Northwest Natural Holding Co [NWN] Filings

10-Q 1 nwn-20240630.htm 10-Q nwn-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

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

For the quarterly period ended June 30, 2024

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

For the transition period from ___________ to____________

NORTHWEST NATURAL HOLDING COMPANY

NORTHWEST NATURAL GAS COMPANY

(Exact name of registrant as specified in its charter)

Commission file number

1-38681

Commission file number

1-15973

Oregon

82-4710680

Oregon

93-0256722

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

250 SW Taylor Street

Portland

Oregon

97204

Portland

Oregon

97204

(Address of principal executive offices)

(Zip Code)

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code:

(503)

226-4211

Registrant’s telephone number, including area code:

(503)

226-4211

Securities registered pursuant to Section 12(b) of the Act:

Registrant

Title of each class

Trading Symbol

Name of each exchange

on which registered

NORTHWEST NATURAL HOLDING COMPANY

Common Stock

NWN

New York Stock Exchange

NORTHWEST NATURAL GAS COMPANY

None

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.

NORTHWEST NATURAL HOLDING COMPANY

Yes

☒

☐

NORTHWEST NATURAL GAS COMPANY

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

NORTHWEST NATURAL HOLDING COMPANY

Yes

☒

☐

NORTHWEST NATURAL GAS COMPANY

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.

NORTHWEST NATURAL HOLDING COMPANY

NORTHWEST NATURAL GAS COMPANY

Large Accelerated Filer

☒

Large Accelerated Filer

☐

Accelerated Filer

☐

Accelerated Filer

☐

Non-accelerated Filer

☐

Non-accelerated Filer

☒

Smaller Reporting Company

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

NORTHWEST NATURAL HOLDING COMPANY

Yes

☐

☒

NORTHWEST NATURAL GAS COMPANY

Yes

☐

☒

At July 26, 2024, 38,670,272 shares of Northwest Natural Holding Company's Common Stock (the only class of Common Stock) were outstanding. All shares of Northwest Natural Gas Company's Common Stock (the only class of Common Stock) outstanding were held by Northwest Natural Holding Company.

This combined Form 10-Q is separately filed by Northwest Natural Holding Company and Northwest Natural Gas Company. Information contained in this document relating to Northwest Natural Gas Company is filed by Northwest Natural Holding Company and separately by Northwest Natural Gas Company. Northwest Natural Gas Company makes no representation as to information relating to Northwest Natural Holding Company or its subsidiaries, except as it may relate to Northwest Natural Gas Company and its subsidiaries.

NORTHWEST NATURAL GAS COMPANY

NORTHWEST NATURAL HOLDING COMPANY

For the Quarterly Period Ended June 30, 2024

TABLE OF CONTENTS


PART 1.	FINANCIAL INFORMATION	Page

	Forward-Looking Statements	3

Item 1.	Unaudited Financial Statements:
	Consolidated Statements of Comprehensive Income of Northwest Natural Holding Company for the three and six months ended June 30, 2024 and 2023	5
	Consolidated Balance Sheets of Northwest Natural Holding Company at June 30, 2024 and 2023 and December 31, 2023	6
	Consolidated Statements of Shareholders' Equity of Northwest Natural Holding Company for the three and six months ended June 30, 2024 and 2023	8
	Consolidated Statements of Cash Flows of Northwest Natural Holding Company for the six months ended June 30, 2024 and 2023	9
	Consolidated Statements of Comprehensive Income of Northwest Natural Gas Company for the three and six months ended June 30, 2024 and 2023	10
	Consolidated Balance Sheets of Northwest Natural Gas Company at June 30, 2024 and 2023 and December 31, 2023	11
	Consolidated Statements of Shareholder's Equity of Northwest Natural Gas Company for the three and six months ended June 30, 2024 and 2023	13
	Consolidated Statements of Cash Flows of Northwest Natural Gas Company for the six months ended June 30, 2024 and 2023	14
	Notes to Unaudited Consolidated Financial Statements	15

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65

Item 4.	Controls and Procedures	66

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	66

Item 1A.	Risk Factors	66

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66



Item 6.	Exhibits	67

	Signatures	69

PART I. FINANCIAL INFORMATION

FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which are subject to the safe harbors created by such Act. Forward-looking statements can be identified by words such as anticipates, assumes, may, intends, plans, projects, seeks, should, believes, estimates, expects, will, could, and similar references (including the negatives thereof) to future periods, although not all forward-looking statements contain these words. Examples of forward-looking statements include, but are not limited to, statements regarding the following:

