PORTLAND, OR--(Marketwired - May 2, 2013) - Northwest Natural Gas Company, dba NW Natural (
- Consolidated earnings for the first quarter of 2013 were $1.40 per share on net income of $37.6 million, compared to $1.50 per share on net income of $40.3 million for the first quarter of 2012.
- Utility customer growth rate was 1.1% for the 12-month period ended March 31, 2013, compared to 0.8% for the 12-month period ended March 31, 2012.
- Dividend of 45.5 cents per share was declared on the Company's common stock. The Company's indicated annual dividend rate is $1.82 per share.
- Earnings guidance for 2013 is estimated to be in the range of $2.15 to $2.35 per share.
Northwest Natural Gas Company, dba NW Natural (
"We performed well in the quarter, with margins up slightly from the first quarter of 2012, after adjusting for annual timing differences created by the recent rate case," said Gregg Kantor, President and Chief Executive Officer. "We continue to see modest improvements in customer additions and control over our operations and maintenance costs."
Financial and operating results
Consolidated income and earnings per share
For the quarter ended March 31, 2013, NW Natural earnings were $1.40 per share on net income of $37.6 million. This compared to the Company's 2012 results of $1.50 per share on net income of $40.3 million. The decrease in net income was primarily due to impacts from the 2012 Oregon rate case, including a decrease in utility margin related to the revenue timing impact of changes in fixed monthly charges and the decoupling baseline in rates, neither of which is expected to impact annual revenues or net income. In addition, the overall revenue reduction was also tied partly to the lower authorized return on equity from the rate case. Partly offsetting these decreases were utility margin gains from customer growth and gas reserve investments, as well as higher net income from gas storage operations.
Results of utility operations
Utility net income results
For the quarter ended March 31, 2013, utility operations provided earnings of $1.34 per share on net income of $36.0 million. This compared to $1.47 per share on net income of $39.5 million for 2012. Net income was negatively affected by a $5.9 million decrease in utility margin, which was primarily attributable to timing differences in this year's first quarter of $2.8 million from the new fixed monthly charges and $2.4 million from the reset of the decoupling baseline for average gas used by utility customers in Oregon. In addition, utility margins decreased by $0.7 million related to the overall revenue requirement decrease from the 2012 Oregon rate case, and by $2.1 million of lower gains from our gas cost incentive sharing mechanism. Partly offsetting these decreases were margin increases of approximately $2 million from customer growth and the rate-base return on our utility's gas reserve investments.
Utility margin results
For the quarter ended March 31, 2013, utility gas sales and transportation deliveries, excluding deliveries of gas stored for others, were 400 million therms, compared to 408 million therms for the same period in 2012, while utility margins were $5.9 million below last year. The 2% decrease in volumes from last year was mainly due to the effects of weather, which was 3% warmer than last year, but 3% colder than average.
Residential and Commercial Sales. Sales to residential and commercial customers for 2013 were 269 million therms, compared to 276 million therms for 2012. The 3% decrease in consumption was due to warmer weather compared to last year, partially offset by increased volumes due to customer growth. Utility margin decreased from $121.4 million for the first quarter of 2012 to $117.4 million for the first quarter of 2013. The timing impacts of changes in fixed monthly charges and decoupling baselines in the 2012 rate case account for most of the decrease in customer margins. However, customer growth and the increase in margin from our gas reserve investments partially offset these timing differences and the impact of the general rate decrease discussed earlier.
NW Natural's weather normalization mechanism in Oregon adjusted margin down by $5.3 million for the first quarter of 2013 and by $3.8 million for the same period in 2012 due to colder weather than average. The decoupling mechanism adjusted margin up by $4.4 million for the current quarter, compared to a margin increase of $6.7 million for the same period in 2012. As a result of changes to the decoupling baseline for average use per customer included in the 2012 Oregon general rate case, the decoupling mechanism's results this year will not be comparable to last year, although the overall impact on revenues will generally be the same on an annualized basis.
Industrial Sales. Gas deliveries to industrial customers were 132 million therms for the first quarter of 2013 and 2012. Utility margin from industrial customers increased 1% to $7.7 million for the quarter ended March 31, 2013, compared to $7.6 million for the same period in 2012 due to customer growth, partially offset by decreased margins from lower usage by a few large customers during the quarter.
