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NW Natural Holdings Reports Second Quarter and Year-to-Date 2019 Results

PORTLAND, Aug. 06, 2019 (GLOBE NEWSWIRE) -- Northwest Natural Holding Company, (NWN) (NW Natural Holdings), reported financial results and highlights for the second quarter of 2019 including:

  • Earned net income of $0.07 per share from continuing operations for the second quarter of 2019, compared to a loss of $0.01 per share for 2018

  • Reported year-to-date earnings of $1.56 per share from continuing operations and adjusted earnings1 of $1.79 per share for 2019, compared to earnings of $1.45 per share from continuing operations for 2018

  • Added more than 12,400 natural gas meters over the last 12 months equating to a 1.7% growth rate

  • Placed our North Mist gas storage expansion into service and began providing storage service

  • Closed Sunriver water utility and wastewater transaction adding 9,400 connections to the water platform

  • Reached an all-party settlement on key items in the Washington general rate case

  • Reaffirmed 2019 GAAP earnings guidance from continuing operations in the range of $2.02 to $2.22 per share. Excluding a regulatory pension disallowance, reaffirmed 2019 earnings guidance from continuing operations on a non-GAAP basis1 in the range of $2.25 to $2.45 per share

"The Company continues to perform well," said David H. Anderson, president and CEO of NW Natural Holdings. "We placed the North Mist gas storage facility into service in May and closed our largest water and wastewater transaction to-date on May 31."

For the second quarter of 2019, net income from continuing operations increased $2.4 million to $2.1 million (or $0.07 per share), compared to a net loss from continuing operations of $0.3 million (or $0.01 per share) for the same period in 2018. Results reflected higher margin from new natural gas rates in Oregon, customer growth, and lower environmental remediation expenses, partially offset by lower other income.

Year-to-date net income from continuing operations increased $3.8 million to $45.5 million (or $1.56 per share), compared to $41.7 million (or $1.45 per share) for the same period in 2018. Results reflected higher margin due to new natural gas rates in Oregon and customer growth. This was partially offset by a regulatory pension disallowance from the final order in the Oregon general rate case, higher operations and maintenance expense, and lower other income.

Excluding the regulatory pension disallowance, on a non-GAAP basis1 adjusted year-to-date net income from continuing operations was $52.1 million (or $1.79 per share) or an increase of $10.4 million compared to net income from continuing operations for the same period in 2018. Results reflected higher margin from new natural gas rates in Oregon and customer growth. This was partially offset by higher operations and maintenance expense and lower other income.

__________
 
  1.  Adjusted 2019 metrics are non-GAAP financial measures and exclude the regulatory pension disallowance of $10.5 million pre-tax or $6.6 million and $0.23 cents per share after-tax. See "Year-To-Date Results", "2019 Earnings Guidance", and "Reconciliation to GAAP" for additional information.


KEY INITIATIVES

North Mist Expansion Project
NW Natural's North Mist facility was placed into service in May 2019. The $149 million facility began earning revenues under an established tariff when it was placed into service. The project is designed to provide long-term, no-notice underground gas storage service to support gas-fired electric generating facilities that enable the integration of wind power into the region's electric generation mix. The North Mist service allows the local electric company to draw on the facility to meet its fueling needs and rapidly respond to natural variability in wind generation.

Water Utilities and Acquisitions
NW Natural Holdings' subsidiary, NW Natural Water Company, LLC (NW Natural Water), closed its largest acquisition to-date in May adding 9,400 water and wastewater connections that serve approximately 20,000 people in Sunriver, Oregon.  NW Natural Water currently serves about 45,000 people through approximately 17,700 connections in the Pacific Northwest with total investments of nearly $70 million. Several smaller acquisitions are pending as we continue to tuck in additional systems close to our existing footprint. Aggregate acquisitions are projected to be accretive to NW Natural Holdings’ earnings per share in the first full year of operations. While ongoing operations are not expected to have an immediately material impact on earnings, the acquisitions mark the Company's continued commitment to building a water platform and are intended to provide investors with a risk profile that is similar to NW Natural's regulated gas utility.