•plans, projections and predictions;

•objectives, goals, visions or strategies;

•assumptions, generalizations and estimates;

•ongoing continuation of past practices or patterns;

•future events or performance;

•trends;

•risks;

•uncertainties;

•timing and cyclicality;

•economic conditions, including impacts of inflation and interest rates, bank failure, recessionary risk, and general economic uncertainty;

•earnings and dividends;

•capital expenditures and allocation;

•capital markets or access to capital;

•capital or organizational structure;

•matters related to climate change and our role in decarbonization or a low-carbon future;

•renewable natural gas, environmental attributes related thereto, and hydrogen;

•our strategy to reduce greenhouse gas emissions and the efficacy of communicating that strategy to shareholders, investors, stakeholders and communities;

•the policies and priorities of the current presidential administration and U.S. Congress;

•the policies and priorities of the officials elected in the 2024 presidential and congressional elections;

•growth;

•customer rates;

•pandemic and related illness or quarantine and economic conditions related thereto or resulting therefrom;

•labor relations and workforce succession;

•commodity costs;

•desirability and cost competitiveness of natural gas;

•gas reserves;

•operational performance and costs;

•energy policy, infrastructure and preferences;

•public policy approach and involvement;

•efficacy of derivatives and hedges;

•liquidity, financial positions, and planned securities issuances;

•valuations;

•project and program development, expansion, or investment;

•business development efforts, including new business lines such as unregulated renewable natural gas, and acquisitions and integration thereof;

•implementation and execution of our water strategy;

•pipeline capacity, demand, location, and reliability;

•adequacy of property rights and operations center development;

•technology implementation and cybersecurity practices;

•competition;

•procurement and development of gas (including renewable natural gas) and water supplies;

•estimated expenditures, supply chain and third party availability and impairment;

•supply chain disruptions;

•costs of compliance, and our ability to include those costs in rates;

•customers bypassing our infrastructure;

•credit exposures and credit ratings or changes in credit ratings;

•uncollectible account amounts;

•rate or regulatory outcomes, recovery or refunds, and the availability of public utility commissions to take action;

•impacts or changes of executive orders, laws, rules and regulations, or legal challenges related thereto, including the Inflation Reduction Act or other energy climate related legislation;

•tax liabilities or refunds, including effects of tax legislation;

•levels and pricing of gas storage contracts and gas storage markets;

•outcomes, timing and effects of potential claims, litigation, regulatory actions, and other administrative matters;

•projected obligations, expectations and treatment with respect to, and the impact of new legislation on, retirement plans;

•international, federal, state, and local efforts to regulate, in a variety of ways, greenhouse gas emissions, and the effects of those efforts;

•geopolitical factors, including the ongoing conflicts in Europe and the Middle East;

•availability, adequacy, and shift in mix, of gas and water supplies;

•effects of new or anticipated changes in critical accounting policies or estimates;

•approval and adequacy of regulatory deferrals;

•effects and efficacy of regulatory mechanisms; and

•environmental, regulatory, litigation and insurance costs and recoveries, and timing thereof.

Forward-looking statements are based on our current expectations and assumptions regarding our 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. Our actual results may differ materially from those contemplated by the forward-looking statements. We therefore caution you against relying on any of these forward-looking statements. They are neither statements of historical fact nor guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in NW Holdings' and NW Natural's 2023 Annual Report on Form 10-K, 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 Disclosures about Market Risk”, respectively, and Part I of this report, Items 2 and 3, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Quantitative and Qualitative Disclosures About Market Risk”, respectively.

Any forward-looking statement made in this report speaks only as of the date on which it is made. Factors or events that could cause actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We 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.

