - 0.01
From gain on sale of discontinued segment - - 0.10 -
--------- --------- --------- ---------
Total basic earnings (loss) per share $ (0.22) $ (0.17) $ 1.09 $ 1.18
========= ========= ========= =========
Diluted Earnings (Loss) Per Share of Common Stock:
From continuing operations $ (0.22) $ (0.17) $ 0.99 $ 1.16
From discontinued segment - - - 0.01
From gain on sale of discontinued segment - - 0.09 -
--------- --------- --------- ---------
Total diluted earnings (loss) per share $ (0.22) $ (0.17) $ 1.08 $ 1.17
========= ========= ========= =========
Dividends Per Share of Common Stock $ 0.31 $ 0.305 $ 0.93 $ 0.915
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(2) Consolidated Statements of Earnings Invested in the Business
(Thousands)
(Unaudited)
Nine Months Ended Sept. 30, Nine Months Ended Sept. 30,
2000 1999
--------------------------- ---------------------------
<S> <C> <C> <C> <C>
Earnings Invested in the Business:
Balance at Beginning of Period $118,711 $106,513
Net Income 29,240 $29,240 31,267 $31,267
Dividends Paid:
Redeemable preferred and preference stock (1,858) (1,904)
Common stock (23,393) (22,804)
Common Stock Repurchased (674) -
--------- ---------
Balance at End of Period $122,026 $113,072
========= =========
Accumulated Other Comprehensive Income
(Loss):
Balance at Beginning of Period ($3,181) ($2,460)
Other comprehensive income (loss) - net of tax:
Recognition of foreign currency
translation adjustment included
in gain on sale of discontinued segment 3,181 3,181 (621) (621)
--------- --------- --------- ---------
Comprehensive Income $32,421 $30,646
========= =========
Balance at End of Period $ - ($3,081)
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(3) Consolidated Balance Sheets
(Thousands)
(Unaudited) (Unaudited)
Sept. 30, Sept. 30, Dec. 31,
2000 1999 1999
----------- ----------- -----------
<S> <C> <C> <C>
Assets:
Plant and Property :
Utility plant $ 1,387,887 $ 1,313,896 $ 1,331,415
Less accumulated depreciation 467,637 432,887 436,386
----------- ----------- -----------
Utility plant - net 920,250 881,009 895,029
----------- ----------- -----------
Non-utility property 3,572 85,563 8,548
Less accumulated depreciation and depletion 3,440 34,011 7,654
----------- ----------- -----------
Non-utility property - net 132 51,552 894
----------- ----------- -----------
Total plant and property 920,382 932,561 895,923
----------- ----------- -----------
Investments and Other 14,999 16,352 16,557
Current Assets:
Cash and cash equivalents 9,472 17,961 10,013
Accounts receivable - net 19,387 21,842 43,349
Accrued unbilled revenue 8,655 8,005 31,550
Inventories of gas, materials and supplies 49,237 37,121 33,919
Investment in discontinued segment - - 29,163
Property held for sale 689 15,690 16,712
Prepayments and other current assets 24,881 21,647 18,349
----------- ----------- -----------
Total current assets 112,321 122,266 183,055
Regulatory Tax Assets 51,060 56,860 51,060
Deferred Gas Costs Receivable 17,610 19,902 20,950
Deferred Debits and Other 76,901 79,975 76,878
----------- ----------- -----------
Total Assets $ 1,193,273 $ 1,227,916 $ 1,244,423
=========== =========== ===========
Capitalization and Liabilities:
Capitalization:
Common stock $ 317,179 $ 312,809 $ 314,066
Earnings invested in the business 122,026 113,072 118,711
Accumulated other comprehensive income (loss) - (3,081) (3,181)
----------- ----------- -----------
Total common stock equity 439,205 422,800 429,596
Redeemable preference stock 25,000 25,000 25,000
Redeemable preferred stock 9,750 10,564 10,564
Long-term debt 376,022 386,482 396,379
----------- ----------- -----------
Total capitalization 849,977 844,846 861,539
----------- ----------- -----------
Minority Interest - 16,086 -
----------- ----------- -----------
Current Liabilities:
Notes payable 72,488 87,276 94,149
Accounts payable 39,831 53,066 68,163
Long-term debt due within one year 30,000 - 10,000
Taxes accrued 4,290 6,280 4,101
Interest accrued 8,480 9,247 4,673
Other current and accrued liabilities 21,740 40,922 39,153
----------- ----------- -----------
Total current liabilities 176,829 196,791 220,239
Deferred Investment Tax Credits 9,905 10,725 10,393
Deferred Income Taxes 140,171 140,817 136,150
Regulatory Liabilities and Other 16,391 18,651 16,102
Commitments and Contingencies - - -
----------- ----------- -----------
Total Capitalization and Liabilities $ 1,193,273 $ 1,227,916 $ 1,244,423
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(4) Consolidated Statements of Cash Flows
(Thousands)
(Unaudited)
Nine Months Ended Sept. 30,
2000 1999
--------- ---------
<S> <C> <C>
Operating Activities:
Net income from continuing operations $ 26,822 $ 31,105
Adjustments to reconcile net income to cash provided by
continuing operations:
Depreciation, depletion and amortization 35,391 33,932
Gain on sale of assets (237) -
Deferred income taxes and investment tax credits 3,533 (16)