Washington Rate Case
On Dec. 31, 2018, NW Natural filed a request for a general rate increase with the Washington Utilities and Transportation Commission (WUTC). Approximately 10% of NW Natural’s revenues are derived from its Washington customers. This is NW Natural’s first Washington rate case in a decade with an increase of $8.3 million in annual revenue requirement originally requested. In addition, NW Natural requested the net Tax Cuts and Jobs Act (TCJA) related benefits be provided to customers, and the adoption of a decoupling and environmental remediation mechanism.

On May 23, 2019, NW Natural and other parties filed two settlements with the WUTC: an all-party settlement resolving all issues in the rate case except the proposed decoupling mechanism and a settlement with all parties except the Public Counsel Unit of the Washington Attorney General related to the adoption of a decoupling mechanism.

Under the all-party settlement, NW Natural's revenue requirement would increase $5.1 million based on a capital structure of 50% long-term debt, 1% short-term debt, and 49% common equity; a return on equity of 9.4%; cost of capital of 7.161%; and rate base of $173.7 million or an increase of $45.9 million since the last rate case. Net TCJA related benefits would be provided to customers with an initial rate reduction of $2.1 million in the first year and continuing annual rate reductions of approximately $0.5 million thereafter.

The settlements await review and approval by the WUTC. The all-party settlement requests that new rates take effect Nov. 1, 2019.

Renewable Natural Gas Legislation
In July, Senate Bill 98 (SB98) was signed into law enabling natural gas utilities to procure or develop renewable natural gas (RNG) on behalf of their Oregon customers. Renewable natural gas is produced from organic materials like food, agricultural and forestry waste, wastewater, or landfills. Methane is captured from these local organic materials as they decompose and conditioned to pipeline quality, so they can be added into the existing natural gas system thereby reducing the carbon content of the energy supply. Senate Bill 98 supports all forms of renewable natural gas including renewable hydrogen.

“We're proud to collaborate with policymakers and thankful for the leadership of Governor Kate Brown, her staff and multiple stakeholders on this groundbreaking legislation that is the first of its kind in the nation,” said David H. Anderson. “This law is an important step as we continue addressing climate change with pragmatic solutions that support our region’s move to more renewable energy, close the loop on waste, and invest in the communities we serve.”

SB98 outlines the following parameters for the RNG program including: setting out broad targets for gas utilities to add as much as 30% of RNG into the state's pipeline system by 2050; allowing gas utilities to invest in RNG infrastructure for the production, processing, pipeline interconnection and distribution of RNG to its customers; and creating a limit of 5% of a utility's revenue requirement that can be used to cover the incremental cost of RNG.

The OPUC and Oregon gas utilities will participate in a rulemaking process for the bill, which is expected to conclude with the OPUC adopting rules by July 31, 2020.

SECOND QUARTER RESULTS
The following financial comparisons are between results for the second quarter of 2019 and 2018 with individual year-over-year drivers below presented on an after-tax basis using a statutory tax rate of 26.5% unless otherwise noted.

NW Natural Holdings' second quarter results are summarized by business segment in the table below:

  Three Months Ended June 30,
  2019   2018   Change
In thousands, except per share data Amount Per Share   Amount Per Share   Amount Per Share
Net income from continuing operations:                
Natural Gas Distribution segment $ 1,212   $ 0.04     $ (2,970 ) $ (0.10 )   $ 4,182   $ 0.14  
Other 839   0.03     2,631   0.09     (1,792 ) (0.06 )
Consolidated $ 2,051   $ 0.07     $ (339 ) $ (0.01 )   $ 2,390   $ 0.08  
                 
Diluted Shares   29,394       28,791       603  

Natural Gas Distribution Segment
Natural Gas Distribution net income was $1.2 million (or $0.04 per share) for 2019, compared to a net loss of $3.0 million (or $0.10 per share) for 2018. Net income increased $4.2 million reflecting a full quarter of higher rates under the Oregon general rate case, customer growth and lower environmental remediation expenses, partially offset by higher interest and lower other income.

