<PAGE>
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 September 30, 1995
Commission File Number 1-7196
CASCADE NATURAL GAS CORPORATION
(Exact name of registrant as specified in its charter)
Washington 91-0599090
(State of incorporation or organization) (IRS Employer
Identification Number)
222 Fairview Avenue North
Seattle, Washington 98109
(Address of principal executive office (Zip Code)
Registrant's telephone number 206-624-3900
including area code
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 31, 1995
- ----------------------------- -------------------------------
Common Stock, $1.00 par value 9,105,367
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<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF NET EARNINGS AVAILABLE TO COMMON SHAREHOLDERS
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------- ---------------------------
Sep. 30, 1995 Sep. 30, 1994 Sep. 30, 1995 Sep. 30, 1994
------------- ------------- ------------- -------------
(dollars in thousands except per share data)
<S> <C> <C> <C> <C>
Operating revenues:
Gas sales $23,563 $26,807 $117,879 $125,395
Transportation revenue 2,923 2,032 7,819 4,337
Other operating income 26 28 139 145
-------- -------- -------- --------
26,512 28,867 125,837 129,877
Less: Gas purchases 14,464 18,041 71,238 80,721
Revenue taxes 1,564 1,664 8,208 8,026
-------- -------- -------- --------
Operating margin 10,484 9,162 46,391 41,130
-------- -------- -------- --------
Cost of operations:
Operating expenses 7,454 7,359 23,470 22,846
Depreciation and amortization 2,972 2,539 8,273 7,486
Property and payroll taxes 1,049 1,035 3,116 3,169
-------- -------- -------- --------
11,475 10,933 34,859 33,501
-------- -------- -------- --------
Earnings (loss) from operations (991) (1,771) 11,532 7,629
Less interest and other
deductions - net 2,425 1,956 7,157 5,666
-------- -------- -------- --------
Earnings (loss) before income taxes (3,416) (3,727) 4,375 1,963
Income taxes (1,099) (1,397) 1,842 757
-------- -------- -------- --------
Net earnings (loss) (2,317) (2,330) 2,533 1,206
Preferred dividends 136 141 408 422
-------- -------- -------- --------
Net earnings (loss) available to
Common Shareholders ($2,453) ($2,471) $2,125 $784
======== ======== ======== ========
Common shares outstanding:
Weighted average 9,063 8,812 8,977 8,675
End of period 9,098 8,851 9,098 8,851
Net earnings (loss) per common share ($0.27) ($0.28) $0.24 $0.09
======== ======== ======== ========
Cash dividends per common share $0.24 $0.24 $0.72 $0.72
======== ======== ======== ========
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<TABLE>
<CAPTION>
PART I. (Continued)
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
Sep 30, 1995 Dec. 31, 1994
------------ ------------
(dollars in thousands)
ASSETS
<S> <C> <C>
Utility Plant, net after accumulated
depreciation of $136,248 and $127,806 $221,222 $206,057
Construction work in progress 5,896 7,872
--------- ---------
227,118 213,929
--------- ---------
Other Assets:
Investments 918 919
Notes receivable, less current maturities 2,335 2,915
--------- ---------
3,253 3,834
--------- ---------
Current Assets:
Cash and cash equivalents 718 3,949
Securities available for sale 2,054 1,466
Accounts receivable, less allowance of $409
and $461 for doubtful accounts 10,820 28,885
Current maturities of notes receivable 868 988
Materials, supplies and inventories 6,124 5,583
Prepaid expenses and other assets 2,689 1,653
--------- ---------
23,273 42,524
--------- ---------
Deferred Charges 13,642 12,010
--------- ---------
$267,286 $272,297
========= =========
COMMON SHAREHOLDERS' EQUITY,
PREFERRED STOCKS AND LIABILITIES
Common Shareholders' Equity:
Common stock, par value $1 per share
Authorized, 15,000,000 shares
Issued and outstanding 9,098,133
and 8,911,661 shares $9,098 $8,912
Additional paid-in capital 70,400 67,992
Retained earnings 6,424 10,806
--------- ---------
85,922 87,710
--------- ---------
Redeemable Preferred Stocks, aggregate
redemption amount of $7,479 and $7,499 7,200 7,217
--------- ---------
Long-term Debt 100,000 100,000
--------- ---------
Current Liabilities:
Notes payable 19,001 14,501
Accounts payable 7,513 18,366
Property, payroll and excise taxes 3,004 4,541
Dividends and interest payable 6,236 4,202
Other current liabilities 2,015 1,620
Current maturities of long-term debt 5,000 5,000
--------- ---------
42,769 48,230
--------- ---------
Deferred Credits:
Gas cost changes 5,187 4,407
Other 26,208 24,733
--------- ---------
31,395 29,140
--------- ---------
Commitments and Contingencies - -
--------- ---------
$267,286 $272,297
========= =========
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<TABLE>
<CAPTION>
PART I (Continued)
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended Sep. 30
-------------------------
1995 1994
(dollars in thousands)
<S> <C> <C>
Operating Activities:
Net earnings $2,533 $1,206
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 8,998 8,346
Amortization of gas cost changes 2,520 (3,196)
Increase in deferred income taxes 1,506 1,448
Decrease in deferred investment tax credits (180) (203)
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable 18,063 16,380
Income taxes (1,716) (2,589)
Inventories 169 17
Gas cost changes (1,740) 121
Deferred items (1,793) (722)
Accounts payable and accrued expenses (9,587) (12,575)
Prepaid expenses and other assets 310 (77)
Other (4) (109)
--------- ---------
Net cash provided by operating activities 19,079 8,047
--------- ---------
Investing Activities:
Capital expenditures (22,586) (18,890)
New consumer loans (793) (1,046)
Receipts on consumer loans 1,492 2,070
Purchase of securities available for sale (1,813) (724)
Proceeds from securities available for sale 1,230 -
--------- ---------
Net cash used by investing activities (22,470) (18,590)
--------- ---------
Financing Activities:
Issuance of common stock, net 1,821 3,828
Redemption of preferred stock (17) (25)
Proceeds from notes payable, net 4,500 10,439
Dividends paid (6,144) (6,122)
--------- ---------
Net cash provided by financing activities 160 8,120
--------- ---------
Net Decrease in Cash and Cash Equivalents (3,231) (2,423)
Cash and Cash Equivalents:
Beginning of period 3,949 3,138
--------- ---------
End of period $718 $715
========= =========
<PAGE>
PART I. (Cont.)
