NW Natural Holdings Reports Second Quarter and Year-to-Date 2019 Results
PORTLAND, Aug. 06, 2019 (GLOBE NEWSWIRE) -- Northwest Natural Holding Company, (NYSE: 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.
__________
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
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, (NYSE: 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.
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
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.
Source: GlobeNewswire
(August 6, 2019 - 6:00 AM EDT)