Gas Cost Sharing Mechanism. Under the Company's regulatory incentive sharing mechanism in Oregon, lower gas costs contributed $0.5 million to margin for the quarter ended March 31, 2013, compared to $2.6 million for the first quarter of 2012.
Utility customer growth
NW Natural's customer growth rate for the trailing 12-month period ended March 31, 2013 was 1.1%, with the Company serving approximately 689,000 customers, compared to a growth rate of 0.8% for the 12-month period ended March 31, 2012. The Company added about 7,400 new customers during the last 12 months, compared to 5,300 customers a year ago.
Gas reserves investment
The Company's gas reserve investment provides long-term gas price stability for our utility customers, and a return on investment for the Company. NW Natural has continued to invest in gas reserves, with $12.3 million invested in the first quarter of 2013. At March 31, 2013, our cumulative net investment in gas reserves was $81.5 million. These reserves hedged approximately 3% of the Company's utility gas supply requirements during the quarter.
We continue to work through several open dockets with the Public Utility Commission of Oregon (OPUC) including:
- the Company's request to recover its cost of service related to prepaid pension assets, which is currently under review in a docket involving all Oregon utilities;
- the OPUC's review of the Company's interstate storage sharing mechanism, for which a docket will be opened to review this sharing arrangement;
- the OPUC's review of the Company's recovery of working capital related to working gas inventory, which is also currently open and under review; and
- the Company's request to recover deferred costs related to environmental investigation and remediation under the new Site Remediation and Recovery Mechanism (SRRM), for which the earnings test is being developed in a separate, open proceeding. A prudence review for all past deferred environmental expenditures is also being conducted in this proceeding. Under the mechanism, an annual review for prudency of subsequent spend will be conducted each year.
We expect decisions on these open dockets in 2013 or early 2014.
Results of gas storage operations
For the quarter ended March 31, 2013, the gas storage segment contributed $0.06 per share on net income of $1.6 million, compared to $0.03 per share on net income of $0.8 million for the first quarter of 2012. Gas storage results for 2013 reflected higher operating revenues from Gill Ranch due to additional contracted storage capacity for the 2012-2013 gas storage year.
Consolidated operations and maintenance expense
Consolidated operations and maintenance expense for the quarter ended March 31, 2013 was $33.8 million, compared to $34.4 million for 2012, for a 2% decrease. This decrease was primarily due to a decrease in utility bad debt expense, partially offset by an increase in utility employee related expense.
Cash provided by operations for the quarter ended March 31, 2013 was $106.1 million, compared to $114.1 million for 2012. The decrease was primarily due to a reduction in deferred gas cost savings. The higher amount of deferred gas cost savings in the first quarter of last year was refunded to customers, which reduced cash flows in the second quarter of 2012. Cash requirements for investing activities in the first quarter of 2013 totaled $36.3 million, compared to $37.7 million for 2012, reflecting ongoing investment in gas reserves and our utility plant capital requirements.
NW Natural's consolidated capitalization at March 31, 2013 reflected 47.9% common equity, 43.8% long-term debt, and 8.3% short-term debt. This compared to 49.6% common equity, 42.8% long-term debt, and 7.6% short-term debt at March 31, 2012.
Revision of prior periods
During the first quarter of 2013, we identified an error in the rate used to calculate interest on regulatory assets. We assessed the materiality of this error on prior period financial statements and concluded it was not material to any prior annual or interim periods; however, the cumulative impact would have been material to the interim period ending March 31, 2013, if corrected in the current period. As a result, in accordance with accounting standards, we have revised our prior period financial statements to correct for this error. This revision resulted in a one cent decrease in earnings per share or a $0.3 million decrease in net income for the first quarter of 2012. For further detail on this revision, see Note 14 in the Form 10-Q for the period ended March 31, 2013, which we expect to file on or about May 2, 2013.
Earnings guidance for 2013
The Company's earnings guidance remains in the range of $2.15 to $2.35 per share for 2013. The Company's 2013 earnings guidance assumes a continued slow economic recovery and customer growth, average weather conditions, no changes to the recoverability of our regulatory assets, and no significant changes in prevailing legislative and regulatory policies or outcomes.
The board of directors of NW Natural declared a quarterly dividend of 45.5 cents a share on the Company's common stock. The dividends will be payable on May 15, 2013 to shareholders of record on April 30, 2013. The Company's indicated annual dividend rate is $1.82 per share.