Margin increased $8.3 million largely due to higher rates in Oregon as well as growth of 1.7% over the last 12 months, which collectively contributed $4.6 million to margin. In addition, margin increased $1.6 million as the North Mist expansion project began providing storage services in May 2019. Finally, lower environmental expenditures coupled with warmer weather on a net basis contributed $2.2 million.

Other income, net decreased $2.1 million primarily due to higher pension expense in 2019 as we began collecting Oregon pension expenses through rates beginning Nov. 1, 2018 and lower allowance for funds used during construction (AFUDC) equity interest as the North Mist expansion project was placed into service in May 2019.

Interest expense increased $1.2 million primarily from higher commercial paper balances and lower AFUDC debt interest as the North Mist expansion project was placed into service in May 2019.

Other
Other net income decreased $1.8 million (or $0.06 per share) reflecting lower asset management revenues from our Mist gas storage facility and higher non-operating expenses associated with developing the water business.

YEAR-TO-DATE RESULTS

Results for the First Six Months of 2019
The following financial comparisons are between the first six months of 2019 and the same period in 2018 with individual year-over-year drivers below presented on an after-tax basis using a statutory tax rate of 26.5% unless otherwise noted. Non-GAAP financial measures exclude the effects of the regulatory pension disallowance in 2019 as these adjusted metrics provide a clearer view of operations, reflect how Management views financial results, and provide comparability to prior year results. See "Reconciliation to GAAP" for a detailed reconciliation of adjusted amounts.

NW Natural Holdings' year-to-date results are summarized by business segment in the table below:

  Six Months Ended June 30,
  2019   2018   Change
In thousands, except per share data Amount Per Share   Amount Per Share   Amount Per Share
Net income from continuing operations:                
Natural Gas Distribution segment $ 42,418   $ 1.45     $ 36,913   $ 1.28     $ 5,505   $ 0.17  
Regulatory pension disallowance, net 6,588   0.23           6,588   0.23  
Adjusted Natural Gas Distribution segment 49,006   1.68     36,913   1.28     12,093   0.40  
                 
Other 3,051   0.11     4,759   0.17     (1,708 ) (0.06 )
                 
Consolidated $ 45,469   $ 1.56     $ 41,672   $ 1.45     $ 3,797   $ 0.11  
Adjusted Consolidated1 52,057   1.79     41,672   1.45     10,385   0.34  
                 
Diluted Shares   29,186       28,825       361  
  1. The 2019 adjusted natural gas distribution segment and adjusted consolidated net income from continuing operations are non-GAAP financial measures and exclude the effects of a regulatory disallowance of NW Natural's pension balancing account of $6.6 million after-tax (or $10.5 million pre-tax). See "Reconciliation to GAAP" for additional information.


Natural Gas Distribution Segment
Natural Gas Distribution segment net income increased $5.5 million (or $0.17 per share). Results were affected by a $6.6 million after-tax disallowance of costs in the pension balancing account as ordered in the Oregon general rate case in March 2019. Excluding the effects of this disallowance, net income increased $12.1 million reflecting the first six months of higher rates under the Oregon general rate case and customer growth, partially offset by higher operations and maintenance expense and a decline in other income.

Margin increased $22.9 million largely due to higher rates in Oregon as well as growth of 1.7% over the last 12 months, which collectively contributed $13.9 million. The North Mist expansion began providing storage services in May 2019 and contributed $1.6 million, and higher fee revenue from interruptible customers as a result of system restrictions contributed $1.1 million net of losses from the gas cost incentive sharing mechanism. Colder weather in the first quarter of 2019 also provided a benefit to margin. Weather was 2% warmer than average for 2019, compared to 11% warmer than average for 2018. Finally, as a result of the March order, margin increased $5.2 million with no significant effect to net income as offsetting adjustments were recognized through expenses and income taxes.

