Exhibit 99.1
NEWS RELEASE
July 29, 2003
FOR RELEASE AT 6:00 A.M. EDT TUESDAY, JULY 29, 2003
NWN REPORTS RESULTS FOR QUARTER, SIX MONTHS ENDED JUNE 30, 2003
PORTLAND, Ore. - Northwest Natural Gas Company (NYSE: NWN), dba NW
Natural, reported consolidated earnings applicable to common stock of $4.3
million or 17 cents a diluted share for the three months ended June 30, 2003,
compared to a loss of $3.6 million or 14 cents a diluted share in the second
quarter of 2002, Mark S. Dodson, president and chief executive officer, said
Tuesday.
NW Natural's results for last year's second quarter included a charge
($13.7 million before tax) equivalent to 32 cents a diluted share for costs
incurred in its efforts to acquire Portland General Electric Company (PGE) from
Enron Corp. (Enron).
"NW Natural achieved good results in the second quarter from all
segments of the business - gas utility operations, gas storage and non-utility
activities - despite the weak economic conditions in our region," Dodson said.
"We are especially encouraged that our utility results reflect residential and
commercial sales that are up substantially from last year due to customer
growth."
Second Quarter Detail
- ---------------------
NW Natural earned $2.7 million or 11 cents a diluted share from gas
utility operations in the second quarter of 2003, compared to $2.9 million or 12
cents a share in the second quarter of 2002. The Company earned $1.2 million or
5 cents a diluted share from its interstate gas storage business segment in this
year's second quarter, about the same as its results from the gas storage
business in the second quarter of 2002. The Company also earned $0.4 million or
about 1 cent a diluted share from its subsidiary and other non-utility
operations in the second quarter of 2003, compared to a loss of $7.7 million or
31 cents a share in the second quarter of 2002. Last year's results for
non-utility operations were earnings of about 1 cent a share before the charge
for the PGE transaction costs.
Operating margin (gross revenues minus cost of sales) in the second
quarter was $58.5 million, up $2.0 million or 3 percent from last year. Total
gas deliveries were 230 million therms, about the same as last year.
o Sales to residential and commercial customers were 110 million therms,
up 8 percent from 2002. Residential and commercial margin was up $6.5
million, or about 12 percent. The higher sales in the second quarter of
2003 were primarily due to customer growth, while the higher operating
margin was due to the combination of customer growth and rate changes
effective in connection with NW Natural's "Conservation Tariff" in
Oregon. Weather in both quarters was cooler than average by about the
same amounts.
o Sales and transportation deliveries to industrial customers were 119
million therms, down 7 percent from 2002. Margin from industrial
customers (not including electric generation customers) was down $0.3
million, or about 3 percent. The lower gas deliveries and margin were
due to the combination of a weaker economy and customer migrations from
higher-margin to lower-margin service contracts.
o Margin from the electric generation market in the second quarter of
2003 was negligible, down from $2.2 million in the second quarter of
2002 when the margin contribution from this sector was equivalent to 5
cents a share of earnings. Contracts for service to two customers in
this market expired at the end of the second quarter of 2002.
NW Natural had 566,955 customers as of June 30, 2003, up 3.3 percent
from a year earlier. Customer growth in the past year contributed an estimated
2.8 million therms in sales volumes and $1.3 million in margin to the second
quarter's results. Temperatures in NW Natural's service area in Oregon and
Washington (measured in degree-days) were 9 percent cooler than the 20-year
average for the period, compared to 8 percent cooler than average in the second
quarter of 2002.
NW Natural's "Conservation Tariff," approved by the Oregon Public
Utility Commission (OPUC) effective Oct. 1, 2002, was designed to recover lost
margin due to changes in residential and commercial customers' consumption
patterns. The tariff provided for small rate increases in residential and
commercial rates relating to the impact of price elasticity. These rate
increases contributed an estimated $2.0 million of margin during the second
quarter of 2003, equivalent to 5 cents a diluted share of earnings. The tariff
also included an experimental partial decoupling mechanism that breaks the link
between the Company's earnings and the quantity of energy consumed by its
customers, so the Company does not have an incentive to discourage customers'
conservation efforts. NW Natural deferred $0.9 million of lost margin in the
second quarter of 2003 for future recovery under the decoupling mechanism,
equivalent to 2 cents a diluted share of earnings.