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three Month and Nine Month Periods Ending September 30, 1995
The preceding statements were taken from the books and records of the Corporation and
reflect all adjustments which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods. All adjustments were of a normal and
recurring nature.
Because of the highly seasonal nature of the business, earnings or loss for any
portion of the year are disproportionate in relation to the full year.
Reference is directed to the Notes to Consolidated Financial Statements contained in
the 1994 Annual Report on Form 10-K and comments included therein under "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources
The seasonal nature of the Company's business creates short-term cash requirements to
finance customer accounts receivable and construction expenditures. To provide working capital
for these requirements, the Company has $40,000,000 of committed lines from three banks which
are used to support a money market facility of a similar amount. The Company also has
$30,000,000 of uncommitted lines from three banks. Long-term debt requirements are met
primarily through the issuance of Medium-Term Notes. At the end of the quarter there was
$100,000,000 outstanding and $50,000,000 registered under the Securities Act of 1933 and
available for issuance.
After preferred and common dividends of $6,144,000 there was $12,935,000 of cash flow
from year-to-date operations. This cash flow and proceeds of $1,821,000 from common stock
issued to participants in the dividend reinvestment plan and 401(k) plan were used primarily
for capital expenditures of $22,586,000 and reductions in short-term borrowing. Capital
expenditures for the remainder of the year are budgeted at $16,914,000 which will be funded
initially with operating cash flow and secondly from the lines of credit described above.
Management is also considering a preferred stock issue to provide the necessary long-term
capital.
Results of Operations
The seasonal third quarter 1995 net loss to common shareholders was $2,453,000, or $0.27
per share, compared to a net loss of $2,471,000, or $0.28 per share, for the quarter ended
September 30, 1994. The operating loss for the third quarter was $1 million, an improvement of
44% over the operating loss for the third quarter of 1994 despite a disappointing September
with estimated temperatures 50% warmer than normal.
For the nine months ended September 30, 1995, net earnings available to common
shareholders was $2,125,000, or $0.24 per share, a 167% improvement over the $.09 per share
earnings available to common shareholders for the nine months ended September 30, 1994.
Operating Margin was up $1,322,000, or 14% over the third quarter of 1994. Of the total
margin, core margin increased 22% due to a 7% increase in the number of residential customers
and a 4% increase in commercial customers as well as an increase in average therms consumed
per residential customer. Core margin also improved because of increases in Oregon rates to
cover costs associated with additional interstate transmission capacity to meet growth. These
costs were not covered in 1994 rates because such inclusion would have resulted in earnings in
excess of a 12.75% target rate of return on equity in that state. Non-core margin was up
$395,000, or 8%, resulting primarily from a significant increase in deliveries to an
industrial customer.
<PAGE>
Margin and Throughput Changes
Third Quarter 1995 compared to 1994
Margin Contribution Throuput
($ in thousands) (thousands of therms)
Amount Percent Amount Percent
------ ------- ------ -------
Core $ 927 22.1% 959 4.0%
Non-Core 395 8.0% 9,958 5.6%
------ ------- ------ -------
Total $1,322 14.4% 10,917 5.4%
====== ======= ====== =======
Margin and Throughput Changes
Nine Months 1995 compared to 1994
Margin Contribution Throuput
($ in thousands) (thousands of therms)
Amount Percent Amount Percent
------ ------- ------ -------
Core $3,764 13.9% 8,230 5.8%
Non-Core 1,497 10.6% 49,258 10.2%
------ ------- ------ -------
Total $5,261 12.8% 57,488 9.2%
====== ======= ====== =======
Total customers increased by 6.3% during the twelve months ended September 30, 1995.
The growth rate was down from the 6.8% reported for the twelve months ended June 30, 1995 and,
as expected, continues to be less than the growth rate for 1994. With a residential market
saturation rate of only 46% and a solid price advantage over competing electric rates, the
market for converting existing buildings to gas should keep Cascade's customer growth rate
high compared to the national average of about 2%. Contrary to national trends, Cascade has
not experienced a decline in per customer consumption despite the installation of more
efficient appliances and better weather insulation of homes. In the less weather sensitive
industrial market, in 1996 we expect to add a fifth co-generation customer, a regional
distribution center for a national retailer, a silicon wafer manufacturer and a food
processor. Expected gross margin from these plants will approximate $1,800,000 annually.