Operations and maintenance expense increased $8.3 million reflecting $0.7 million of higher compensation and benefits expense and $2.8 million of expense related to the disallowance of costs in the pension balancing account. In addition, as a result of the March order, $4.8 million of costs were recognized with no significant effect to net income due to offsetting adjustments in margin and income taxes.

Depreciation expense increased $1.4 million related to higher property, plant, and equipment as we continue to invest in our natural gas utility system and facilities.

Other income, net decreased $12.0 million primarily due to $4.9 million of expense related to the disallowance of costs in the pension balancing account and $3.6 million of higher pension expense as we began collecting Oregon pension expenses through rates beginning Nov. 1, 2018. As a result of beginning collections of the pension balancing account, $3.1 million of regulatory interest income was recognized related to the equity interest component of financing costs on the pension balancing account. In addition, also as a result of the March order, $5.8 million of costs were recognized with no significant effect to net income due to offsetting adjustments in margin and income taxes.

Interest expense increased $1.9 million primarily from higher commercial paper balances.

Tax expense reflected a $5.9 million benefit related to the amortization and application of deferrals from the March order; however, as this offset higher expense, there was no significant resulting effect on net income.

Other
Other net income decreased $1.7 million (or $0.06 per share) reflecting lower asset management revenues from our Mist gas storage facility and non-operating expenses associated with developing the water business.

BALANCE SHEET AND CASH FLOWS
During the first six months of 2019, the Company generated $155.1 million in operating cash flow and invested $90.5 million of capital expenditures in our natural gas distribution segment to support growth, safety, and technology and facility upgrades and $55.8 million for water acquisitions. Cash provided by financing activities was $46.5 million for the first six months of 2019 or an increase of $101.5 million compared to the same period in 2018. The increase was primarily due to issuing $175 million of long-term debt and 1.4 million shares of NW Natural Holdings common stock in June 2019, partially offset by repayments of short-term debt.

The Company continues to expect capital expenditures for 2019 to be in the range of $230 to $270 million to support gas utility customer growth and safety and reliability, as well as several projects. The total capital investment for the five-year period from 2019 to 2023 is expected to range from $850 to $950 million, with a majority of the investment supporting continued customer growth, natural gas distribution system maintenance and improvements, investments in a new headquarters building and technology, and utility gas storage facility maintenance.

2019 EARNINGS GUIDANCE
On March 1, 2019, NW Natural Holdings initiated 2019 earnings guidance from continuing operations in the range of $2.25 to $2.45 per share. As previously disclosed, this range did not incorporate a potential regulatory disallowance from an Oregon all-party settlement. On March 25, 2019, the OPUC issued an order requiring NW Natural to forego $10.5 million ($6.6 million after-tax or $0.23 per share) of costs associated with the pension balancing account. As a result of the disallowance, NW Natural Holdings' 2019 GAAP earnings guidance from continuing operations is expected to range from $2.02 to $2.22 per share. Excluding the pension disallowance on a non-GAAP basis, 2019 earnings guidance from continuing operations is expected to range from $2.25 to $2.45 per share.

This guidance assumes continued customer growth, average weather conditions, and no significant changes in prevailing regulatory policies, mechanisms, or outcomes, or significant laws or regulations. The expected sale of Gill Ranch and the related gain, and any operating results associated with it, are not included in this guidance range, as they are, and are expected to continue to be, reported as Discontinued Operations.

DIVIDEND DECLARED
In July 2019, NW Natural Holdings' Board of Directors declared a quarterly dividend of 47.5 cents per share on NW Natural Holdings' common stock. The dividend is payable on August 15, 2019 to shareholders of record on July 31, 2019, reflecting an annual indicated dividend rate of $1.90 per share.

CONFERENCE CALL AND WEBCAST
As previously announced, NW Natural Holdings will host a conference call and webcast today to discuss its second quarter 2019 financial and operating results.