Equity in (earnings) losses of investments 19 (552)
Allowance for funds used during construction (471) (567)
Deferred gas costs receivable 3,340 7,893
Regulatory accounts and other - net 266 (10,134)
--------- ---------
Cash from operations before working capital changes 68,663 61,661
Changes in operating assets and liabilities:
Accounts receivable - net 23,962 25,396
Accrued unbilled revenue 22,895 26,253
Inventories of gas, materials and supplies (15,318) (15,863)
Accounts payable (28,332) (2,235)
Accrued interest and taxes 3,996 1,837
Other current assets and liabilities (23,945) 11,974
--------- ---------
Cash Provided by Continuing Operating Activities 51,921 109,023
--------- ---------
Cash Provided by Discontinued Segment - net 34,762 28
--------- ---------
Investing Activities:
Acquisition and construction of utility plant assets (60,141) (78,685)
Investment in non-utility property (2,536) (9,526)
Proceeds from sale of assets 20,087 -
Investments and other 1,010 865
--------- ---------
Cash Used in Investing Activities (41,580) (87,346)
--------- ---------
Financing Activities:
Common stock issued 3,590 4,202
Common stock repurchased (1,508) -
Redeemable preferred stock retired (814) (935)
Long-term debt issued 50,000 20,000
Long-term debt retired (50,000) (10,000)
Change in short-term debt (21,661) 314
Cash dividend payments:
Redeemable preferred and preference stock (1,858) (1,904)
Common stock (23,393) (22,804)
--------- ---------
Cash Used in Financing Activities (45,644) (11,127)
--------- ---------
Increase (Decrease) in Cash and Cash Equivalents (541) 10,578
Cash and Cash Equivalents - Beginning of Period 10,013 7,383
--------- ---------
Cash and Cash Equivalents - End of Period $ 9,472 $ 17,961
========= =========
=========================================================================================
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ 21,017 $ 19,748
Income Taxes $ 22,552 $ 27,300
=========================================================================================
Supplemental Disclosure of Non-cash Financing Activities:
Conversion to common stock:
7-1/4 % Series of Convertible Debentures $ 357 $ 256
=========================================================================================
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
<TABLE>
<CAPTION>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(5) Consolidated Statements of Capitalization
(Thousands, Except Per Share Amounts)
(Unaudited) (Unaudited)
Sept. 30, 2000 Sept. 30, 1999 Dec. 31, 1999
-------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Common Stock Equity:
Common stock - par value $3-1/6 per share $ 79,831 $ 79,296 $ 79,458
Premium on common stock 237,348 233,513 234,608
Earnings invested in the business 122,026 113,072 118,711
Accumulated other comprehensive income (loss) - (3,081) (3,181)
--------- --------- ---------
Total common stock equity 439,205 52% 422,800 50% 429,596 50%
--------- ------ --------- ------ --------- ------
Redeemable Preference Stock:
$6.95 Series, stated value $100 per share 25,000 3% 25,000 3% 25,000 3%
--------- ------ --------- ------ --------- ------
Redeemable Preferred Stock:
Stated value $100 per share:
$4.75 Series - 64 64
$7.125 Series 9,750 10,500 10,500
--------- --------- ---------
Total redeemable preferred stock 9,750 1% 10,564 1% 10,564 1%
--------- ------ --------- ------ --------- ------
Long-Term Debt:
First Mortgage Bonds
--------------------
9-3/4% Series due 2015 - 50,000 50,000
Medium-Term Notes
-----------------
First Mortgage Bonds:
5.96% Series B due 2000 5,000 5,000 5,000
5.98% Series B due 2000 5,000 5,000 5,000
6.62% Series B due 2001 10,000 10,000 10,000
8.05% Series A due 2002 10,000 10,000 10,000
6.75% Series B due 2002 10,000 10,000 10,000
5.55% Series B due 2002 20,000 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
7.63% Series B due 2019 20,000 - 20,000
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
7.72% Series B due 2025 20,000 - -
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 10,000
7.74% Series B due 2030 20,000 - -
7.85% Series B due 2030 10,000 - -
Unsecured:
8.47% Series A due 2001 10,000 10,000 10,000
Convertible Debentures
----------------------
7-1/4% Series due 2012 9,022 9,482 9,379
--------- --------- ---------
406,022 386,482 406,379
Less long-term debt due within one year 30,000 - 10,000
--------- --------- ---------
Total long-term debt 376,022 44% 386,482 46% 396,379 46%
--------- ------ --------- ------ --------- ------
Total Capitalization $ 849,977 100% $ 844,846 100% $ 861,539 100%
========= ====== ========= ====== ========= ======
</TABLE>
See Notes to Consolidated Financial Statements
7
<PAGE>
NORTHWEST NATURAL GAS COMPANY
PART I. FINANCIAL INFORMATION
(6) 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 1999 Annual Report on Form 10-K (1999
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 2000 presentation.