Operating expenses for the quarter were up $95,000, or 1.3%, over the quarter ended
September 30, 1994. For the nine months, operating expenses were up $624,000, or 2.7%. After
a period of years with increases in total benefits and health care costs, Cascade has
experienced considerable moderation in these expenses in 1995. However, in 1996 we will be
incurring an increase in expense related to the amortization of deferred post retirement
medical benefits. The net effect will be an increase in benefits expense in 1996 by
approximately $1,450,000. The Company is seeking inclusion of this expense increase in rates
to customers.
Interest expense was up $469,000 for the quarter and $1,491,000 for the nine months
due primarily to an increase of $13,000,000 in long-term debt and increased average borrowings
under short-term credit arrangements to finance plant expansion.
The Company reported earlier the commencement in June of this year of negotiations to
seek a general rate increase in the state of Washington. As part of this negotiation process
the Company intends to file new rates by the end of November, 1995. It is hoped a conclusion
to this rate case can be reached in the first half of 1996.
Cascade has received and is investigating a claim of contamination of a former
manufactured gas site in Oregon once operated by a predecessor company. At this date there is
no estimate of the extent of clean-up costs, if any. To the extent the Company may be
responsible for such costs, it expects to seek contribution from its insurers and would seek
appropriate rate relief to the extent of any remaining expense incurred.
<PAGE>
PART II OTHER INFORMATION
Item 2. Changes in Securities
Under the terms of its bank credit agreement, the Company is required to maintain a
minimum of $70,010,000 of net worth. Under this restriction approximately $15,912,000 was
available for the payment of dividends at September 30, 1995.
Item 5. Other Information
On January 6, 1995 the Company amended its articles of incorporation to reduce the
authorized amount of its $. 55 Cumulative Preferred Stock from 167,973 to 136,088. The
amendment did not require shareholder approval.
Ratio of Earnings to Fixed Charges
Twelve Months
Ended September 30, Year Ended December 31
- ----------------------- -------------------------------------
1995 1994 1994 1993 1992 1991 1990
2.16 2.21 2.07 2.86 1.97 2.45 2.48
For purposes of this calculation, earnings include income before income taxes plus fixed
charges. Fixed charges include interest expense and the amortization of debt issuance
expenses. Refer to Exhibit 12 for calculation of these ratios as well as the ratio of
earnings to fixed charges including preferred dividends.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
No. Description
--- -----------
3.1 Articles of incorporation as amended
12 Computation of Ratio of Earnings to Fixed Charges
27 Financial Data Schedule UT, filed electronically via EDGAR only
b. Reports on Form 8-K:
No Form 8-K was filed during the quarter for which this report is filed.<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
CASCADE NATURAL GAS COMPANY
(Registrant)
By /s/ J. D. Wessling
J. D. Wessling
Vice President - Finance
Chief Financial Officer
DATED: November 7, 1995
<PAGE>
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<PAGE>
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF CASCADE NATURAL GAS CORPORATION
As Amended through January 6, 1995
We, the undersigned, W. BRIAN MATSUYAMA and DONALD E. BENNETT, President
and Secretary respectively, of Cascade Natural Gas Corporation do hereby on
behalf of said Corporation restate in a single document the entire text of its
Articles of Incorporation, as previously amended, supplemented or restated to
the date hereof:
ARTICLE I
The name of this Corporation shall be Cascade Natural Gas Corporation.
ARTICLE II
The objects and purposes for which this Corporation is formed are and shall be
as follows:
1. To manufacture, produce, buy, sell, transport and in all other respects
dispose of and deal in all forms and types of natural and/or manufactured gas,
oil, petroleum and all forms and types of residual products thereof; to supply
natural and/or manufactured gas and/or related petroleum products for lights,
heating, power and all other domestic and industrial uses, and to furnish the
same to public or private consumers both within and without the State of
Washington; to construct pipelines for the transportation of natural and/or
manufactured gas and other petroleum products and to buy, operate, lease and
sell the same; to acquire, construct, erect, lay down, maintain, enlarge,
alter, work and use all lands, buildings, easements, pipelines, machinery,
plants, stocks, motors, fittings, meters, other apparatus materials and things
and to supply all materials, products and things that may be necessary,
incident or convenient in connection with the production, transportation, use,
storage, regulation, measurement, supply and distribution of any of the
products of the Company; to engage in the transportation of natural and/or
manufactured gas, oil, petroleum and related products, either produced by this
Corporation or other persons or corporations by means of pipelines, railroads,
boats, barges, or other conveyances and to lease or sublease all or any part
thereof to or from other persons or corporations for the like purpose; to
acquire by purchase or otherwise, or by the right of exercise of eminent
domain, rights-of-way for natural and/or manufactured gas or other petroleum
products pipelines and to construct and maintain such pipelines for the
carriage and transportation of such products on its own behalf and hire; to
buy, acquire, sell, retain, deal in or otherwise dispose of, natural gas and
other petroleum properties and interest and any right, title or interest
therein; to carry on such other business pertaining to natural and
manufactured gas, oil, petroleum and similar products as may be found
necessary or desirable or such as is generally engaged in by a corporation of
this kind and to do all other acts and things required to be done in
connection therewith, either within or without the State of Washington, U.S.A.
2. To manufacture, purchase or otherwise acquire, own, mortgage, pledge,
sell, assign and transfer, or otherwise dispose of, to invest, trade, deal in
and deal with, goods, wares and merchandise and real and personal property of
every class and description.