Presentation of results
In addition to presenting results of operations and earnings amounts in accordance with generally accepted accounting principles (GAAP), NW Natural has expressed certain measures in this press release on an equivalent cents per share basis, which are non-GAAP financial measures. These amounts reflect factors that directly impact the Company's earnings. In calculating these financial disclosures, we allocate income tax expense based on the effective tax rate, where applicable. These non-GAAP financial measures should not be used to the exclusion of GAAP financial measures. NW Natural believes that these non-GAAP financial measures provide useful information to the reader by removing the effects of variances in GAAP reported results of operations that we believe are not indicative of fundamental changes in our financial condition or results of operations.
Conference call arrangements
As previously reported, NW Natural will conduct a conference call and webcast starting at 8 a.m. Pacific Time (11 a.m. Eastern Time) on May 2, 2013 to review the Company's financial and operating results for the three months ended March 31, 2013.
To hear the conference call live, please dial 1-888-317-6016 within the United States and 1-855-669-9657 from Canada. International callers can dial 1-412-317-6016. To access the conference replay, please call 1-877-344-7529 and enter the conference identification pass code (10027411). To hear the replay from international locations, please dial 1-412-317-0088.
To hear the conference by webcast, log on to NW Natural's corporate website at www.nwnatural.com.
This report, and other presentations made by NW Natural from time to time, may contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipates," "intends," "plans," "seeks," "believes," "estimates," "expects" and similar references to future periods. Examples of forward-looking statements include, but are not limited to, statements regarding the following: plans, objectives, goals, strategies, future events, investments, hedge efficacy, gas reserves and their financial value and benefit, customer growth, weather, commodity and other costs, customer rates, financial positions, revenues and earnings, dividends, performance, legislative actions and impact, effects of future regulatory proceedings, rate recovery, and other statements that are other than statements of historical facts.
Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed by reference to the factors described in Part I, Item 1A "Risk Factors", and Part II, Item 7 and Item 7A "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosure about Market Risk" in the Company's most recent Annual Report on Form 10-K and in Part I, Items 2 and 3 "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Quantitative and Qualitative Disclosures About Market Risk", and Part II, Item 1A, "Risk Factors", in the Company's quarterly reports filed thereafter.
All forward-looking statements made in this report and all subsequent forward-looking statements, whether written or oral and whether made by or on behalf of the Company, are expressly qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or otherwise, except as may be required by law. 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 statements.
About NW Natural
NW Natural (
|NORTHWEST NATURAL GAS COMPANY|
|Comparative Income Statement|
|(Consolidated - Unaudited)|
|Three Months Ended|
|In thousands, except per share amounts||03/31/13||03/31/12||Change||% Change|
|Income from operations||$||74,206||$||78,666||$||(4,460||)||(6||)%|
|Diluted average shares of common stock outstanding||26,973||26,862||111||-||%|
|Basic earnings per share of common stock||$||1.40||$||1.50||$||(0.10||)||(7||)|
|Diluted earnings per share of common stock||1.40||1.50||(0.10||)||(7||)|
|Twelve Months Ended|
|In thousands, except per share amounts||03/31/13||03/31/12||Change||% Change|
|Income from operations||$||137,720||$||145,649||$||(7,929||)||(5||)%|
|Diluted average shares of common stock outstanding||26,916||26,745||171||1||%|
|Basic earnings per share of common stock||$||2.09||$||2.34||$||(0.25||)||(11||)|
|Diluted earnings per share of common stock||2.09||2.34||(0.25||)||(11||)|
|NORTHWEST NATURAL GAS COMPANY|
|Consolidated Balance Sheets (Unaudited)||March 31,||March 31,|
|Cash and cash equivalents||$||8,337||$||4,031|