2. Segment Reporting
The Company principally operates in a single line of business
consisting of the distribution of natural gas, which constitutes the "utility"
segment. The "other" segment consists primarily of investments in alternative
energy projects in California, a discontinued natural gas and oil exploration
business in Canada, a Boeing 737-300 aircraft which is leased to Continental
Airlines and non-utility gas storage services.
The following table presents information about reportable segments for
the three and nine months ended Sept. 30, 2000 and 1999. Inter-segment
transactions are insignificant.
<TABLE>
<CAPTION>
Three Months ended Sept. 30, Nine Months ended Sept. 30,
---------------------------- ---------------------------
Thousands Utility Other Total Utility Other Total
---------------------------------------------------------------------------------------------------------------
2000
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues $ 35,434 $ 64 $ 35,498 $ 174,161 $ 239 $ 174,400
Income (loss) from operations (862) 126 (736) 62,787 248 63,035
Income (loss) from financial investments - 92 92 - (19) (19)
Net income (loss) from continuing
operations (5,130) 262 (4,868) 26,681 141 26,822
Net income (loss) from discontinued
segment - (17) (17) - 2,418 2,418
Total Assets 1,172,879 20,394 1,193,273 1,172,879 20,394 1,193,273
1999
Net operating revenues $ 33,523 $ 82 $ 33,605 $ 174,495 $ 256 $ 174,751
Income (loss) from operations (780) 22 (758) 66,946 (16) 66,930
Income from financial investments - 826 826 - 552 552
Net income (loss) from continuing
operations (4,324) 716 (3,608) 30,242 863 31,105
Net income from discontinued
segment - 48 48 - 162 162
Total Assets 1,134,154 93,762 1,227,916 1,134,154 93,762 1,227,916
</TABLE>
8
<PAGE>
3. Property Held for Sale
Property held for sale at Sept. 30, 2000, consists of oil and gas
properties owned by NNG Financial Corporation. Property held for sale at Sept.
30, 1999, consisted of a new headquarters building which was constructed for the
Port of Portland. Property held for sale is classified as a current asset.
4. Discontinued Segment
On Jan. 26, 2000, the Company sold its interest in Canor Energy Ltd.
(Canor), an Alberta, Canada corporation engaged in natural gas and oil
exploration, development and production in Alberta and Saskatchewan, Canada. The
after-tax gain from the sale was $2.4 million, net of Canadian tax on dividends
($0.6 million) and U.S. income tax ($2.8 million).
The consolidated financial statements of the Company have been
restated to reflect Canor as a discontinued segment. Accordingly, Canor's
operating revenues and expenses are included in net income from discontinued
segment for 1999, and its cash flows are reported as cash provided by
discontinued segment for all periods presented.
5. Other Comprehensive Income
Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," establishes guidelines for the reporting and display of
comprehensive income and its components in financial statements. Comprehensive
income includes the recognition of foreign currency translation adjustment
losses which were accumulated in prior periods and realized in the gain on sale
of discontinued segment.
6. Stock Repurchase Program
In May 2000, the Company commenced a program to repurchase up to 2
million shares, or up to $35 million in value, of its common stock through a
repurchase program to extend through May 2001. Purchases are made in the open
market or through privately negotiated transactions. As of Sept. 30, 2000, the
Company had repurchased 66,800 shares of common stock at a total cost of $1.5
million.
7. Contingencies
The Company owns property in Linnton, Oregon that is the site of a
former gas manufacturing plant that was closed in 1956. The site has been under
investigation by the Company in recent years under program oversight by the
Oregon Department of Environmental Quality (ODEQ). During 1998, the ODEQ and the
U.S. Environmental Protection Agency (EPA) completed a study of sediments in a
5.5 mile segment of the Willamette River (the Portland Harbor) that includes the
area adjacent to the site. In March 2000, Region 10 of the EPA reported that it
would recommend the Portland Harbor for listing as a Superfund site, and in July
2000, the governor of Oregon concurred with the EPA's proposal to move forward
with the listing. Future remediation of the Linnton site may be affected by any
EPA management plan for the Portland Harbor. (See Part II, Item 8, Note 12,
"Environmental Matters," in the 1999 Form 10-K.)
The Company previously owned property adjacent to the Linnton site
that now is the location of a manufacturing plant owned by Wacker Siltronic
Corporation (Wacker). On Oct. 4, 2000, the ODEQ issued an order requiring Wacker
and NW Natural to determine the nature and extent of releases of hazardous
substances to Willamette River sediments from the Wacker property. Both Wacker
and NW Natural notified the ODEQ of their intent to comply with the order. The
Company established a reserve of $0.3 million in the third quarter of 2000 for
the estimated costs of the investigation. NW Natural expects that its costs of
investigation and any remediation for which it may be responsible should be
recoverable, in large part, from insurance. In the event these costs are not
recovered from insurance, NW Natural will seek recovery through future rates.