3. To acquire by purchase, assignment or otherwise, letters patent of the
United States and the Territorial and other rights and licenses which may be
of value or advantage in the carrying out of the above mentioned objects, and
to dispose of the same by sale, license, assignment or otherwise.
4. To acquire, and pay for in cash, stock or bonds of this Corporation, or
otherwise, the good will, rights, assets and property, and to undertake or
assume the whole or any part of the obligations or liabilities of any person,
firm, association or corporation.
5. To guarantee, purchase, hold, sell, assign, transfer, mortgage, pledge or
otherwise dispose of shares of the capital stock of, or any bonds, securities
or evidence of indebtedness created by any other corporation or corporations
organized under the laws of this State, or any other state, country, nation or
government, and while the owner thereof to exercise all rights, powers and
privileges of ownership.
6. To issue bonds, debentures, or obligations of this Corporation from time
to time, for any of the objects or purposes of the Corporation, and to secure
the same by mortgage, pledge, deed of trust, or otherwise.
7. To have one or more officers; to carry on all or any of its operations
and business and without restriction or limit as to amount, to purchase or
otherwise acquire, own, hold, mortgage, sell, convey or otherwise dispose of
real and personal property of every class and description, in any of the
states, districts, territories or colonies of the United States, and in any
and all foreign countries, subject to the laws of such states, district,
territory, colony or country.
8. To carry on in general any other business in connection with the
foregoing, whether manufacturing or otherwise, and to have and exercise all
the powers conferred by the laws of Washington upon corporations and to do any
or all of the things thereinbefore set forth to the same extent as natural
persons might or could do.
9. The foregoing clauses shall be construed both as objects and powers, and
it is specifically provided that the foregoing enumeration of specific powers
shall not be held to limit or restrict in any manner the powers of this
Corporation.
ARTICLE III
The time of the existence of this Corporation shall be perpetual.
ARTICLE IV
The office and principal place of business of this Corporation shall be 222
Fairview Avenue North, Seattle, King County, Washington 98109.
ARTICLE V
The capital of this Corporation shall consist of a total of sixteen million
one hundred thirty-six thousand and eighty-eight (16,136,088) shares, divided
into one hundred thirty-six thousand and eighty-eight (136,088) shares of $.55
Cumulative Preferred Stock, without nominal or par value (hereinafter referred
to as "Preferred Stock"), one million (1,000,000) shares of Preferred Stock,
with a par value of $1.00 per share (hereinafter referred to as the "$1.00
Preferred Stock"), and fifteen million (15,000,000) shares of Common Voting
Stock with a parvalue of $1.00 per share (hereinafter referred to as "Common
Stock").
The designations, preferences, privileges, voting power, restrictions, and
qualifications of shares of each class of stock are as follows:
1. The $.55 Preferred Stock consists of 17,930 shares of Series A, 42,000
shares of Series B and 76,158 shares of Series C. All shares of all series of
$.55 Preferred Stock are alike in every particular, except as to the dates
from which dividends commenced to accrue and the commencement of the period
for establishment of sinking funds for redemption of shares, and all shares of
$.55 Preferred Stock are of equal rank and have the same powers, preferences
and rights, and are subject to the same qualifications, limitations, and
restrictions, without distinction between the shares of different series
thereof.
2. The holders of the $.55 Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, dividends from the surplus or
net profits of the Corporation at the rate of $.55 per annum and no more,
payable quarterly on the first days of February, May, August, and November.
Such dividends shall be paid to or set apart for the holders of $.55 Preferred
Stock before any Common Stock of the Corporation or any other class of
securities of the Corporation junior to the $.55 Preferred Stock as to
dividends or assets ("Other Securities") shall be purchased, retired, or
otherwise acquired for valuable consideration by the Corporation or any
dividends shall be paid upon, or set apart for any of the Common Stock or
Other Securities of the Corporation, and shall be cumulative, so that if in
any quarterly dividend period, the dividend installment computed at the rate
of $.55 per share per annum shall not have been paid upon or set apart for the
$.55 Preferred Stock, the deficiency (without interest) shall be fully paid or
set apart for payment before any Common Stock or Other Securities of the
Corporation shall be purchased, retired, or otherwise acquired for valuable
consideration by the Corporation or any dividends shall be paid upon, or set
apart for the Common Stock or Other Securities.
3. In the event of voluntary liquidation, dissolution, or winding up of the
Corporation, the holders of the $.55 Preferred Stock shall be entitled, after
the debts of the Corporation shall have been paid, to receive out of the
assets remaining, the then current redemption or call price per share thereof,
determined in accordance with the provisions hereinbelow concerning optional
redemption of $.55 Preferred Stock, together with all dividends thereon
accrued or in arrears, whether or not earned or declared, before any payment
is made or assets set apart for the payment to the holders of the Common Stock
or Other Securities, and shall be entitled to no further payments or
distribution. In the event of the involuntary liquidation, dissolution, or
winding up of the Corporation, the holders of the $.55 Preferred Stock shall
be entitled, after the debts of the Corporation shall have been paid, to
receive out of the assets remaining, $10.00 per share, together with all
dividends thereon accrued or in arrears, whether or not earned or declared,
before any payment is made or assets set apart for payment to the holders of
the Common Stock or Other Securities, and shall be entitled to no further
payments or distribution. If the assets remaining after payment of the
corporate debts be insufficient to pay the full amounts as hereinabove
provided, such assets as remain shall be divided among the holders of $.55
Preferred Stock in proportion to the number of shares of $.55 Preferred Stock
held.