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

NORTHWEST NATURAL HOLDING COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands, except per share data	2024		2023		2024		2023

Operating revenues	$	211,714	$	237,859	$	645,184	$	700,282

Operating expenses:
Cost of gas	72,970		102,433		248,687		308,182
Operations and maintenance	64,950		66,819		138,564		138,636
Environmental remediation	2,329		2,140		8,075		7,515
General taxes	11,853		10,889		27,321		25,108
Revenue taxes	9,211		9,185		27,455		28,227
Depreciation	33,762		31,293		66,860		62,758
Other operating expenses	933		1,257		2,689		2,505
Total operating expenses	196,008		224,016		519,651		572,931
Income from operations	15,706		13,843		125,533		127,351
Other income (expense), net	6		6,618		(1,128)		8,224
Interest expense, net	19,311		18,974		39,842		37,270
(Loss) income before income taxes	(3,599)		1,487		84,563		98,305
Income tax (benefit) expense	(812)		243		23,527		25,390


Net (loss) income	(2,787)		1,244		61,036		72,915
Other comprehensive income (loss):
Change in employee benefit plan liability, net of taxes of $115 and $49 for the three and six months ended June 30, 2024, respectively	115		—		(134)		—
Amortization of non-qualified employee benefit plan liability, net of taxes of $55 and $37 for the three months ended and $101 and $74 for the six months ended June 30, 2024 and 2023, respectively	152		103		279		205
Unrealized gain on interest rate swaps, net of taxes of $22 and $445 for the three months ended and $146 and $297 for the six months ended June 30, 2024 and 2023, respectively	58		1,236		404		825
Comprehensive (loss) income	$	(2,462)	$	2,583	$	61,585	$	73,945
Average common shares outstanding:
Basic	38,260		36,019		38,013		35,815
Diluted	38,260		36,062		38,059		35,845






(Loss) earnings per share of common stock:
Basic	$	(0.07)	$	0.03	$	1.61	$	2.04
Diluted	(0.07)		0.03		1.60		2.03

See Notes to Unaudited Consolidated Financial Statements

NORTHWEST NATURAL HOLDING COMPANY

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	June 30,		June 30,		December 31,
In thousands	2024		2023		2023

Assets:
Current assets:
Cash and cash equivalents	$	65,192	$	137,759	$	32,920

Accounts receivable	61,821		73,930		121,341
Accrued unbilled revenue	22,863		21,924		83,138
Allowance for uncollectible accounts	(3,758)		(3,297)		(3,455)
Regulatory assets	124,102		111,819		178,270
Derivative instruments	8,033		12,423		11,380
Inventories	107,332		67,502		112,571


Other current assets	37,535		35,797		65,275

Total current assets	423,120		457,857		601,440
Non-current assets:
Property, plant, and equipment	4,764,593		4,391,993		4,556,609
Less: Accumulated depreciation	1,234,148		1,181,230		1,198,555
Total property, plant, and equipment, net	3,530,445		3,210,763		3,358,054
Regulatory assets	308,521		307,999		333,443
Derivative instruments	2,985		2,118		431
Other investments	83,795		104,330		102,951
Operating lease right of use asset, net	69,813		72,096		71,308
Assets under sales-type leases	127,794		132,045		129,882
Goodwill	163,166		152,670		163,344
Other non-current assets	112,727		96,827		106,239

Total non-current assets	4,399,246		4,078,848		4,265,652
Total assets	$	4,822,366	$	4,536,705	$	4,867,092

See Notes to Unaudited Consolidated Financial Statements

NORTHWEST NATURAL HOLDING COMPANY

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	June 30,		June 30,		December 31,
In thousands, except share information	2024		2023		2023

Liabilities and equity:
Current liabilities:
Short-term debt	$	79,000	$	41,000	$	89,780
Current maturities of long-term debt	866		240,714		150,865
Accounts payable	93,564		101,369		145,361
Taxes accrued	11,302		12,217		15,454
Interest accrued	18,130		11,443		15,836
Regulatory liabilities	99,663		61,546		84,962
Derivative instruments	52,048		42,135		98,661
Operating lease liabilities	1,851		1,732		2,333
Other current liabilities	79,116		58,777		93,626

Total current liabilities	435,540		570,933		696,878
Long-term debt	1,574,751		1,294,578		1,425,435
Deferred credits and other non-current liabilities:
Deferred tax liabilities	394,489		380,058		382,673
Regulatory liabilities	705,929		672,215		695,896
Pension and other postretirement benefit liabilities	153,849		147,063		158,116
Derivative instruments	11,988		25,212		28,055
Operating lease liabilities	76,692		77,951		77,167
Other non-current liabilities	122,412		128,417		119,034