Date and Time: Tuesday, August 6
   
  8 a.m. PT (11 a.m. ET)  
   
Phone Numbers: United States:  1-866-267-6789
   
  Canada:  1-855-669-9657
   
  International:  1-412-902-4110

The call will also be webcast in a listen-only format for the media and general public and can be accessed at nwnaturalholdings.com. A replay of the conference call will be available on our website and by dialing 1-877-344-7529 (U.S.), 1-855-669-9658 (Canada), and 1-412-317-0088 (international). The replay access code is 10133284.

ABOUT NW NATURAL HOLDINGS
Northwest Natural Holding Company, (NWN) (NW Natural Holdings), is headquartered in Portland, Oregon, and through its subsidiaries has been doing business for 160 years in the Pacific Northwest. It owns NW Natural Gas Company (NW Natural), NW Natural Water Company, LLC (NW Natural Water), and other business interests and activities.

NW Natural is a local distribution company that currently provides natural gas service to approximately two million people in more than 140 communities through more than 750,000 meters in Oregon and Southwest Washington with one of the most modern pipeline systems in the nation. NW Natural consistently leads the industry with high J.D. Power & Associates customer satisfaction scores.

NW Natural has 20 Bcf of storage in Oregon with 4 Bcf supporting renewables. NW Natural Holdings’ subsidiaries own and operate 35 Bcf of underground gas storage capacity.

NW Natural Water currently provides water distribution service to approximately 45,000 people through 17,700 connections. To date, NW Natural Water has acquired seven water distribution utilities and a wastewater company with several additional acquisitions pending. Upon closing current outstanding transactions, cumulatively, NW Natural Water expects to have invested $70 million and serve nearly 47,000 people through approximately 18,300 connections in the Pacific Northwest. Additional information regarding our water business is available at nwnaturalwater.com.

Additional information is available at nwnaturalholdings.com.

Investor Contact:
Nikki Sparley
Phone: 503-721-2530
Email: n1s@nwnatural.com

Media Contact:
Melissa Moore
Phone: 503-220-2436
Email: msm@nwnatural.com

Forward-Looking Statements
This report, and other presentations made by NW Holdings 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," "assumes," "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, assumptions, estimates, timing, goals, strategies, future events, investments, capital expenditures, targeted capital structure, risks, risk profile, stability, acquisitions and integration thereof, dispositions and timing, completion and outcomes thereof, customer and business growth, customer satisfaction ratings, weather, customer rates or rate recovery, adoption of renewable energy and our ability to provide effective supporting resources, the future of RNG and RNG regulation, infrastructure availability and development, environmental remediation cost recoveries, gas storage development or costs or timing related thereto, the water utility strategy and the related pending water acquisitions, operating plans of third parties, financial results, including estimated income, liquidity, expenses, positions, revenues, returns, and earnings and earnings guidance, capital expenditures, dividends, performance, timing, outcome, or effects of regulatory proceedings or regulatory approvals, regulatory prudence reviews, effects of regulatory decisions or mechanisms, anticipated regulatory actions or filings, expectations, timing and treatment with respect to rate cases, recovery of pension expense or our pension balancing account, accounting treatment of future events, effects of changes in laws or regulations, including tax reform, and other statements that are other than statements of historical facts.

Forward-looking statements are based on current expectations and assumptions regarding its 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. Actual results may differ materially from those contemplated by the forward-looking statements. You are therefore cautioned against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future operational, economic or financial 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 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 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 NW Holdings or NW Natural, are expressly qualified by these cautionary statements. Any forward-looking statement speaks only as of the date on which such statement is made, and NW Holdings and NW Natural 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 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.

Presentation of Non-GAAP Results
In addition to presenting the results of operations and earnings amounts in total, certain financial measures exclude the regulatory pension disallowance in 2019, which is a non-GAAP financial measure. The Company presents net income and EPS excluding this item along with the GAAP measures to illustrate the magnitude of this item on ongoing business and operational results. Although the excluded amount is properly included in the determination of this item under GAAP, the Company believes the amount and nature of such an item makes period-to-period comparisons of operations difficult or potentially confusing. Financial measures are expressed in cents per share as these amounts reflect factors that directly impact earnings, including income taxes. All references to EPS are on the basis of diluted shares. The Company uses such non-GAAP financial measures to analyze financial performance because the Company believes they provide useful information to investors and creditors in evaluating the Company's financial condition and results of operations.