9
<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,
reclassified as a discontinued segment in 1999 and sold in the
first quarter of 2000
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 1999 Annual Report on Form
10-K (1999 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
and nine months ended Sept. 30, 2000 and 1999.
Earnings and Dividends
----------------------
The Company incurred a loss of 22 cents a diluted share for the
quarter ended Sept. 30, 2000, compared to a loss of 17 cents a share in last
year's third quarter. The loss applicable to common stock was $5.5 million in
the third quarter of 2000 and $4.2 million in the third quarter of 1999. A third
quarter loss is customary for NW Natural, reflecting low summertime use of
natural gas.
NW Natural lost 23 cents a diluted share from utility operations in
the third quarter of 2000, compared to a loss of 20 cents a share in the same
period of 1999. The larger loss is primarily due to the warmer weather
experienced during the third quarter of 2000, compared to the third quarter of
1999.
The Company earned $27.4 million, or $1.08 a diluted share, and $29.4
million, or $1.17 a share, for the nine months ended Sept. 30, 2000 and 1999,
respectively. Year-to-date, NW Natural earned 98 cents a diluted share from
utility operations compared to $1.12 a share in the same period in 1999. Weather
in the first nine months of 2000 was 6 percent warmer than in 1999, resulting in
a decrease in margin from residential and commercial customers equivalent to an
estimated 21 cents a share. The Company recorded a gain equivalent to 9 cents a
diluted share from the sale of a discontinued segment (Canor) in the first nine
months of 2000, compared to income of 1 cent a share from Canor's operations
during the first nine months of 1999.
Financial Corporation earned the equivalent of 1 cent a share and 3
cents a share, respectively, in both the third quarter and the first nine months
of 2000. See "Subsidiary Operations," below.
Dividends paid on common stock were 31 cents a share and 30.5 cents a
share for the three-month periods ended Sept. 30, 2000 and 1999, respectively.
In October 2000, the Company's Board of Directors declared a quarterly dividend
of 31 cents a share on the common stock, payable Nov. 15, 2000, to shareholders
of record on Oct. 31, 2000. The current indicated annual dividend rate is $1.24
a share.
10
<PAGE>
Results of Operations
---------------------
Regulatory Developments
-----------------------
On July 31, 2000, the Washington Utilities and Transportation
Commission (WUTC) approved, effective Aug. 1, 2000, rate increases averaging 23
percent for NW Natural's Washington sales customers. On Sept. 28, 2000, the
Oregon Public Utility Commission (OPUC) approved, effective Oct. 1, 2000, rate
increases also averaging 23 percent for NW Natural's Oregon sales customers.
These rate increases reflect increases in the cost of natural gas commodity
purchased under contracts with gas producers (see Part I, Item 2., Results of
Operations, "Comparison of Gas Operations--Cost of Gas," below).
Even with the commodity-related rate increases approved in Washington
and Oregon, NW Natural expects to continue to enjoy a price advantage over
competing fuels, including heating oil as well as electricity provided by the
investor-owned electric utilities in its service territory.
Comparison of Gas Operations
----------------------------
The following table summarizes the composition of gas utility volumes
and revenues:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
2000 1999 2000 1999
---------------------- ----------------------
<S> <C> <C> <C> <C>
Gas Sales and Transportation Volumes - Therms (000's):
Residential and commercial sales 53,886 54,335 436,220 456,868
Unbilled volumes 2,036 1,753 (36,367) (45,246)
---------- ---------- ---------- ----------
Weather-sensitive volumes 55,922 56,088 399,853 411,622
Industrial firm sales 14,632 16,695 56,541 65,362
Industrial interruptible sales 14,213 11,602 42,733 39,303
---------- ---------- ---------- ----------
Total gas sales 84,767 84,385 499,127 516,287
Transportation deliveries 102,085 107,146 339,745 324,555
---------- ---------- ---------- ----------
Total volumes sold and delivered 186,852 191,531 838,872 840,842
========== ========== ========== ==========
Utility Operating Revenues - Dollars (000's):
Residential and commercial sales $ 42,319 $ 38,028 $ 300,666 $ 286,916
Unbilled revenues 1,412 1,021 (22,924) (25,422)
---------- ---------- ---------- ----------
Weather-sensitive revenues 43,731 39,049 277,742 261,494
Industrial firm sales 6,747 7,071 25,805 27,489
Industrial interruptible sales 5,621 3,699 16,315 12,355
---------- ---------- ---------- ----------
Total gas sales 56,099 49,819 319,862 301,338
Transportation revenues 5,039 5,277 16,232 14,960
Other revenues (26) 505 (2,542) 1,174
---------- ---------- ---------- ----------
Total utility operating revenues $ 61,112 $ 55,601 $ 333,552 $ 317,472
========== ========== ========== ==========
Cost of gas sold - Dollars (000's) $ 25,678 $ 22,078 $ 159,391 $ 142,977
========== ========== ========== ==========
Total number of customers (end of period) 510,219 487,806 510,219 487,806
========== ========== ========== ==========
Degree Days:
Actual 107 127 2,702 2,869
20-year average 96 92 2,604 2,598
</TABLE>
11
<PAGE>
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 11 percent colder than average in
the third quarter of 2000 and 38 percent colder than average in the third
quarter of 1999. For the first nine months of 2000, weather was 4 percent colder
than average but 6 percent warmer than the first nine months of 1999.