As reported above, NW Natural earned 5 cents a diluted share, after
tax and revenue sharing, from interstate gas storage services in the second
quarters of both years. The Company provides gas storage services to customers
in the interstate market from its Mist gas storage field, using storage capacity
that has been developed in advance of core utility customers' requirements.
Income from the gas storage business segment includes the results from a
contract with an independent energy trading company that seeks to optimize the
use of NW Natural's assets by trading temporarily unused portions of its gas
storage capacity and upstream pipeline transportation capacity.
NW Natural has a Purchased Gas Adjustment (PGA) tariff in Oregon under
which it absorbs 33 percent of any excess cost of gas, or retains 33 percent of
any savings, both as compared to the gas commodity prices built into rates. The
Company also has an off-system gas sales program under which it shares margins
realized from its sales in the off-system market of natural gas that was under
contract with gas suppliers, but was not required for delivery to core market
customers. NW Natural's share of the savings and margins realized from its gas
commodity and off-system gas sales programs in the second quarter of 2003
contributed $0.3 million of margin, equivalent to about 1 cent a diluted share
of earnings. The equivalent result in the second quarter of 2002 was shared
savings and margins of $1.5 million, equivalent to about 3 cents a share of
earnings.
NW Natural's results for the second quarters of 2003 and 2002
incorporate significant swings in some elements of operating expense or other
income that have been volatile in recent years.
o Pension expense for NW Natural's defined benefit plans, as measured
under SFAS 87, was $0.9 million in the second quarter of 2003, compared
to less than $0.1 million in the second quarter of 2002.
o Health insurance expense was $2.0 million in the second quarter of
2003, up from $1.5 million in the second quarter of 2002.
o Partially offsetting these cost increases, however, was a gain of $0.5
million (recorded in Other Income) in the second quarter of 2003 for
an increase in fair value of investments related to certain
corporate-owned life insurance policies, compared to a $0.6
million loss recorded in the second quarter of 2002 for a decrease in
fair value of the same investments. These policies are among the
corporate-owned life insurance policies NW Natural uses to fund one of
its employee benefit programs.
Results for the second quarter of 2002 included adjustments reducing
cost of gas relating to one-time corrections in the amounts of deferred expenses
for the recovery of pipeline demand charges under NW Natural's PGA mechanism.
The adjustments, totaling $2.9 million, contributed 7 cents a share to earnings
in the second quarter of 2002 of which $2.6 million or 6 cents a share applied
to periods prior to 2002. The methodology represented in the corrections
continues to be applied in the Company's accounting for pipeline demand charges.
Six-Month Results
- -----------------
Results for the six months ended June 30, 2003, were earnings
applicable to common stock of $30.6 million, or $1.18 a diluted share, compared
to earnings of $30.3 million, also equivalent to $1.18 a diluted share, in the
first six months of 2002. The results for the first six months of 2002 included
the charge equivalent to 32 cents a diluted share for the PGE transaction costs,
as reported above.
Operating margin in the first six months of 2003 was $157.1 million,
down $10.1 million or 6 percent from last year. Total gas deliveries were 577
million therms, down about 8 percent from last year.
o Sales to residential and commercial customers were 330 million therms,
down 5 percent from 2002. Residential and commercial margin was down
$1.3 million, or about 1 percent. The decline in sales and margin in
these market segments was primarily due to warm weather in the first
quarter of 2003. Temperatures in the first half of the year were 4
percent warmer than the 20-year average, and 9 percent warmer than last
year.
o Sales and transportation deliveries to industrial and electric
generation customers were 247 million therms, down about 11 percent
from last year. Margin from industrial and electric generation
customers was down $7.5 million, or about 29 percent. The lower
deliveries were due to the weaker economy, while the lower margin was
also due to customer migration to lower-margin service and the
expiration of contracts with two electric generation customers at the
end of the second quarter of 2002. Margin from the electric generation
market in the first six months of 2002 was $4.6 million, equivalent to
earnings of 11 cents a diluted share.
o The rate increases pursuant to the Conservation Tariff contributed an
estimated $6.0 million of margin during the first six months of 2003,
equivalent to 14 cents a share of earnings, and the decoupling
mechanism contributed $1.4 million of margin, equivalent to 3 cents a
share of earnings.