NORTHWEST NATURAL HOLDINGS
Consolidated Income Statement and Financial Highlights (Unaudited)
Second Quarter 2019
  Three Months Ended     Six Months Ended     Twelve Months Ended    
In thousands, except per share amounts,  June 30,     June 30,     June 30,    
customer, and degree day data 2019   2018 Change 2019   2018 Change 2019   2018 Change
Operating revenues $ 123,443     $ 124,567   (1)% $ 408,791     $ 388,202   5% $ 726,732     $ 713,039   2%
                         
Operating expenses:                  
  Cost of gas 35,107     42,053   (17) 140,564     150,159   (6) 245,924     278,338   (12)
  Operations and maintenance 39,486     38,028   4
90,968     77,551   17
170,115     157,465   8
  Environmental remediation (2,656 )   1,882   (241) 6,291     6,506   (3) 10,912     12,232   (11)
  General taxes 7,879     7,729   2
16,906     17,203   (2) 31,875     31,959  
  Revenue taxes 4,496     4,780   (6) 16,422     17,209   (5) 29,295     17,209   70
  Depreciation and amortization 22,387     21,147   6
43,959     42,022   5
87,093     82,898   5
  Other operating expenses 646     679   (5) 1,538     1,532  
3,233     1,532   111
  Total operating expenses 107,345     116,298   (8) 316,648     312,182   1
578,447     581,633   (1)
Income from operations 16,098     8,269   95
92,143     76,020   21
148,285     131,406   13
Other income (expense), net (2,768 )   7   NM (16,515 )   (827 ) NM (19,289 )   (359 ) NM
Interest expense, net 10,654     8,771   21
20,859     18,045   16
39,873     36,468   9
Income (loss) before income taxes 2,676     (495 ) (641) 54,769     57,148   (4) 89,123     94,579   (6)
Income tax expense (benefit) 625     (156 ) (501) 9,300     15,476   (40) 18,015     26,306   (32)
Net income (loss) from continuing operations 2,051     (339 ) (705) 45,469     41,672   9
71,108     68,273   4
Loss from discontinued operations, net of tax (956 )   (659 ) 45
(1,173 )   (1,133 ) 4
(2,782 )   (126,396 ) (98)
Net income (loss) $ 1,095     $ (998 ) (210) $ 44,296     $ 40,539   9
$ 68,326     $ (58,123 ) (218)
                         
Common shares outstanding:                        
  Average diluted for period 29,394     28,791     29,186     28,825     29,040     28,734    
  End of period 30,422     28,800     30,422     28,800     30,422     28,800    
                           
Per share of common stock information:                        
Diluted earnings (loss) from continuing operations $ 0.07     $ (0.01 )   $ 1.56     $ 1.45     $ 2.45     $ 2.38    
Diluted loss from discontinued operations, net of tax (0.03 )   (0.02 )   (0.04 )   (0.04 )   (0.10 )   (4.40 )  
Diluted earnings (loss) 0.04     (0.03 )   1.52     1.41     2.35     (2.02 )  
Dividends declared 0.4750     0.4725     0.9500     0.9450     1.8975     1.8875    
Book value, end of period 28.82     26.37     28.82     26.37     28.82     26.37    
Market closing price, end of period 69.50     63.80     69.50     63.80     69.50     63.80    
                         
Capital structure, end of period:                        
  Common stock equity 48.5 %   48.5 %   48.5 %   48.5 %   48.5 %   48.5 %  
  Long-term debt 44.6     43.7     44.6     43.7     44.6     43.7    
  Short-term debt (including current maturities of long-term debt) 6.9     7.8     6.9     7.8     6.9     7.8    
  Total 100.0 %   100.0 %   100.0 %   100.0 %   100.0 %   100.0 %  
                           