NW Natural continues to experience rapid customer growth, with 22,413
customers added since Sept. 30, 1999 for a growth rate of 4.6 percent. In the
three years ended Dec. 31, 1999, approximately 68,000 customers were added to
the system, representing an average annual growth rate of 5 percent.
Residential and commercial sales volumes in the three months and nine
months ended Sept. 30, 2000, were lower by 0.3 percent and 3 percent,
respectively, compared to the corresponding 1999 periods, due to the warmer
weather in the current year periods. Residential and commercial revenues in the
three months and nine months increased, however, by $4.7 million, or 12 percent,
and $16.2 million, or 6 percent, respectively, over the corresponding 1999
periods. The higher residential and commercial revenues in both 2000 periods
over the comparable 1999 periods were due primarily to rate increases effective
during 1999. (See Part II, Item 7, "Results of Operations - Regulatory Matters,"
in the 1999 Form 10-K.) Customer growth in the residential and commercial
segments since Sept. 30, 1999, contributed an estimated $0.9 million of
additional margin during the third quarter of 2000.
In order to match revenues with related purchased gas costs, NW
Natural records estimated unbilled revenues for gas delivered but not yet billed
to customers through the end of the period.
Industrial, Transportation and Other Revenues
---------------------------------------------
Total volumes delivered to industrial firm, industrial interruptible,
and transportation customers were 4.5 million therms, or 3 percent, lower in the
third quarter of 2000 than in the same period of 1999. Transportation volumes
decreased 5.0 million therms while gas sales to industrial firm and
interrruptible customers increased 0.5 million therms. Margin from these
customers decreased from $10.9 million in the third quarter of 1999 to $10.5
million in the third quarter of 2000.
For the current nine-month period, total industrial sales and
transportation volumes increased 9.8 million therms, or 2 percent, in 2000.
Margin from these customers was $0.2 million, or less than 1 percent, lower than
in the first nine months of 1999.
The primary factor contributing to the decreases in industrial margin
in the current three-month and nine-month periods was the migration of some
customers from industrial firm to interruptible rate schedules.
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 1999 Form 10-K), decreased $0.5
million during the third quarter of 2000 compared to the third quarter of 1999.
Year-to-date other revenues decreased $3.7 million compared to the first nine
months of 1999. In 2000, other revenues consisted of regulatory adjustments
totaling $4.3 million, including amortizations relating to Y2K costs ($0.8
million) and conservation program costs ($3.5 million), offset by customer fees
($1.2 million) and miscellaneous revenues ($0.6 million). Other revenues in the
first nine months of 1999 included customer fees ($0.7 million) and
miscellaneous revenues ($0.5 million).
12
<PAGE>
Cost of Gas
-----------
The cost per therm of gas sold was 16 percent higher during the third
quarter of 2000 than in the third quarter of 1999, and was 15 percent higher
year-to-date. The cost of gas sold includes current gas purchases, gas
withdrawals from storage, system demand costs adjusted for seasonal volumes and
regulatory deferrals. The cost of gas sold was reduced by sales to off-system
customers of $1.9 million and $1.1 million for the first nine months of 2000 and
1999, respectively. Under an agreement with the OPUC, net proceeds from these
sales are treated as a reduction to cost of gas sold.
The cost per therm of gas purchased was 32 percent higher in the third
quarter of 2000 than in the third quarter of 1999, and was 28 percent higher
year-to-date, due to higher prevailing prices in the natural gas commodity
market. NW Natural was able to offset some of the negative earnings impact from
higher gas prices through an active natural gas commodity hedge program. In the
third quarter of 2000, NW Natural recorded gains of $7.3 million from commodity
swaps compared to gains of $2.4 million in the same period of 1999. In the first
nine months of 2000, NW Natural recorded gains from commodity swaps of $10.5
million, compared to $2.1 million in the first nine months of 1999. Gains
(losses) from commodity hedges are recorded as reductions (increases) to the
cost of gas.
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. 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 periods. NW Natural deferred $0.2 million of
higher gas costs in the third quarter of 2000 and $1.7 million year-to-date, and
expects to begin recovering these amounts from customers later this year.
Accordingly, NW Natural absorbed $0.1 million of the higher gas costs in the
third quarter and $0.8 million year-to-date, reducing earnings by less than 1
cent a share and 3 cents a share, respectively.
