Northwest Natural Gas Company (NWN) Q1 2010 Earnings Call Transcript May 5, 2010 11:00 am ET Executives Bob Hess – Director, IR Gregg Kantor – President and CEO David Anderson – SVP and CFO Analysts Michael Bates – D.A. Davidson & Company Jim Lykins – Hilliard Lyons Dan Fidell – Brean Murray Mike Hahn – Bryn Mawr Capital Presentation Operator
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With that, let me turn you over to Gregg.Gregg Kantor Thank you, Bob. Good morning, everyone and welcome. Thank you for joining us for our first quarter earnings call. Before I turn it over to David to cover the financial details, let me give an overview of results for the period. First, I'm pleased to report our results for the quarter were in line with our expectations. This time last year we were seeing some large gains as a result of a substantial decline in commodity costs and the associated benefit of our gas cost sharing mechanism in Oregon. In the first quarter of this year, we did receive a benefit from lower gas prices, although much smaller than last year. Apart from the effects of our gas cost sharing mechanism, utility revenues declined in the period primarily due to warmer weather and lower customer usage, plus a slightly lower regulatory adjustment from income taxes paid. However, earnings from our gas storage operations increased by 23% compared to the first quarter of 2009. Also in the quarter, we continued to benefit from the technology and restructuring initiatives we completed last year and we benefited from a successful property tax case which David will discuss in more detail. With staffing reductions behind us, we are now operating with about 1,000 employees compared to more than 1,300 in 2005. Leaner staffing levels and lower bad debt expenses have helped us reduce O&M costs by about 10% compared to the first quarter of 2009. In the utility, the pace of new customer additions remains stable keeping us at a growth rate of just under 1% on a rolling 12-month basis and a few leading indicators suggest some positive movement in our housing sector. The nationwide upswing in the housing market also prevailed in Portland. Home sales in the metro area were about 52% higher this March compared to a year ago.
In fact, March homes for sale inventories dropped to the lowest level in more than two years and the single family new construction segment is showing signs of improvement with about a 66% increase in new permits this quarter compared to the same period a year ago.That said, we will be waiting with the rest of the country, to see how much of this increased activity continues now that the federal homebuyer tax credits have expired. But regardless of timing, I continue to believe we are in a good position to capitalize on the preference for natural gas heating and lower gas prices as the new home construction market picks up momentum. Before I turn it over to David, let me share one more bit of good news from the quarter, news that demonstrates again our service culture remains stronger than ever. We learned in the first quarter that Northwest Natural ranked first in the West in this year's J.D. Power and Associates gas utility business customer satisfaction study. Once again, this outcome is attributed to the men and women who serve our customers in a time when many businesses have been struggling. Attentive customer service is critical, and frankly, no one does it better than our employees. In summary, we feel good about our performance in the first three months of 2010. There's a great deal more to do, but we are pleased with our progress and are on track to achieve the goals we've laid out for ourselves this year. After David's remarks, I'll provide an update on our infrastructure projects and what we expect in the months ahead. David? David Anderson Thank you, Gregg. And good morning, everybody and welcome. Earnings for the first quarter of 2010 were 8% lower than 2009's first quarter with net income of $43.6 million or $1.64 per share. That compares to $47.4 million or $1.78 per share in 2009. Read the rest of this transcript for free on seekingalpha.com