NW Natural earned $2.5 million, after tax and revenue sharing, from
interstate gas storage services in the first six months of 2003, equivalent to
10 cents a diluted share, compared to earnings from storage services of $2.0
million or 8 cents a share in the first half of 2002.
NW Natural's share of the savings and margin realized from its gas
commodity and off-system gas sales programs under its PGA tariff contributed
$4.9 million of margin in the first six months of 2003, equivalent to 11 cents a
diluted share of earnings. The equivalent result in the first half of 2002 was
$10.4 million, equivalent to 25 cents a diluted share.
Results for the first six months of 2003 and 2002 also incorporate
swings in the elements of operating expense or other income that contributed to
variances in the second quarter, cited above.
o Pension expense for the defined benefit plans was $1.9 million in the
six months ended June 30, 2003, compared to $0.1 million in the first
six months of 2002.
o Health insurance expense was $3.6 million in the first six months
of 2003, up from $3.0 million in the first six months of 2002.
o Partially offsetting these increases was a net gain of $0.4 million in
the first six months of 2003 for an increase in fair value of the
corporate-owned life insurance policies, compared to losses of $0.6
million in the first six months of 2002.
Updated Outlook for 2003
- ------------------------
NW Natural estimates that its results for the quarter ending Sept. 30,
2003, will be a seasonal loss in the range of 25 to 35 cents a share, and
confirms its prior estimate that its earnings for 2003 will be in the range of
$1.65 to $1.80 a share. Consistent with prior earnings guidance, both estimates
assume average weather conditions for the balance of the year.
The earnings estimate for 2003 also assumes results in NW Natural's
general rate case in Oregon that are consistent with the Company's positions on
the remaining contested issues in the case. NW Natural filed its general rate
case in November 2002, proposing rate increases in Oregon averaging 6.8 percent.
The filing is subject to approval by the OPUC. The procedural schedule for the
case contemplates that new rates will be authorized to be in effect during the
fourth quarter of 2003. The Company and the OPUC Staff have filed stipulations
or reached tentative agreements resolving many of the previously contested
issues in the case. These stipulations and agreements, if approved by the
Commission, would reduce the amount of NW Natural's proposed revenue increase.
The issues that have been stipulated or tentatively resolved do not include the
issue of rate of return on equity.
Dividends Declared
- ------------------
The Board of Directors of NW Natural has declared a quarterly dividend
of 31.5 cents a share on the Company's common stock, as well as regular
quarterly dividends on its preferred stock. The dividends will be paid on August
15, 2003, to shareholders of record on July 31, 2003.
NOTE: This report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The
Company's future operating results will be affected by various uncertainties and
risk factors, many of which are beyond the Company's control, including
governmental policy and regulatory action, the competitive environment and
economic factors, as well as weather conditions. For a more complete description
of these uncertainties and risk factors, see the Company's filings with the
Securities and Exchange Commission on Form 10-K for the year ended Dec. 31,
2002, and on Form 10-Q for the quarter ended March 31, 2003.
-0-
PRESS CONTACT: Steve Sechrist
503/226-4211 Ext. 3517
INVESTOR CONTACT: James Boehlke
503/721-2451
503/226-4211 Ext. 2451
NORTHWEST NATURAL GAS COMPANY
Comparative Income Statement
(Consolidated - Unaudited)
Three Months Ended
------------------
6/30/03 6/30/02 Increase
------- ------- --------
1.Gross Operating Revenues $117,489,000 $101,873,000 $ 15,616,000
2.Net Income (Loss) $ 4,462,000 $ (2,992,000) $ 7,454,000
a/3.Earnings (Loss) Applicable to
Common Stock $ 4,315,000 $ (3,582,000) $ 7,897,000
4.Average Shares of
Common Stock
Outstanding 25,682,000 25,410,000 272,000
a/5.Basic Earnings (Loss) Per Share
of Common Stock $ 0.17 $ (0.14) $ 0.31
a/6.Diluted Earnings (Loss) Per Share
of Common Stock $ 0.17 $ (0.14) $ 0.31
Year to Date Increase
------------ --------
6/30/03 6/30/02 (Decrease)
------- ------- ----------
1.Gross Operating Revenues $324,028,000 $380,436,000 $(56,408,000)
2.Net Income $ 30,866,000 $ 31,455,000 $ (589,000)
a/3.Earnings Applicable to
Common Stock $ 30,572,000 $ 30,270,000 $ 302,000
4.Average Shares of
Common Stock
Outstanding 25,649,000 25,338,000 311,000
a/5.Basic Earnings Per Share
of Common Stock $ 1.19 $ 1.19 $ -
a/6.Diluted Earnings Per Share
of Common Stock $ 1.18 $ 1.18 $ -
a/ After allowance for preferred and preference stock dividend requirements.