Total deferred credits and other non-current liabilities	1,465,359		1,430,916		1,460,941
Commitments and contingencies (Note 16)
Equity:
Common stock - no par value; authorized 100,000,000 shares; issued and outstanding 38,669,098, 36,064,625, and 37,631,212 at June 30, 2024 and 2023, and December 31, 2023, respectively	929,498		831,135		890,976
Retained earnings	423,718		414,398		399,911
Accumulated other comprehensive loss	(6,500)		(5,255)		(7,049)
Total equity	1,346,716		1,240,278		1,283,838
Total liabilities and equity	$	4,822,366	$	4,536,705	$	4,867,092

See Notes to Unaudited Consolidated Financial Statements

NORTHWEST NATURAL HOLDING COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)


In thousands, except per share amounts	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Total shareholders' equity, beginning balances	$	1,343,386	$	1,248,307	$	1,283,838	$	1,175,441

Common stock:
Beginning balances	905,153		824,304		890,976		805,253
Stock-based compensation	496		426		2,224		3,006
Shares issued pursuant to equity based plans, net of shares withheld for taxes	1,025		1,011		1,256		837
Issuance of common stock, net of issuance costs	22,824		5,394		35,042		22,039


Ending balances	929,498		831,135		929,498		831,135

Retained earnings:
Beginning balances	445,058		430,597		399,911		376,473
Net (loss) income	(2,787)		1,244		61,036		72,915
Dividends on common stock	(18,553)		(17,443)		(37,229)		(34,990)

Ending balances	423,718		414,398		423,718		414,398

Accumulated other comprehensive income (loss):
Beginning balances	(6,825)		(6,594)		(7,049)		(6,285)
Other comprehensive income	325		1,339		549		1,030

Ending balances	(6,500)		(5,255)		(6,500)		(5,255)

Total shareholders' equity, ending balances	$	1,346,716	$	1,240,278	$	1,346,716	$	1,240,278

Dividends per share of common stock	$	0.4875	$	0.4850	$	0.9750	$	0.9700

See Notes to Unaudited Consolidated Financial Statements

NORTHWEST NATURAL HOLDING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six Months Ended June 30,
In thousands	2024		2023
Operating activities:
Net income	$	61,036	$	72,915
Adjustments to reconcile net income to cash provided by operations:
Depreciation	66,860		62,758
Regulatory amortization of gas reserves	1,085		1,678
Deferred income taxes	8,844		8,610
Qualified defined benefit pension plan expense (benefit)	2,164		(1,129)
Contributions to qualified defined benefit pension plans	(3,390)		—
Deferred environmental expenditures, net	(14,128)		(9,732)
Environmental remediation expense	8,075		7,515


Asset optimization revenue sharing bill credits	(29,198)		(10,471)
Other	15,698		14,068
Changes in assets and liabilities:
Receivables, net	118,562		163,965
Inventories	5,411		20,084
Income and other taxes	14,837		14,834
Accounts payable	(10,966)		(48,935)
Deferred gas costs	(14,418)		(16,370)
Asset optimization revenue sharing	4,284		12,056
Decoupling mechanism	4,085		(9,554)
Cloud-based software	(16,424)		(7,229)
Regulatory accounts	14,866		8,992
Other, net	8,793		13,799
Cash provided by operating activities	246,076		297,854
Investing activities:
Capital expenditures	(198,929)		(144,863)
Acquisitions, net of cash acquired	—		(3,249)



Purchase of equity method investment	(1,000)		(1,000)
Other	(512)		(2,428)
Cash used in investing activities	(200,441)		(151,540)
Financing activities:


Proceeds from common stock issued, net	34,986		22,072
Long-term debt issued	150,000		200,000
Long-term debt retired	(150,000)		—


Changes in other short-term debt, net	(10,780)		(217,200)
Cash dividend payments on common stock	(35,600)		(33,293)

Payment of financing fees	(748)		(1,883)
Shares withheld for tax purposes	(1,314)		(1,313)
Other	(764)		(578)
Cash used in financing activities	(14,220)		(32,195)
Increase in cash, cash equivalents and restricted cash	31,415		114,119
Cash, cash equivalents and restricted cash, beginning of period	49,624		40,964
Cash, cash equivalents and restricted cash, end of period	$	81,039	$	155,083

