NORTHWEST NATURAL GAS CO - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2004

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition period from to

Commission File No. 1-15973

LOGO

NORTHWEST NATURAL GAS COMPANY

(Exact name of registrant as specified in its charter)

Oregon

93-0256722

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

220 N.W. Second Avenue, Portland, Oregon 97209

(Address of principal executive offices) (Zip Code)

Registrant’s Telephone Number, including area code: (503) 226-4211

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes x No ¨

At July 30, 2004, 27,343,860 shares of the registrant’s Common Stock, $3¹/6 par value (the only class of Common Stock) were outstanding.

NORTHWEST NATURAL GAS COMPANY

For the Quarterly Period Ended June 30, 2004


		Page Number
	PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements

	Consolidated Statements of Income for the three-month and six-month periods ended June 30, 2004 and 2003	3

	Consolidated Statements of Earnings Invested in the Business and Comprehensive Income for the six-month periods ended June 30, 2004 and 2003	4

	Consolidated Balance Sheets at June 30, 2004 and 2003 and Dec. 31, 2003	5

	Consolidated Statements of Cash Flows for the six-month periods ended June 30, 2004 and 2003	7

	Consolidated Statements of Capitalization at June 30, 2004 and 2003 and Dec. 31, 2003	8

	Notes to Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Results of Operations and Financial Condition	16

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31

Item 4.	Controls and Procedures	31

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	32

Item 2.	Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities	32

Item 4.	Submission of Matters to a Vote of Security Holders	33

Item 5.	Other Information	33

Item 6.	Exhibits and Reports on Form 8-K	34

	Signature	34

NORTHWEST NATURAL GAS COMPANY

PART I. FINANCIAL INFORMATION

Consolidated Statements of Income

(Unaudited)


	Three Months Ended June 30,					Six Months Ended June 30,
Thousands, except per share amounts	2004			2003		2004		2003
Operating revenues:
Gross operating revenues	$	109,659		$	117,489	$	364,109	$	324,028
Cost of sales		57,030			58,940		199,446		166,891

Net operating revenues		52,629			58,549		164,663		157,137

Operating expenses:
Operations and maintenance		24,307			23,331		49,817		47,402
Taxes other than income taxes		7,531			7,350		19,984		18,167
Depreciation and amortization		13,913			13,338		27,819		26,504

Total operating expenses		45,751			44,019		97,620		92,073

Income from operations		6,878			14,530		67,043		65,064

Other income		442			1,348		465		764
Interest charges - net of amounts capitalized		8,764			9,126		17,708		18,072

Income (loss) before income taxes		(1,444	)		6,752		49,800		47,756
Income tax expense (benefit)		(728	)		2,290		17,904		16,890


Net income (loss)		(716	)		4,462		31,896		30,866
Redeemable preferred stock dividend requirements		—			147		—		294

Earnings (loss) applicable to common stock	$	(716	)	$	4,315	$	31,896	$	30,572

Average common shares outstanding:
Basic		27,257			25,682		26,615		25,649
Diluted		27,582			26,041		26,947		26,002

Earnings (loss) per share of common stock:
Basic	$	(0.03	)	$	0.17	$	1.20	$	1.19
Diluted	$	(0.03	)	$	0.17	$	1.19	$	1.18

See Notes to Consolidated Financial Statements

NORTHWEST NATURAL GAS COMPANY

PART I. FINANCIAL INFORMATION

Consolidated Statements of Earnings Invested in the Business and

Comprehensive Income

(Unaudited)


	Six Months Ended June 30,
Thousands	2004					2003
Earnings invested in the business:
Balance at beginning of period	$	170,053				$	157,136
Net income		31,896		$	31,896		30,866		$	30,866
Cash dividends paid:
Redeemable preferred stock		—					(299	)
Common stock		(17,306	)				(16,144	)
Common stock expense		(1,453	)				—

Balance at end of period	$	183,190				$	171,559

Accumulated other comprehensive income (loss):
Balance at beginning of period	$	(1,016	)			$	(3,084	)

Comprehensive income				$	31,896				$	30,866

Balance at end of period	$	(1,016	)			$	(3,084	)

See Notes to Consolidated Financial Statements

NORTHWEST NATURAL GAS COMPANY

PART I. FINANCIAL INFORMATION

Consolidated Balance Sheets


Thousands	June 30, 2004 (Unaudited)			June 30, 2003 (Unaudited)			Dec. 31, 2003
Assets:
Plant and property:
Utility plant	$	1,717,296		$	1,592,613		$	1,659,089
Less accumulated depreciation		491,340			454,261			471,716

Utility plant - net		1,225,956			1,138,352			1,187,373

Non-utility property		26,807			23,008			23,395
Less accumulated depreciation and amortization		5,083			4,631			4,855

Non-utility property - net		21,724			18,377			18,540

Total plant and property		1,247,680			1,156,729			1,205,913

Other investments		15,083			12,833			12,635

Current assets:
Cash and cash equivalents		7,528			24,059			4,706
Accounts receivable		44,755			34,137			53,976
Allowance for uncollectible accounts		(1,886	)		(2,315	)		(1,763	)
Accrued unbilled revenue		11,970			14,579			59,109
Inventories of gas, materials and supplies		48,960			35,405			50,859
Prepayments and other current assets		17,209			21,729			32,661

Total current assets		128,536			127,594			199,548

Regulatory assets:
Income tax asset		64,475			47,975			63,449
Deferred gas costs receivable		9,513			—			—
Unamortized costs on debt redemptions		7,568			6,277			7,803
Other		5,377			6,661			6,020

Total regulatory assets		86,933			60,913			77,272

Other assets:
Investment in life insurance		60,000			57,660			59,710
Fair value of non-trading derivatives		28,285			22,842			23,885
Other		13,915			16,841			12,369

Total other assets		102,200			97,343			95,964

Total assets	$	1,580,432		$	1,455,412		$	1,591,332

See Notes to Consolidated Financial Statements

NORTHWEST NATURAL GAS COMPANY

PART I. FINANCIAL INFORMATION

Consolidated Balance Sheets


Thousands	June 30, 2004 (Unaudited)		June 30, 2003 (Unaudited)		Dec. 31, 2003
Capitalization and liabilities:
Capitalization:
Common stock	$	86,563	$	81,467	$	82,137
Premium on common stock		295,159	&nbs

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