Subsidiary Operations
---------------------
The following table summarizes financial information for Financial
Corporation:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
------------------- ------------------
2000 1999 2000 1999
------------------- ------------------
<S> <C> <C> <C> <C>
Consolidated Subsidiary (Thousands):
Net Operating Revenues $ 64 $ 82 $ 239 $ 256
Operations and Maintenance Expense 33 22 (9) 156
Depreciation, Depletion and Amortization (95) 38 - 116
------- ------- ------- -------
Income (Loss) from Operations 126 22 248 (16)
Income (Loss) from Financial Investments 92 826 (19) 552
Other Income - net 83 77 282 273
------- ------- ------- -------
Income Before Income Taxes 301 925 511 809
Income Tax Expense 80 231 456 12
------- ------- ------- -------
Net Income $ 221 $ 694 $ 55 $ 797
======= ======= ======= =======
</TABLE>
Results from Financial Corporation's operations in the third quarter
of 2000 were income equivalent to 1 cent a share, compared to income of 3 cents
a share for the third quarter of 1999.
For the nine months ended Sept. 30, 2000, Financial Corporation
recorded break-even results compared to income of 3 cents a share in the first
nine months of 1999. Results were weaker in the current year primarily due to
adjustments totaling $0.6 million to Financial Corporation's deferred income tax
accounts recorded in the second quarter of 2000.
13
<PAGE>
Financial Corporation's net assets at Sept. 30, 2000, were $7.8
million, compared to $7.7 million at Sept. 30, 1999.
Discontinued Segment
--------------------
In the fourth quarter of 1999, the Company decided to sell its
interest in Canor with the effect that Canor was reclassified as a discontinued
segment. The Company sold Canor in the first quarter of 2000 and reported a gain
equivalent to 9 cents a diluted share (see Item 1, Note 4, "Notes to
Consolidated Financial Statements," above). Net income from the discontinued
segment for the nine months ended Sept. 30, 1999, was $0.2 million, net of tax,
equivalent to 1 cent a share.
Operating Expenses
------------------
Operations and Maintenance
--------------------------
Operations and maintenance expenses were $1.4 million, or 3 percent,
higher in the first nine months of 2000 compared to the same period in 1999. NW
Natural's expenses increased $1.5 million, or 3 percent, primarily due to a
reduction in 1999 expense from a credit adjustment to a litigation reserve in
the second quarter resulting from an appellate court decision in the Company's
favor in the Chase Gardens case ($3.0 million), offset by lower advertising and
other marketing expense ($1.1 million), bonus accruals ($0.3 million) and bad
debt accruals ($0.2 million) in the first nine months of 2000.
Operations and maintenance expenses were $0.8 million, or 4 percent,
higher in the third quarter of 2000, primarily due to additions to the bad debt
reserve ($0.5 million) and one-time costs relating to the Company's listing on
the New York Stock Exchange ($0.2 million). Approximately half of the increase
in bad debt accruals related to bankruptcies involving two small industrial
customers; the other half was an additional accrual to the reserve for
residential and commercial bad debts based on an estimate of requirements for
bad debt write-offs from revenues in 2000.
Taxes Other than Income Taxes
-----------------------------
Taxes other than income taxes increased $0.7 million, or 4 percent, in
the first nine months of 2000 compared to the first nine months of 1999.
Property taxes increased $0.4 million, regulatory fees increased $0.2 million
and franchise taxes increased $0.1 million.
Depreciation, Depletion and Amortization
----------------------------------------
The Company's depreciation, depletion and amortization expense
increased $0.8 million, or 7 percent, in the third quarter and by $1.5 million,
or 4 percent, compared to the first nine months of 1999. Depreciation expense
was higher in the current year periods due to additional utility plant in
service and a one-time asset write-down of $0.3 million in connection with NW
Natural's Washington general rate case.
Other Income
------------
The Company's other income for the year-to-date was $0.5 million lower
than in 1999. The decrease was primarily due to lower income from subsidiary
investments ($0.6 million) and a decrease in interest income from regulatory
account balances ($0.4 million), partially offset by a development fee relating
to construction of the Port of Portland Building ($0.3 million) and a gain on
the sale of shares in an insurance company received as the result of a
demutualization ($0.2 million).
14
<PAGE>
Interest Charges - net
----------------------
The Company's net interest expense increased $2.4 million, or 11
percent, in the first nine months of 2000 compared to the same period in 1999.
The increase was due to an increase in long-term debt outstanding, and an
adjustment relating to the Chase Gardens case that reduced interest expense by
$0.9 million in the first nine months of 1999.
Income Taxes
------------
The effective corporate income tax rates from continuing operations
during the nine months ended Sept. 30, 2000 and 1999, were 35.5 percent and 35.7
percent, respectively.
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 1999 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 1999 Form 10-K).
Cash Flows
----------
Operating Activities
--------------------
Continuing operations provided net cash of $51.9 million in the nine
months ended Sept. 30, 2000, down from $109.0 million in the first nine months
of 1999. An increase in cash from operations before working capital changes
($7.0 million) was offset by higher working capital requirements ($64.1
million). The increase in cash from continuing operations before working capital
changes compared to the first nine months of 1999 was primarily due to a
decrease in regulatory account net debit balances in 2000 ($10.4 million), an
increase in the balance of deferred income taxes and investment tax credits
($3.5 million), and higher depreciation, depletion and amortization ($1.5
million), offset in part by a smaller decrease in deferred gas costs receivable
($4.5 million) and lower net income from continuing operations ($4.3 million).