Natural Gas Distribution segment operating statistics:                        
Meters - end of period 755,106     742,667   1.7% 755,106     742,667   1.7% 755,106     742,667   1.7%
Volumes in therms:                        
  Residential and commercial sales 102,457     103,637     420,560     381,656     700,067     680,633    
  Industrial sales and transportation 111,590     113,756     241,225     242,690     465,575     481,724    
Total volumes sold and delivered 214,047     217,393     661,785     624,346     1,165,642     1,162,357    
Operating revenues:                        
  Residential and commercial sales $ 103,178     $ 106,526     $ 354,296     $ 352,110     $ 623,968     $ 638,751    
  Industrial sales and transportation 12,210     13,403     28,231     30,792     56,152     61,023    
  Other distribution revenues 404     (1,494 )   12,248     (6,561 )   18,703     (5,125 )  
  Other regulated services 2,192     80     2,250     107     2,402     8,080    
Total operating revenues 117,984     118,515     397,025     376,448     701,225     702,729    
  Less: Cost of gas 35,163     42,107     140,676     150,271     246,148     278,674    
  Less: Environmental remediation expense (2,656 )   1,882     6,291     6,506     10,912     12,232    
  Less: Revenue taxes 4,496     4,780     16,422     17,209     29,295     17,209    
Margin, net $ 80,981     $ 69,746     $ 233,636     $ 202,462     $ 414,870     $ 394,614    
Degree days:                        
  Average (25-year average) 308     311     1,637     1,627     2,705     2,705    
  Actual 160     193   (17)% 1,610     1,449   11% 2,474     2,540   (3)%
Percent colder (warmer) than average weather (48 )%   (38 )%   (2 )%   (11 )%   (9 )%   (6 )%  
  NM = Not Meaningful calculation                        


NORTHWEST NATURAL HOLDINGS            
Consolidated Balance Sheets (Unaudited)   June 30, 
In thousands   2019     2018  
Assets:            
Current assets:            
Cash and cash equivalents   $ 60,885     $ 8,755  
Accounts receivable   42,670     31,512  
Accrued unbilled revenue   14,840     13,995  
Allowance for uncollectible accounts   (814 )   (657 )
Regulatory assets   46,688     41,092  
Derivative instruments   2,186     2,044  
Inventories   23,100     43,109  
Gas reserves   17,206     16,579  
Other current assets   18,296     11,672  
Discontinued operations current assets   14,001     12,743  
Total current assets   239,058     180,844  
Non-current assets:        
Property, plant, and equipment   3,355,811     3,298,856  
Less: Accumulated depreciation   1,016,185     984,998  
Total property, plant, and equipment, net   2,339,626     2,313,858  
Gas reserves   56,171     75,362  
Regulatory assets   318,340     339,177  
Derivative instruments   670     1,077  
Other investments   62,815     64,854  
Operating lease right of use asset   5,013      
Assets under sales-type leases   148,886      
Goodwill   49,393      
Other non-current assets   18,159     11,588  
Total non-current assets   2,999,073     2,805,916  
Total assets   $ 3,238,131     $ 2,986,760  
Liabilities and equity:        
Current liabilities:        
Short-term debt   $ 20,080     $ 47,100  
Current maturities of long-term debt   104,396     74,785  
Accounts payable   76,429     70,551  
Taxes accrued   7,003     6,916  
Interest accrued   7,826     6,652  
Regulatory liabilities   32,484     34,275  
Derivative instruments   4,650     11,744  
Operating lease liabilities   4,271      
Other current liabilities   36,612     32,935  
Discontinued operations current liabilities   13,279     12,922  
Total current liabilities   307,030     297,880  
Long-term debt   806,001     683,895  
Deferred credits and other non-current liabilities:        
Deferred tax liabilities   292,791     281,028  
Regulatory liabilities   605,036     602,294  
Pension and other postretirement benefit liabilities   217,909     218,061  
Derivative instruments   2,062     3,913  
Operating lease liabilities   721      
Other non-current liabilities   129,835     140,163  
Total deferred credits and other non-current liabilities   1,248,354     1,245,459  
Equity:        
Common stock   555,052     452,195  
Retained earnings   330,018     315,462  
Accumulated other comprehensive loss   (8,324 )   (8,131 )
Total equity   876,746     759,526  
Total liabilities and equity   $ 3,238,131     $ 2,986,760  