4. The Corporation may, at any time and from time to time, at the option of
the Board of Directors, unless prevented from doing so by law or by applicable
restrictive provisions herein, or in any mortgage or deed of trust or loan
agreement of the Corporation, redeem the whole or any part of the outstanding
$.55 Preferred Stock on any dividend payment date after the issuance thereof,
upon not less than 30 days' previous notice to the holders of record of the
$.55 Preferred Stock to be redeemed, at a redemption or call price for each
share thereof equal to the sum of Ten Dollars ($10.00) plus all dividends
accrued or in arrears thereon, plus a premium of Ten Cents (10 cents) per
share as to shares of Series C. No premium shall be payable on redemption with
respect to redemption of shares of Series A or shares of Series B, at any
time, or with respect to shares of Series C redeemed after June 25, 1994;
provided, however, that if such redemption is effected with funds set apart
for the $.55 Preferred Stock redemption sinking fund as provided herein, then
the same may be effected at a price per share equal to the sum of Ten Dollars
($10.00) plus all dividends accrued or in arrears thereon and without the
payment of any premium. If less than all the shares of $.55 Preferred Stock
are to be redeemed, the shares to be redeemed shall be selected in such manner
as the Board of Directors may determine. No shares of $.55 Preferred Stock
shall be purchased, redeemed, or otherwise acquired for a valuable
consideration unless full cumulative dividends on the $.55 Preferred Stock for
all past quarterly dividend periods shall have been paid, or declared and a
sum sufficient for the payment thereof set apart. The holders of shares of
$.55 Preferred Stock called for redemption shall not, from and after the date
fixed in such notice for the redemption of such stock, possess or exercise any
rights as stockholders of the Corporation except the right to receive from the
Corporation the redemption price of such shares together with all unpaid
accrued dividends thereon, without interest, upon the surrender thereof,
unless default shall be made by the Corporation in providing funds at the time
and place specified in such notice for payment of the redemption price.
5. While any shares of $.55 Preferred Stock remain outstanding, within each
twelve (12) month period ending November 1, the Corporation, unless prevented
from doing so by law or by applicable restrictive provisions herein or in any
mortgage or deed of trust or loan agreement of the Corporation, shall
establish a sinking fund out of surplus or may establish a sinking fund out of
capital, and shall acquire therewith, either by the redemption thereof or by
the purchase thereof in such manner as the Board of Directors may determine
from time to time at not exceeding the sinking fund redemption price thereof,
and shall retire not less than the lesser of 17,948 shares of Series A, 10,500
shares of Series B, and 14,500 shares of Series C or all remaining shares of
each series, respectively, of $.55 Preferred Stock.
Provided, however, that if the Corporation shall be prevented by law or by
applicable restrictive provisions herein, or in any mortgage or deed of trust
or loan agreement of the Corporation, or for any other reason, from acquiring
during any twelve (12) month period the number of shares of $.55 Preferred
Stock which, in the absence of such restriction it would be required to
acquire during such period, the aggregate deficit shall be made good in the
first succeeding twelve (12) month period in which the Corporation shall not
be prevented by such restrictions from retiring shares of $.55 Preferred
Stock. Any shares of $.55 Preferred Stock which in any such twelve (12) month
period are redeemed by the Corporation at the optional redemption price
hereinabove set forth, or are purchased by the Corporation but not applied to
meet the Corporation's sinking fund obligation for such twelve month periods
may be credited on the amount required to be acquired in any one or more of
the next following twelve (12) month periods which the Corporation may
designate. Shares of $.55 Preferred Stock of the Corporation redeemed or
purchased shall not be reissued. So long as any share of $.55 Preferred Stock
shall remain outstanding, no dividends, whether in cash, stock, or otherwise,
shall be paid or declared or any distribution be made with respect to the
Common Stock or Other Securities, nor shall any Common Stock or Other
Securities be purchased, retired or otherwise acquired for a valuable
consideration by the Corporation unless on or before the preceding November 1,
the Corporation shall have acquired the number of shares of $.55 Preferred
Stock required to have been acquired by such date.
6. Except as otherwise provided herein or as otherwise made mandatory by
law, the holders of the $.55 Preferred Stock shall have no right to vote for
the election of directors or for any other purpose and shall not be entitled
receive notice of any meeting of stockholders and all voting rights shall be
vested exclusively in the holders of the Common Stock and, to the extent
applicable, holders of Other Securities. If and whenever six full quarterly
dividends on $.55 Preferred Stock shall be unpaid, then the holders of the
$.55 Preferred Stock shall be entitled, voting separately as a class and to
the exclusion of the holders of the Common Stock and Other Securities, to vote
for the election of three of the directors of the Corporation until all
arrears and dividends on the $.55 Preferred Stock shall have been paid in
full, and thereupon the voting right for the election of three directors shall
be divested from the holders of the $.55 Preferred Stock and revested in the
holders of the Common Stock and, to the extent applicable, holders of Other
Securities, subject to revesting in the event of each and every other
subsequent such default. While any $.55 Preferred Stock is outstanding, the
Corporation, without first obtaining the consent, by the affirmative vote at a
meeting called for that purpose, of the holders of at least two thirds of the
total number of shares of $.55 Preferred Stock then outstanding, shall not:
a. Increase the authorized number of shares of $.55 Preferred Stock or
authorize or issue any stock having priority or preference over, or ranking on
a parity with, the $.55 Preferred Stock as to dividends or assets; or
b. Amend the provisions hereof so as to affect adversely any of the
preferences or other rights hereby given to the $.55 Preferred Stock; or
c. Merge or consolidate with or into any other corporation or
corporations or sell or transfer all or substantially all of its assets as an
entity.