NORTHWEST NATURAL GAS COMPANY
Comparative Income Statement
(Consolidated - Unaudited)
Twelve Months Ended Increase
------------------- --------
6/30/03 6/30/02 (Decrease)
------- ------- ----------
1.Gross Operating Revenues $584,968,000 $695,197,000 $(110,229,000)
2.Net Income $ 43,203,000 $ 50,870,000 $ (7,667,000)
a/3.Earnings Applicable to
Common Stock $ 41,814,000 $ 48,495,000 $ (6,681,000)
4.Average Shares of
Common Stock
Outstanding 25,586,000 25,250,000 336,000
a/5.Basic Earnings Per Share
of Common Stock $ 1.63 $ 1.92 $ (0.29)
a/6.Diluted Earnings Per Share
of Common Stock $ 1.62 $ 1.90 $ (0.28)
a/ After allowance for preferred and preference stock dividend requirements.
NORTHWEST NATURAL GAS COMPANY
Financial Highlights
(Thousands, except per share amounts)
Second Quarter - 2003
3 MONTHS ENDED 6 MONTHS ENDED 12 MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
2003 2002 2003 2002 2003 2002
----------------------- ------------------------ ------------------------
Condensed Consolidated Statements of Income:
Gross Operating Revenues $ 117,489 $ 101,873 $ 324,028 $ 380,436 $ 584,968 $ 695,197
Cost of Sales 58,940 45,309 166,891 213,206 307,517 398,335
------------------------ ------------------------ ------------------------
Operating Margin 58,549 56,564 157,137 167,230 277,451 296,862
Operating Expense:
O&M 23,331 20,233 47,402 42,402 90,120 84,293
Other Taxes 7,350 6,852 18,167 18,854 33,389 35,135
D&A 13,338 12,784 26,504 25,598 52,996 50,823
------------------------ ------------------------ ------------------------
Total Operating Expenses 44,019 39,869 92,073 86,854 176,505 170,251
------------------------ ------------------------ ------------------------
Operating Income 14,530 16,695 65,064 80,376 100,946 126,611
Other Income (Expense) 1,348 (13,557) 764 (14,427) 301 (13,690)
Interest Charges - Net 9,126 8,577 18,072 16,726 35,478 34,345
Income Tax Expense (Benefit) 2,290 (2,447) 16,890 17,768 22,566 27,706
------------------------ ------------------------ ------------------------
Net Income (Loss) from Operations 4,462 (2,992) 30,866 31,455 43,203 50,870
Preferred and Preference Dividends 147 590 294 1,185 1,389 2,375
------------------------ ------------------------ ------------------------
Earnings (Loss) Applicable to Common Stock $ 4,315 $ (3,582) $ 30,572 $ 30,270 $ 41,814 $ 48,495
======================== ======================== ========================
Common Shares Outstanding:
Average for Period 25,682 25,410 25,649 25,338 25,586 25,250
End of period 25,726 25,465 25,726 25,465 25,726 25,465
Earnings (loss) per Share:
Basic $ 0.17 $ (0.14) $ 1.19 $ 1.19 $ 1.63 $ 1.92
Diluted $ 0.17 $ (0.14) $ 1.18 $ 1.18 $ 1.62 $ 1.90
CONDENSED CONSOLIDATED BALANCE SHEETS:
Plant and property $ 1,026,354 $ 974,597 $ 1,026,354 $ 974,597 $ 1,026,354 $ 974,597
Other investments 12,833 13,290 12,833 13,290 12,833 13,290
Current assets 128,424 129,315 128,424 129,315 128,424 129,315
Regulatory assets and other 158,256 167,452 158,256 167,452 158,256 167,452
------------------------ ------------------------ ------------------------