Supplemental disclosure of cash flow information:
Interest paid, net of capitalization	$	34,802	$	36,376
Income taxes paid, net of refunds	10,251		12,163

See Notes to Unaudited Consolidated Financial Statements

NORTHWEST NATURAL GAS COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)


	Three Months Ended June 30,				Six Months Ended June 30,
In thousands	2024		2023		2024		2023

Operating revenues	$	200,188	$	228,348	$	622,963	$	682,861

Operating expenses:
Cost of gas	73,026		102,490		248,799		308,295
Operations and maintenance	56,751		60,238		122,260		125,627
Environmental remediation	2,329		2,140		8,075		7,515
General taxes	11,305		10,597		26,396		24,597
Revenue taxes	9,198		9,159		27,393		28,134
Depreciation	31,658		29,880		62,765		60,024
Other operating expenses	535		542		1,258		1,239
Total operating expenses	184,802		215,046		496,946		555,431
Income from operations	15,386		13,302		126,017		127,430
Other (expense) income, net	(430)		3,832		(1,752)		6,277
Interest expense, net	15,336		15,028		31,414		29,639
(Loss) income before income taxes	(380)		2,106		92,851		104,068
Income tax expense	44		322		25,717		26,744


Net (loss) income	(424)		1,784		67,134		77,324
Other comprehensive income (loss):
Change in employee benefit plan liability, net of taxes of $115 and $49 for the three and six months ended June 30, 2024, respectively	115		—		(134)		—
Amortization of non-qualified employee benefit plan liability, net of taxes of $55 and $37 for the three months ended and $101 and $74 for the six months ended June 30, 2024 and 2023, respectively	152		103		279		205

Comprehensive (loss) income	$	(157)	$	1,887	$	67,279	$	77,529

See Notes to Unaudited Consolidated Financial Statements

NORTHWEST NATURAL GAS COMPANY

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	June 30,		June 30,		December 31,
In thousands	2024		2023		2023

Assets:
Current assets:
Cash and cash equivalents	$	19,189	$	131,778	$	19,841

Accounts receivable	57,227		67,454		117,216
Accrued unbilled revenue	20,823		19,669		81,524
Receivables from affiliates	429		529		824
Allowance for uncollectible accounts	(3,523)		(3,080)		(3,228)
Regulatory assets	124,078		111,819		178,270
Derivative instruments	7,624		11,691		11,184
Inventories	105,599		65,949		110,855


Other current assets	36,445		35,006		60,138

Total current assets	367,891		440,815		576,624
Non-current assets:
Property, plant, and equipment	4,581,003		4,261,100		4,393,759
Less: Accumulated depreciation	1,213,169		1,168,270		1,181,962
Total property, plant, and equipment, net	3,367,834		3,092,830		3,211,797
Regulatory assets	308,415		307,974		333,418
Derivative instruments	2,588		1,551		373
Other investments	65,865		87,848		86,145
Operating lease right of use asset, net	69,317		71,508		70,728
Assets under sales-type leases	127,794		132,045		129,882
Other non-current assets	109,009		95,343		102,410

Total non-current assets	4,050,822		3,789,099		3,934,753
Total assets	$	4,418,713	$	4,229,914	$	4,511,377

See Notes to Unaudited Consolidated Financial Statements

NORTHWEST NATURAL GAS COMPANY

CONSOLIDATED BALANCE SHEETS (UNAUDITED)


	June 30,		June 30,		December 31,
In thousands	2024		2023		2023

Liabilities and equity:
Current liabilities:
Short-term debt	$	—	$	—	$	16,780
Current maturities of long-term debt	—		89,982		—
Accounts payable	86,528		95,674		138,111
Payables to affiliates	7,963		5,072		14,850
Taxes accrued	9,906		10,000		15,293
Interest accrued	15,108		10,964		15,111
Regulatory liabilities	99,545		61,496		84,912
Derivative instruments	52,048		42,135		98,661
Operating lease liabilities	1,691		1,598		2,128
Other current liabilities	75,018		55,841		89,371

Total current liabilities	347,807		372,762		475,217
Long-term debt	1,365,066		1,234,577		1,364,732
Deferred credits and other non-current liabilities:
Deferred tax liabilities	382,177		371,762		371,867
Regulatory liabilities	704,980		671,263		694,947
Pension and other postretirement benefit liabilities	153,848		147,063		158,116
Derivative instruments	11,988		25,212		28,055
Operating lease liabilities	76,355		77,490		76,757
Other non-current liabilities	112,158		119,489		109,066