7. After full cumulative dividends have been paid or declared and set apart
for payment upon issued and outstanding $.55 Preferred Stock, as hereinabove
provided, and after the provisions herein or as established by the Board of
Directors with respect to any sinking fund for redemption of $.55 Preferred
Stock have been complied with, holders of the Common Stock or Other Securities
shall be entitled to receive such further dividends as may from time to time
be declared by the Board of Directors of the Corporation out of any remaining
surplus or net profits. The term "full cumulative dividend" whenever used in
this article with reference to the $.55 Preferred Stock of any series shall be
deemed to mean (whether or not in any dividend period or any part thereof in
respect of which such term is used there shall have been surplus or net
profits of the Corporation legally available for the payment of such
dividends) that amount which shall be equal to cumulative dividends at the
prescribed rate to date from the date of cumulation for such series (including
an amount equal to a dividend at such rate for the elapsed portion of the
current dividend period) less, in each case, the amount of all cumulative
dividends paid or deemed paid, upon the $.55 Preferred Stock. The term "date
of cumulation" as used in this article with respect to $.55 Preferred Stock of
any series means the date on which the dividend period during which shares of
$.55 Preferred Stock of such series are first issued shall begin or the date
on which such shares are first issued when such issue is made on a date on
which a dividend period begins.
8. A consolidation, reorganization, or merger of the Corporation with any
other corporation or corporations shall not be considered a dissolution,
liquidation, or winding up of the Corporation within the meaning of such terms
as used herein.
9. The $1.00 Preferred Stock may be issued from time to time in one or more
series in any manner permitted by law and the provisions of these Restated
Articles of Incorporation of the Corporation, as determined from time to time
by the Board of Directors and stated in the resolution or resolutions
providing for the issuance thereof, prior to the issuance of any shares
thereof. The Board of Directors shall have the authority to fix and determine,
subject to the provisions of this Article V, the rights and preferences of the
shares of any series so established. Unless otherwise provided in the
resolution or resolutions establishing a series of shares of $1.00 Preferred
Stock, prior to the issue of any shares of a series so established or to be
established, the Board of Directors may, by resolution, amend the relative
rights and preferences of the shares of such series, and, after the issue of
shares of a series whose number has been designated by the Board of Directors,
the resolution or resolutions establishing the series may be amended by the
Board of Directors to decrease (but not below the number of shares of such
series then outstanding) the number of shares of that series.
The 7.85% Preferred Stock, $1.00 par value was authorized by the Board of
Directors on December 20,1991. The rights and preferences of the 7.85%
Preferred Stock are attached as Exhibit A.
The Series Z Junior Participating Preferred Stock, $1.00 par value, was
authorized by the Board of Directors on March 19, 1993. The rights and
preferences of the Series Z Preferred Stock are attached as Exhibit B.
ARTICLE VI
The amount of paid-in capital with which this Corporation shall begin to do
business shall be Five Hundred Dollars ($500.00) payable in cash or other
property taken at a fair valuation.
<PAGE>
ARTICLE VII
The directors shall be nine (9) in number, but the number of directors may be
increased to any number not exceeding eleven (11) or decreased to any number
not less than three (3) at any annual meeting of the shareholders, or at any
special meeting of the shareholders called for that purpose, or by a
two-thirds vote of the then directors of the Corporation at any regular
meeting of the directors, or at any special meeting of the directors called
for that purpose.
The names and post office addresses of the directors of the Corporation in
office at the time of the adoption of these Restated Articles and on the date
hereof, who shall serve until the 1992 Annual Meeting of Shareholders, and
until their successors are elected and qualify are as follows:
Donald E. Bennett 222 Fairview Avenue No.
Seattle, Washington 98109
Melvin C. Clapp 222 Fairview Avenue No.
Seattle, Washington 98109
Brooks G. Ragen Suite 4300
999 Third Avenue
Seattle, Washington 98104
Howard L. Hubbard 5320 N.W. Edgebrook Place
Portland, Oregon 97229-1974
W. Brian Matsuyama 222 Fairview Avenue No.
Seattle, Washington 98109
Andrew V. Smith 1600 Bell Plaza, Room 1802
Seattle, Washington 98191
Mary A. Williams 1234 McGilvra Boulevard E.
Seattle, Washington 98112
David A. Ederer 4919 N.E. Laurel Crest Lane
Seattle, Washington 98105
Carl Burnham, Jr. P. O. Box S
Ontario, Oregon 97914
ARTICLE VIII
The Board of Directors of this Corporation shall have the authority to make
and alter By-Laws not inconsistent with the law or with the Articles of
Incorporation and subject to the power of the shareholders to change or repeal
such By-Laws.
ARTICLE IX
Except as may be otherwise provided by law, or by applicable restrictive
provisions of Article V hereof, as amended, or any mortgage, deed of trust or
loan agreement of the Corporation, the shares of stock of this Corporation,
whether Preferred or Common, may be issued by it from time to time without the
consent of any holder of any share thereof, in such manner, or amount of
shares of each said class of stock, and for such consideration in labor,
services, money or property, as from time to time may be fixed and determined
by the Board of Directors of this Corporation, and, except as so restricted,
the right, power and authority of said Board of Directors from time to time so
to authorize and order the issuance by this Corporation of the said shares of
each class of said stock and such number or amount of shares and for such
consideration in labor, services, money or property as from time to time said
Board of Directors may fix and determine, is hereby absolutely reserved to
said Board of Directors.
