The following is management's assessment of NW Holdings' and NW Natural's
financial condition, including the principal factors that affect results of
operations. The discussion refers to the consolidated results for the three
months ended March 31, 2022 and 2021 of NW Holdings, the substantial majority of
which consist of the operating results of NW Natural. When significant activity
exists at NW Holdings that does not exist at NW Natural, additional disclosure
has been provided. References in this discussion to "Notes" are to the Notes to
Unaudited Consolidated Financial Statements in this report. A significant
portion of the business results are seasonal in nature, and, as such, the
results of operations for the three month period is not necessarily indicative
of expected fiscal year results. Therefore, this discussion should be read in
conjunction with NW Holdings' and NW Natural's 2021 Annual Report on Form 10-K,
as applicable (2021 Form 10-K).
NW Natural's natural gas distribution activities are reported in the natural gas
distribution (NGD) segment. The NGD segment also includes NWN Gas Reserves,
which is a wholly-owned subsidiary of Energy Corp, the NGD-portion of NW
Natural's Mist storage facility in Oregon, and NW Natural RNG Holding Company,
LLC. NW Natural RNG Holding Company, LLC holds an investment in Lexington
Renewable Energy, LLC, which is accounted for under the equity method. Other
activities aggregated and reported as other at NW Natural include the non-NGD
storage activity at Mist as well as asset management services and the appliance
retail center operations. Other activities aggregated and reported as other at
NW Holdings include NNG Financial's investment in Kelso-Beaver Pipeline (KB
Pipeline) and NWN Water's investment in Avion Water Company, Inc., which are
accounted for under the equity method, NW Natural Renewables Holdings, LLC and
its non-regulated renewable natural gas activities; and NWN Water, which through
itself or its subsidiaries, owns and continues to pursue investments in the
water sector. See Note 4 for further discussion of our business segment and
other, as well as our direct and indirect wholly-owned subsidiaries.
NON-GAAP FINANCIAL MEASURES. In addition to presenting the results of operations
and earnings amounts in total, certain financial measures are expressed in cents
per share, which are non-GAAP financial measures. All references in this section
to earnings per share (EPS) are on the basis of diluted shares. We use such
non-GAAP financial measures to analyze our financial performance because we
believe they provide useful information to our investors and creditors in
evaluating our financial condition and results of operations. Our non-GAAP
financial measures should not be considered a substitute for, or superior to,
measures calculated in accordance with U.S. GAAP. Moreover, these non-GAAP
financial measures have limitations in that they do not reflect all the items
associated with the operations of the business as determined in accordance with
GAAP. Other companies may calculate similarly titled non-GAAP financial measures
differently than how such measures are calculated in this report, limiting the
usefulness of those measures for comparative purposes. A reconciliation of each
non-GAAP financial measure to the most directly comparable GAAP financial
measure is provided below.
Three Months Ended March 31,
2022 2021
Earnings per share of common stock (diluted) - Total $ 1.80 $ 1.94
Diluted EPS - NGD segment(1) 1.77 1.76
Diluted EPS - NW Holdings - other(1) 0.03 0.18
(1) Non-GAAP financial measure
37
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EXECUTIVE SUMMARY
Current financial results and highlights include:
•Reported net income of $1.80 per share (diluted) for the first quarter of 2022,
compared to net income of $1.94 per share (diluted) in the prior year;
•Added more than 10,800 meters during the past twelve months for a growth rate
of 1.4% at March 31, 2022;
•Invested nearly $70 million in our utility systems in the first three months of
2022 for greater reliability and resiliency;
•Commenced operations at the first renewable natural gas (RNG) facility under
the landmark Oregon legislation Senate Bill 98, which is producing RNG on behalf
of our gas utility customers;
•Construction began on the first RNG facility in which our competitive
renewables business is investing; and
•Continued executing our water and wastewater investment strategy, announcing
acquisitions near our existing service territory in Texas.
Key year-to-date financial highlights for NW Holdings include:
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