Total deferred credits and other non-current liabilities	1,441,506		1,412,279		1,438,808
Commitments and contingencies (Note 16)
Equity:
Common stock	644,903		614,903		644,903
Retained earnings	626,523		601,602		594,954
Accumulated other comprehensive loss	(7,092)		(6,209)		(7,237)
Total equity	1,264,334		1,210,296		1,232,620
Total liabilities and equity	$	4,418,713	$	4,229,914	$	4,511,377

See Notes to Unaudited Consolidated Financial Statements

NORTHWEST NATURAL GAS COMPANY

CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY (UNAUDITED)


In thousands	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Total shareholder's equity, beginning balances	$	1,282,362	$	1,250,180	$	1,232,620	$	1,191,082

Common stock:
Beginning balances	644,903		614,911		644,903		614,903


Capital contributions from parent	—		(8)		—		—


Ending balances	644,903		614,903		644,903		614,903

Retained earnings:
Beginning balances	644,818		641,581		594,954		582,593
Net (loss) income	(424)		1,784		67,134		77,324
Dividends on common stock	(17,871)		(41,763)		(35,565)		(58,315)

Ending balances	626,523		601,602		626,523		601,602

Accumulated other comprehensive income (loss):
Beginning balances	(7,359)		(6,312)		(7,237)		(6,414)
Other comprehensive income	267		103		145		205

Ending balances	(7,092)		(6,209)		(7,092)		(6,209)

Total shareholder's equity, ending balances	$	1,264,334	$	1,210,296	$	1,264,334	$	1,210,296

See Notes to Unaudited Consolidated Financial Statements

NORTHWEST NATURAL GAS COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)


	Six Months Ended June 30,
In thousands	2024		2023

Operating activities:
Net income	$	67,134	$	77,324
Adjustments to reconcile net income to cash provided by operations:
Depreciation	62,765		60,024
Regulatory amortization of gas reserves	1,085		1,678
Deferred income taxes	7,637		4,172
Qualified defined benefit pension plan expense (benefit)	2,164		(1,129)
Contributions to qualified defined benefit pension plans	(3,390)		—
Deferred environmental expenditures, net	(14,128)		(9,732)
Environmental remediation expense	8,075		7,515
Asset optimization revenue sharing bill credits	(29,198)		(10,471)

Other	14,821		13,022
Changes in assets and liabilities:
Receivables, net	119,695		167,936
Inventories	5,629		20,438
Income and other taxes	3,971		6,078
Accounts payable	(13,544)		(52,366)
Deferred gas costs	(14,418)		(16,370)
Asset optimization revenue sharing	4,284		12,056
Decoupling mechanism	4,085		(9,554)
Cloud-based software	(16,424)		(7,229)
Regulatory accounts	14,867		9,020
Other, net	7,089		15,593

Cash provided by operating activities	232,199		288,005
Investing activities:
Capital expenditures	(179,015)		(129,298)


Other	(757)		(2,428)

Cash used in investing activities	(179,772)		(131,726)
Financing activities:



Long-term debt issued	—		200,000



Changes in other short-term debt, net	(16,780)		(170,200)
Cash dividend payments on common stock	(35,565)		(58,315)
Shares withheld for tax purposes	(1,314)		(1,313)
Other	(277)		(2,045)
Cash used in financing activities	(53,936)		(31,873)
(Decrease) increase in cash, cash equivalents and restricted cash	(1,509)		124,406
Cash, cash equivalents and restricted cash, beginning of period	36,520		24,671
Cash, cash equivalents and restricted cash, end of period	$	35,011	$	149,077

Supplemental disclosure of cash flow information:
Interest paid, net of capitalization	$	28,735	$	28,078
Income taxes paid, net of refunds	24,920		26,745

See Notes to Unaudited Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements represent the respective, consolidated financial results of Northwest Natural Holding Company (NW Holdings) and Northwest Natural Gas Company (NW Natural) and all respective companies that each registrant directly or indirectly controls, either through majority ownership or otherwise. This is a combined report of NW Holdings and NW Natural, which includes separate consolidated financial statements for each registrant.