No holder of shares of the capital stock of any class of this Corporation
shall have any preemptive or preferential right of subscription to any shares
of any class of stock of this Corporation, whether now or hereafter
authorized, or to any obligations convertible into stock of this Corporation,
which may be issued or sold, nor any right of subscription other than such, if
any, as the Board of Directors in its discretion may from time to time
determine and at such price as the Board of Directors from time to time may
fix.
Payment or delivery to, or receipt by this Corporation of such consideration
as may be fixed and determined by the Board of Directors for the issuance of
any share or shares of its capital stock, as hereinbefore provided, shall
operate and be construed, deemed and held: (a) to discharge, release and
satisfy fully and absolutely all liability to the Corporation and/or to its
creditors now or at any time hereafter existing, of any subscriber for and/or
holder of any such share or shares so authorized to be issued in any way on
account of, founded upon, or arising out of any subscription for and/or
purchase of, and/or issuance of such share or shares, and (b) to constitute
such share or shares fully paid stock of the Corporation.
ARTICLE X
LIMITATION ON DIRECTOR LIABILITY
To the fullest extent permitted by Washington law at the time this Article
becomes effective or as may thereafter be in effect, a director of this
Corporation shall not be liable to this Corporation or its shareholders for
the monetary damages for his or her conduct as a director. Any amendment to or
repeal of this Article X shall not adversely affect any right of a director of
this Corporation hereunder with respect to any acts or omissions of such
director occurring prior to such amendment or repeal.
ARTICLE XI
INDEMNIFICATION OF DIRECTORS
To the fullest extent permitted by Washington law at the time this Article
becomes effective or as may be thereafter in effect, this Corporation is
authorized to indemnify any director of this Corporation. The Board of
Directors shall be entitled to determine the terms of such indemnification,
including advance of expenses, and to give effect thereto through the adoption
of By-Laws, approval of agreements, or by any other manner approved by the
Board of Directors. Any amendment to or repeal of this Article XI shall not
adversely affect any right of a director of this Corporation hereunder with
respect to any right to indemnification that arises prior to such amendment or
repeal.
ARTICLE XII
BUSINESS COMBINATIONS / FAIR PRICE PROVISIONS
A. The following definitions shall apply for purposes of this Article XII:
1. The terms "Affiliate"and "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange
Act of 1934 and the rules and regulations thereunder (the"Act") (or any
subsequent provisions replacing such Act, rules, or regulations) as in effect
on March 24, 1992 (the term "registrant" in said Rule 12b-2 meaning in this
case the Corporation).
2. The term "Beneficially Own," when used with respect to a person's
interest in shares of capital stock, shall mean that said person has or shares
(or has the right to acquire under any option, warrant, conversion right or
other right), directly or indirectly, the power to vote, the power to dispose
of, the power to direct the voting or disposition of, or the right to enjoy
the economic benefits of such shares.
3. The term "Business Combination" shall mean (a) any merger or
consolidation of the Corporation or a Subsidiary of the Corporation with or
into an lnterested Shareholder (or an Affiliate or Associate of an lnterested
Shareholder) or any merger of an Interested Shareholder (or an Affiliate or
Associate of an Interested Shareholder) into the Corporation or a Subsidiary
of the Corporation, (b) any sale, lease, exchange, transfer, encumbrance or
other disposition of Substantial Assets either of the Corporation (including
without limitation any securities of a Subsidiary) or of a Subsidiary of the
Corporation, to an Interested Shareholder (or an Affiliate or Associate of an
Interested Shareholder), (c) the issuance of any securities of the Corporation
or a Subsidiary of the Corporation to an Interested Shareholder (or an
Affiliate or Associate of an Interested Shareholder), (d) any
reclassification, exchange of shares or other recapitalization that would have
the effect of increasing the proportion of shares of Common Stock or other
capital stock of the Corporation or a Subsidiary of the Corporation
Beneficially Owned by an Interested Shareholder, or (e) any agreement,
contract, or other arrangement providing for any of the foregoing
transactions.
4. The term "Continuing Director" shall mean a director who was a
member of the Board of Directors of the Corporation immediately prior to the
time that the Interested Shareholder involved in a Business Combination became
an Interested Shareholder and who is not the Interested Shareholder or an
Affiliate or Associate of the Interested Shareholder.
5. "Fair Market Value" means (a) in the case of cash, the amount of
such cash; (b) in the case of stock, the highest closing sale price during the
30-day period immediately preceding the date in question of a share of such
stock on the composite tape for New York Stock Exchange Listed Stocks, or, if
such stock is not quoted on the composite tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the principal
United States securities exchange registered under the Act on which such stock
is listed, or, if such stock is not listed on any such exchange, the highest
closing bid quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any similar system
then in use, or if no quotations are available, the fair market value on the
date in question of a share of such stock as determined by a majority of the
Continuing Directors in good faith; and (c) in the case of property other than
cash or stock, the fair market value of such property on the date in question
as determined in good faith by a majority of the Continuing Directors.
6. The term "Interested Shareholder" shall mean any person (other than
the Corporation or any Subsidiary and other than any profit-sharing, employee
stock ownership or other employee benefit plan of the Corporation or any
Subsidiary or any trustee of or fiduciary with respect to any such plan when
acting in such capacity) who is or has announced or publicly disclosed a plan
or intention to become the beneficial owner of Common Stock representing ten
percent (10%) or more of the votes entitled to be cast by the holders of all
then outstanding shares of Common Stock.