NORTHWEST NATURAL HOLDINGS                
Consolidated Statements of Cash Flows (Unaudited)   Six Months Ended June 30, 
In thousands   2019   2018
Operating activities:                
Net income   $ 44,296     $ 40,539  
Adjustments to reconcile net income to cash provided by operations:        
Depreciation and amortization   43,959     42,022  
Regulatory amortization of gas reserves   9,467     7,816  
Deferred income taxes   5,917     11,227  
Qualified defined benefit pension plan expense   6,988     2,876  
Contributions to qualified defined benefit pension plans   (4,650 )   (5,570 )
Deferred environmental expenditures, net   (7,148 )   (7,330 )
Amortization of environmental remediation   6,291     6,506  
Regulatory revenue recovery deferral from TCJA   639     9,212  
Regulatory disallowance of pension costs   10,500      
Other   6,282     810  
Changes in assets and liabilities:        
Receivables, net   69,036     79,332  
Inventories   14,929     4,803  
Income and other taxes   16,300     (11,967 )
Accounts payable   (27,843 )   (26,613 )
Interest accrued   520     (121 )
Deferred gas costs   (44,850 )   4,787  
Decoupling mechanism   8,635     4,613  
Other, net   (4,797 )   (990 )
Discontinued operations   638     700  
Cash provided by operating activities   155,109     162,652  
Investing activities:        
Capital expenditures   (91,147 )   (102,370 )
Acquisitions, net of cash acquired   (55,811 )    
Other   (5,389 )   195  
Discontinued operations   (1,050 )   (283 )
Cash used in investing activities   (153,397 )   (102,458 )
Financing activities:        
Proceeds from stock options exercised   1,723     45  
Proceeds from common stock issued   93,182      
Long-term debt issued   175,000      
Long-term debt retired       (22,000 )
Change in short-term debt   (197,540 )   (7,100 )
Cash dividend payments on common stock   (25,916 )   (25,577 )
Other   91     (279 )
Cash provided by (used in) financing activities   46,540     (54,911 )
Increase in cash and cash equivalents   48,252     5,283  
Cash and cash equivalents, beginning of period   12,633     3,472  
Cash and cash equivalents, end of period   $ 60,885     $ 8,755  
         
Supplemental disclosure of cash flow information:        
Interest paid, net of capitalization   $ 19,725     $ 17,117  
Income taxes paid (refunded), net   (6,095 )   13,347  


NORTHWEST NATURAL HOLDINGS    
Reconciliation to GAAP (Unaudited)    
Year-to-Date Results 2019    
    Six Months Ended June 30, 
    2019   2018
In thousands, except per share data   Amount Per
Share
  Amount Per
Share
CONSOLIDATED                            
GAAP net income from continuing operations   $ 45,469   $ 1.56     $ 41,672   $ 1.45  
Regulatory pension disallowance   10,500   0.36        
Income tax effect of regulatory disallowance1   (3,912 ) (0.13 )      
Adjusted net income from continuing operations   $ 52,057   $ 1.79     $ 41,672   $ 1.45  
             
Diluted shares     29,186       28,825  
             
NATURAL GAS DISTRIBUTION SEGMENT            
GAAP net income   $ 42,418   $ 1.45     $ 36,913   $ 1.28  
Regulatory pension disallowance   10,500   0.36        
Income tax effect of regulatory disallowance1   (3,912 ) (0.13 )      
Adjusted net income   $ 49,006   $ 1.68     $ 36,913   $ 1.28  
             
  1. Regulatory disallowance related to the pension balancing account was recognized in the first quarter of 2019. Tax effect of adjustment was calculated using a combined federal and state statutory rate of 26.5% and reducing the disallowance by a $1.1 million deferred taxes specifically associated with the pension balancing account.