NW Natural's regulated natural gas distribution activities are reported in the natural gas distribution (NGD) segment. The NGD segment is NW Natural's core operating business and serves residential, commercial, and industrial customers in Oregon and southwest Washington. The NGD segment is the only reportable segment for NW Holdings and NW Natural. All other activities, water, wastewater and water services businesses, and other investments are aggregated and reported as other at their respective registrant.

NW Holdings and NW Natural consolidate all entities in which they have a controlling financial interest. Investments in corporate joint ventures and partnerships that NW Holdings does not directly or indirectly control, and for which it is not the primary beneficiary, include NNG Financial's investment in Kelso-Beaver Pipeline and NWN Water's investment in Avion Water Company, Inc., which are accounted for under the equity method. See Note 13 for activity related to investments. NW Holdings and its direct and indirect subsidiaries are collectively referred to herein as NW Holdings, and NW Natural and its direct and indirect subsidiaries are collectively referred to herein as NW Natural. The consolidated financial statements of NW Holdings and NW Natural are presented after elimination of all intercompany balances and transactions.

Information presented in these interim consolidated financial statements is unaudited, but includes all material adjustments management considers necessary for a fair statement of the results for each period reported including normal recurring accruals. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in NW Holdings' and NW Natural's combined 2023 Annual Report on Form 10-K (2023 Form 10-K). A significant part of NW Holdings' and NW Natural's business is of a seasonal nature; therefore, NW Holdings and NW Natural results of operations for interim periods are not necessarily indicative of full year results. Seasonality affects the comparability of the results of other operations across quarters but not across years.

Notes to the consolidated financial statements reflect the activity for both NW Holdings and NW Natural for all periods presented, unless otherwise noted. Certain reclassifications have been made to conform prior period information to the current presentation. The reclassifications did not have a material effect on our consolidated financial statements.

2. SIGNIFICANT ACCOUNTING POLICIES

Significant accounting policies are described in Note 2 of the 2023 Form 10-K. There were no material changes to those accounting policies during the six months ended June 30, 2024 other than those set forth in this Note 2. The following are current updates to certain critical accounting policy estimates and new accounting standards.

Industry Regulation

NW Holdings' principal business is to operate as a holding company for NW Natural and its other subsidiaries. NW Natural's principal business is the distribution of natural gas, which is regulated by the OPUC and WUTC. NW Natural also has natural gas storage services, which are regulated by the FERC, and to a certain extent by the OPUC and WUTC. Additionally, certain of NW Holdings' subsidiaries own water businesses, which are regulated by the public utility commission in the state in which the water utility is located, which is currently Oregon, Washington, Idaho, Texas and Arizona. Wastewater businesses, to the extent they are regulated, are generally regulated by the public utility commissions in the state in which the wastewater utility is located, which is currently Texas and Arizona. Accounting records and practices of the regulated businesses conform to the requirements and uniform system of accounts prescribed by these regulatory authorities in accordance with U.S. GAAP. The businesses in which customer rates are regulated have approved cost-based rates which are intended to allow such businesses to earn a reasonable return on invested capital.

In applying regulatory accounting principles, NW Holdings and NW Natural capitalize or defer certain costs and revenues as regulatory assets and liabilities pursuant to orders of the applicable state public utility commission, which provide for the recovery of revenues or expenses from, or refunds to, utility customers in future periods, including a return or a carrying charge in certain cases.

Amounts deferred as regulatory assets and liabilities for NW Holdings and NW Natural were as follows:


	Regulatory Assets
	June 30,				December 31,
In thousands	2024		2023		2023
NW Natural:
Current:
Unrealized loss on derivatives(1)	$	52,048	$	42,135	$	98,661
Gas costs	7,134		24,782		9,301
Environmental costs(2)	9,915		6,749		9,950
Decoupling(3)	538		1,520		2,288
Pension balancing(4)	7,131		7,131		7,131
Income taxes	2,208		2,208		2,208
Washington Climate Commitment Act compliance	19,655		10,379		20,537
COVID-19 deferrals and expenses, net	2,646		231		9,685
Security and systems improvements	2,647		2,984		3,267
Other(5)	20,156		13,700		15,242
Total current - NW Natural	124,078		111,819		178,270
Other (NW Holdings)	24