The increase in working capital requirements was due to changes in net balances
of other current assets and liabilities ($35.9 million) (see "Port of Portland
Building," below), a larger reduction in accounts payable ($26.1 million), a
smaller reduction in accrued unbilled revenue ($3.4 million) and a smaller
reduction in accounts receivable ($1.4 million), offset in part by a larger
increase in accrued interest and taxes ($2.2 million) and a smaller increase in
inventories of gas, materials and supplies ($0.5 million).
The discontinued segment provided net cash of $34.8 million in the
first nine months of 2000, due to the sale of the Company's interest in Canor.
15
<PAGE>
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
1999 Form 10-K).
Port of Portland Building
-------------------------
A large portion of the change in cash from continuing operations in
the first nine months of 2000, compared to the first nine months of 1999, was
due to cash flows relating to NW Natural's development contract for construction
of a new headquarters building for the Port of Portland. The Port made
construction progress payments totaling $18.8 million in the second and third
quarters of 1999. NW Natural recorded current liabilities in the amounts of
these payments, pending closing on the sale of the building, with the effect of
reducing working capital requirements in the first nine months of 1999. The Port
made its final payment of $1.2 million at closing on the sale of the building in
the third quarter of 2000. At that time NW Natural reversed the balance of
current liabilities relating to the building ($19.3 million), with the effect of
increasing working capital requirements by that amount in the first nine months
of 2000.
Cash used in construction of the building was recorded in both periods
as an investment in non-utility property (see "Investing Activities," below). NW
Natural used a portion of the Port's progress payments to pay off the balance
outstanding under a bank line of credit arranged for construction of the
building ($12.3 million), contributing to a reduction in short-term debt in the
first nine months of 1999 (see "Financing Activities," below).
Investing Activities
--------------------
Cash requirements for investing activities in the first nine months of
2000 were $41.6 million, down from $87.3 million in the first nine months of
1999.
Cash requirements for year-to-date utility construction totaled $60.1
million, down $18.5 million from the first nine months of 1999. The decrease in
utility construction was primarily due to the completion of additional
underground storage facilities in 1999.
NW Natural's construction expenditures are estimated to total $82
million for 2000. Over the five-year period 2000 through 2004, these
expenditures are estimated at between $450 million and $500 million. The level
of capital expenditures over the next five years reflects projected high
customer growth plus a major system reinforcement project and the development of
additional underground gas storage facilities. An estimated 60 percent of the
required funds is expected to be internally generated over the five-year period,
with the remainder funded through a combination of long-term debt and equity
securities with short-term debt providing liquidity and bridge financing.
Investments in non-utility property in the first nine months of 2000
included final payments of $2.6 million for the construction of the new
headquarters building for the Port of Portland, compared to $9.7 million
invested in the building during the first nine months of 1999. Total proceeds
from the sale of the building ($20.0 million) were recognized as proceeds from
sale of assets.
There were no new capital investments by Financial Corporation during
the first nine months of 2000 or 1999.
Financing Activities
--------------------
Internally generated cash, including cash from the sale of Canor, was
used to reduce short-term debt by $21.7 million in the first nine months of
2000, compared to an increase of $0.3 million in the first nine months of 1999.
The Company issued the same amount of long-term debt as it retired during the
first nine months of 2000, compared to its net issuance of $10 million of
long-term debt during the first nine months of 1999.
16
<PAGE>
During the third quarter of 2000 the Company sold $50 million of
secured Medium-Term Notes with an average weighted maturity of 28 years and an
average weighted coupon rate of 7.754%. The proceeds from the sale of the notes
were used to redeem, effective Sept. 29, 2000, all $50 million of the Company's
9-3/4% Series of First Mortgage Bonds due 2015. The refunding will save the
Company about $0.8 million per year in future interest expense.
In May 2000, the Company commenced a program to repurchase up to 2
million shares, or up to $35 million in value, of NW Natural's common stock
through a repurchase program to extend through May 2001. The purchases are made
in the open market or through privately negotiated transactions. As of Sept. 30,
2000, the Company had repurchased 66,800 shares of common stock at a total cost
of $1.5 million.
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. The commercial paper is supported by bank
lines of credit (see "Lines of Credit," below). 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 1999 Form
10-K). NW Natural had $72.5 million of commercial paper notes outstanding at
Sept. 30, 2000, compared to $81.7 million outstanding at Sept. 30, 1999.
Financial Corporation had no commercial paper notes outstanding at those dates.
Lines of Credit
---------------
NW Natural has available through Sept. 30, 2001, committed lines of
credit with four commercial banks totaling $120 million which are used as backup
lines for the commercial paper program. In addition, Financial Corporation has
available through Sept. 30, 2001, committed lines of credit with two commercial
banks totaling $20 million. Financial Corporation's lines are supported by the
guaranty of NW Natural.