Total assets $ 1,325,867 $ 1,284,654 $ 1,325,867 $ 1,284,654 $ 1,325,867 $ 1,284,654
======================== ======================== ========================
Common stock equity $ 501,071 $ 487,936 $ 501,071 $ 487,936 $ 501,071 $ 487,936
Redeemable preferred and preference stock 7,500 33,250 7,500 33,250 7,500 33,250
Long-term debt 450,858 416,183 450,858 416,183 450,858 416,183
------------------------ ------------------------ ------------------------
Total capitalization 959,429 937,369 959,429 937,369 959,429 937,369
------------------------ ------------------------ ------------------------
Notes payable 16,600 - 16,600 - 16,600 -
Long-term debt due within one year 35,000 50,000 35,000 50,000 35,000 50,000
Other current liabilities 93,188 79,031 93,188 79,031 93,188 79,031
Deferred income taxes and investment tax credits 152,024 146,035 152,024 146,035 152,024 146,035
Regulatory liabilities and other 69,626 72,219 69,626 72,219 69,626 72,219
------------------------ ------------------------ -----------------------
Total capitalization and liabilities $ 1,325,867 $ 1,284,654 $ 1,325,867 $ 1,284,654 $ 1,325,867 $ 1,284,654
======================== ======================== ========================
Dividends Paid Per Share $ 0.315 $ 0.315 $ 0.63 $ 0.63 $ 1.26 $ 1.255
Book Value Per Share - end of period $ 19.48 $ 19.16 $ 19.48 $ 19.16 $ 19.48 $ 19.16
Market Closing Price - end of period $ 27.25 $ 28.75 $ 27.25 $ 28.75 $ 27.25 $ 28.75
NORTHWEST NATURAL GAS COMPANY
Financial Highlights
(Thousands, except per share amounts)
Second Quarter - 2003
3 MONTHS ENDED 6 MONTHS ENDED 12 MONTHS ENDED
JUNE 30 JUNE 30 JUNE 30
2003 2002 2003 2002 2003 2002
----------------------- ---------------------- ----------------------
OPERATING STATISTICS:
Total Customers-end of period 566,955 548,589 566,955 548,589 566,955 548,589
Gas Deliveries (therms)
Res. & Comm. Customers 110,458 102,448 330,219 346,763 574,085 599,815
Industrial Firm 11,967 15,675 26,521 39,430 50,306 76,914
Industrial Interruptible 8,303 5,905 11,988 20,280 17,949 55,318
Transportation 98,916 106,616 208,076 217,348 436,727 398,792
----------------------- ---------------------- ----------------------
Total 229,644 230,644 576,804 623,821 1,079,067 1,130,839
Gas Revenues
Res. & Comm. Customers $ 94,684 $ 78,333 $ 281,257 $ 319,929 $ 504,836 $ 569,541
Industrial Firm 7,019 9,026 15,685 26,891 31,759 51,887
Industrial Interruptible 4,099 2,675 5,943 12,571 9,309 32,356
Transportation 5,048 7,431 10,853 13,883 22,990 25,802
Other revenues 4,196 1,906 5,247 2,079 7,186 2,002
----------------------- ---------------------- ----------------------
Total $ 115,046 $ 99,371 $ 318,985 $ 375,353 $ 576,080 $ 681,588
Cost of gas sold $ 58,934 $ 45,294 $ 166,868 $ 212,438 $ 307,464 $ 391,520
Net operating revenues (utility margin) $ 56,112 $ 54,077 $ 152,117 $ 162,915 $ 268,616 $ 290,068
Degree Days
Normal (20-year average) 672 674 2,510 2,510 4,216 4,215
Actual 730 729 2,413 2,649 3,996 4,288
Colder (warmer) than normal 9% 8% -4% 6% -5% 2%