|Accrued unbilled revenue||29,633||44,444|
|Allowance for uncollectible accounts||(2,116||)||(3,694||)|
|Income taxes receivable||2,033||1,735|
|Other current taxes||12,441||13,075|
|Total current assets||248,165||310,890|
|Property, plant, and equipment||2,808,673||2,680,537|
|Less: Accumulated depreciation||824,561||779,683|
|Total property, plant, and equipment - net||1,984,112||1,900,854|
|Other non-current assets||14,735||14,191|
|Total non-current assets||2,558,334||2,411,983|
|Liabilities and equity:|
|Other current liabilities||41,445||41,503|
|Total current liabilities||302,105||340,563|
|Deferred credits and other non-current liabilities:|
|Deferred tax liabilities||467,360||436,750|
|Pension and other postretirement benefit liabilities||215,808||189,003|
|Other non-current liabilities||79,112||79,461|
|Total deferred credits and other non-current liabilities||1,056,057||997,292|
|Accumulated other comprehensive loss||(9,058||)||(7,633||)|
|Total liabilities and equity||$||2,806,499||$||2,722,873|
|NORTHWEST NATURAL GAS COMPANY||Three Months Ended|
|Consolidated Statements of Cash Flows (Unaudited)||March 31,|
|Adjustments to reconcile net income to cash provided by operations:|
|Depreciation and amortization||18,807||17,950|
|Deferred tax liabilities||25,797||26,879|
|Non-cash expenses related to qualified defined benefit pension plans||1,476||2,007|
|Contributions to qualified defined benefit pension plans||(1,400||)||(13,800||)|
|Deferred environmental expenditures, net of recoveries||(4,482||)||(827||)|
|Changes in assets and liabilities:|
|Deferred gas costs||1,966||23,663|
|Cash provided by operating activities||106,118||114,054|
|Utility gas reserves||(12,257||)||(17,220||)|
|Cash used in investing activities||(36,266||)||(37,735||)|
|Common stock issued, net||1,115||1,458|
|Long-term debt retired||-||(40,000||)|
|Change in short-term debt||(59,500||)||(27,900||)|
|Cash dividend payments on common stock||(12,248||)||(11,913||)|
|Cash used in financing activities||(70,438||)||(78,121||)|
|Decrease in cash and cash equivalents||(586||)||(1,802||)|
|Cash and cash equivalents, beginning of period||8,923||5,833|
|Cash and cash equivalents, end of period||$||8,337||$||4,031|
|Supplemental disclosure of cash flow information:|
|Income taxes paid||-||101|
|NORTHWEST NATURAL GAS COMPANY|
|Financial Highlights (Unaudited)|
|First Quarter - 2013|
|In thousands, except per share amounts, customer, and degree day data||Three Months Ended |
|Twelve Months Ended |
|Cost of gas||142,359||169,755||(16)||327,939||447,653||(27)|
|Operations and maintenance||33,757||34,432||(2)||128,802||128,662||-|
|Depreciation and amortization||18,807||17,950||5||73,874||70,645||5|
|Total operating expenses||203,655||230,973||(12)||561,109||676,912||(17)|
|Income from operations||74,206||78,666||(6)||137,720||145,649||(5)|
|Other income and expense, net||520||472||10||3,207||2,293||40|
|Interest expense, net||11,127||11,191||(1)||43,093||42,830||1|
|Income before income taxes||63,599||67,947||97,834||105,112|
|Income tax expense||25,960||27,663||(6)||41,700||42,604||(2)|
|Common shares outstanding:|
|Average for period, basic||26,929||26,781||26,868||26,687|
|Average for period, diluted||26,973||26,862||26,916||26,745|
|End of Period||26,948||26,798||26,948||26,798|
|Earnings per share:|
|Dividends declared per share of common stock||0.455||0.445||1.80||1.76|
|Book value per share, end of period||28.08||27.74||28.08||27.74|
|Market closing price, end of period||43.82||45.40||43.82||45.40|
|Balance sheet data, end of period:|
|(including amounts due in one year)|
|Customers, end of period||689,199||681,794||1.1%||689,199||681,794||1.1%|
|Utility volumes, therms:|
|Residential and commercial sales||268,664||276,159||630,390||683,899|
|Total utility volumes sold and delivered||400,190||408,159||1,103,800||1,159,099|
|Utility operating revenues:|
|Residential and commercial sales||$||256,366||$||287,014||$||611,689||$||737,764|
|Regulatory adjustment for income taxes paid||-||-||-||(7,448||)|
|Less: Revenue taxes||7,261||7,855||17,836||20,641|
|Total utility operating revenues||269,659||302,905||666,616||794,611|
|Less: Cost of gas||142,359||169,755||327,939||447,653|
|Average (25-year average)||1,855||1,886||4,248||4,285|
|Percent colder (warmer) than average weather||3||%||4||%||(3||)%||8||%|