Under the terms of these lines of credit, NW Natural and Financial
Corporation pay commitment fees but are not required to maintain compensating
bank balances. The interest rates on borrowings 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 Sept. 30, 2000 or 1999.
Stock Listing
-------------
On July 27, 2000, the Company's Common Stock, $3-1/6 par value, and
the Common Share Purchase Rights appurtenant thereto, began trading on the New
York Stock Exchange, Inc. under the symbol "NWN." The stock previously traded on
the Nasdaq National Market with the symbol NWNG.
Ratios of Earnings to Fixed Charges
-----------------------------------
For the nine months and 12 months ended Sept. 30, 2000, and the 12
months ended Dec. 31, 1999, the Company's ratios of earnings to fixed charges,
computed using the Securities and Exchange Commission method, were 2.66, 2.86
and 3.12, respectively. For this purpose, earnings consist of net income before
taxes plus fixed charges, and 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.
17
<PAGE>
Contingent Liabilities
----------------------
Environmental Matters
---------------------
The Company owns property in Linnton, Oregon that is the site of a
former gas manufacturing plant that was closed in 1956. The site has been under
investigation by the Company in recent years under program oversight by the
Oregon Department of Environmental Quality (ODEQ). During 1998, the ODEQ and the
U.S. Environmental Protection Agency (EPA) completed a study of sediments in a
5.5 mile segment of the Willamette River (the Portland Harbor) that includes the
area adjacent to the site. In March 2000, Region 10 of the EPA reported that it
would recommend the Portland Harbor for listing as a Superfund site, and in July
2000 the governor of Oregon concurred with the EPA's proposal to move forward
with the listing. Future remediation of NW Natural's Linnton site may be
affected by any EPA management plan for the Portland Harbor. (See Part II, Item
8, Note 12, "Environmental Matters," in the 1999 Form 10-K.)
The Company previously owned property adjacent to the Linnton site
that now is the location of a manufacturing plant owned by Wacker Siltronic
Corporation (Wacker). On Oct. 4, 2000, the ODEQ issued an order requiring Wacker
and NW Natural to determine the nature and extent of releases of hazardous
substances to Willamette River sediments from the Wacker property. Both Wacker
and NW Natural notified the ODEQ of their intent to comply with the order. The
Company established a reserve of $0.3 million in the third quarter of 2000 for
the estimated costs of the investigation. NW Natural expects that its costs of
investigation and any remediation for which it may be responsible should be
recoverable, in large part, from insurance. In the event these costs are not
recovered from insurance, NW Natural will seek recovery through future rates.
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 and the Washington Utilities and Transportation Commission, 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; and (x) legal and
administrative proceedings and settlements. All 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
18
<PAGE>
results to differ materially from those contained in any forward-looking
statement.
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 1999 Form 10-K.
PART II. OTHER INFORMATION
Item 5. OTHER INFORMATION
Regulatory Developments
-----------------------
On Oct. 26, 2000, the WUTC issued a Second Supplemental Order in NW
Natural's Washington general rate case, Docket No. UG-000073, adopting a
settlement negotiated by the Company and the other parties in the case and
authorizing a phased-in revenue increase of $4.3 million per year, or 12.1
percent. The first $3.0 million per year of the revenue increase was effective
on Nov. 1, 2000, and the remaining $1.3 million per year will be effective on
Oct. 1, 2001.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 10(a) - Employment Agreement dated September 20, 2000, between
the Company and an executive officer
Exhibit 10(b) - Amendment No. 3 to Directors Deferred Compensation Plan
(December 1, 1997 Restatement), dated September 28, 2000
Exhibit 10(c) - Amendment No. 5 to Executive Deferred Compensation Plan
(1990 Restatement), dated September 28, 2000
Exhibit 10(d) - Employment Agreement dated October 20, 2000, between the
Company and an executive officer
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
Sept. 30, 2000.
19
<PAGE>
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: November 13, 2000 /s/ Stephen P. Feltz
---------------------------------------
Stephen P. Feltz
Principal Accounting Officer
Treasurer and Controller
20
<PAGE>
NORTHWEST NATURAL GAS COMPANY
EXHIBIT INDEX
To
Quarterly Report on Form 10-Q
For Quarter Ended
September 30, 2000
Exhibit
Document Number
-------- -------
Employment Agreement dated September 20, 2000, between the Company
and an executive officer 10(a)
Amendment No. 3 to Directors Deferred Compensation Plan (December 1,
1997 Restatement), dated September 28, 2000 10(b)
Amendment No. 5 to Executive Deferred Compensation Plan (1990
Restatement), dated September 28, 2000 10(c)
Employment Agreement dated October 20, 2000, between the Company
and an executive officer 10(d)
Statement re: Computation of Per Share Earnings 11
Computation of Ratios of Earnings to Fixed Charges 12
Financial Data Schedule 27
21