7. The term "person" shall mean any individual, firm, company, or
other entity and shall include any group comprised of any person and any other
person with whom such person or any Affiliate or Associate of such person has
any agreement, arrangement, or understanding, directly or indirectly, for the
purpose of acquiring, holding, voting, or disposing of Common Stock.
8. The term "Subsidiary" means any company of which a majority of any
class of equity security is Beneficially Owned by the Corporation; provided,
however, that for the purposes of the definition of Interested Shareholder set
forth in paragraph 6 of this section A, the term "Subsidiary" shall mean only
a company of which a majority of each class of equity security is Beneficially
Owned by the Corporation.
9. The term "Substantial Assets" shall mean assets with a Fair Market
Value in excess of five percent (5%) of the total assets of the Corporation as
reported in the consolidated financial statements of the Corporation as of the
end of its most recent fiscal year ending prior to the time the determination
is made.
B. In addition to any vote or approval required by law, any Business
Combination shall require the affirmative vote of the holders of not less than
eighty percent (80%) of the outstanding shares of capital stock of the
Corporation which are not Beneficially Owned by the Interested Shareholder and
its Affiliates or Associates involved in the Business Combination; provided,
however, that such eighty percent (80%) voting requirement shall not apply if:
1. The Business Combination is a merger, consolidation or exchange of
shares involving the Corporation which provides for the conversion of the
shares of Common Stock of the Corporation into cash, securities or other
property with a Fair Market Value per share of Common Stock not less than the
highest per share consideration (appropriately adjusted for stock splits,
stock dividends and other like charges) paid or given by the lnterested
Shareholder and any of its Affiliates or Associates for any of their shares of
Common Stock; or
2. The Business Combination was approved by the Board of Directors of
the Corporation; provided that a majority of the Board of Directors consisted
of Continuing Directors and at least two-thirds of the Continuing Directors
voted to approve the Business Combination.
C. The provisions set forth in this Article XII may not be repealed or
amended in any respect unless such repeal or amendment is approved by the
affirmative vote of the holders of not less than eighty percent (80%) of the
outstanding shares of capital stock of the Corporation which are not
Beneficially Owned by an Interested Shareholder.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 12
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDEND REQUIREMENTS
Twelve Months Ended
September 30 Year Ended December 31
------------------- ----------------------------------------
1995 1994 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------ ------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest expense $9,423 7,540 8,090 7,038 7,478 7,793 8,374
Amortization of debt issuance expense 604 586 593 562 402 362 373
-------- ------- ------- ------- ------- ------- --------
Total fixed charges 10,027 8,126 8,683 7,600 7,880 8,155 8,747
-------- ------- ------- ------- ------- ------- --------
Earnings, as defined:
Net earnings 7,087 6,351 5,760 9,103 4,843 7,651 8,376
Add (deduct):
Income taxes 4,590 3,452 3,505 5,224 2,817 4,206 4,547
Cumulative effect of change
in accounting method - - - (209) - - -
Fixed charges 10,027 8,126 8,683 7,600 7,880 8,155 8,747
-------- ------- ------- ------- ------- ------- --------
Total earnings $21,704 17,929 17,948 21,718 15,540 20,012 21,670
-------- ------- ------- ------- ------- ------- --------
Ratio of earnings to fixed charges 2.16 2.21 2.07 2.86 1.97 2.45 2.48
-------- ------- ------- ------- ------- ------- --------
Fixed charges and preferred
dividend requirements:
Fixed charges $10,027 8,126 8,683 7,600 7,880 8,155 8,747
Preferred dividend requirements 896 867 898 913 941 229 238
-------- ------- ------- ------- ------- ------- --------
Total $10,923 8,993 9,581 8,513 8,821 8,384 8,985
-------- ------- ------- ------- ------- ------- --------
Ratio of earnings to fixed charges
and preferred dividend requirements 1.99 1.99 1.87 2.55 1.76 2.39 2.41
-------- ------- ------- ------- ------- ------- --------
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> This schedule contains summary financial information
extracted from the Company's Consolidated Condensed
Balance Sheets and related Consolidated Condensed
Statements of Net Earnings Available to Common
Shareholders for the period ended September 30, 1995 and
is qualified in its entirety by reference to such
financial statements.
<MULTIPLIER> 1,000
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<PERIOD-TYPE> 9-MOS
<BOOK-VALUE> PER-BOOK
<S> <C>
<TOTAL-NET-UTILITY-PLANT> 227,118
<OTHER-PROPERTY-AND-INVEST> 3,253
<TOTAL-CURRENT-ASSETS> 23,273
<TOTAL-DEFERRED-CHARGES> 13,642
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 267,286
<COMMON> 9,098
<CAPITAL-SURPLUS-PAID-IN> 70,400
<RETAINED-EARNINGS> 6,424
<TOTAL-COMMON-STOCKHOLDERS-EQ> 85,922
7,200
0
<LONG-TERM-DEBT-NET> 100,000
<SHORT-TERM-NOTES> 19,001
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 5,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 50,163
<TOT-CAPITALIZATION-AND-LIAB> 267,286
<GROSS-OPERATING-REVENUE> 125,837
<INCOME-TAX-EXPENSE> 1,842
<OTHER-OPERATING-EXPENSES> 114,305
<TOTAL-OPERATING-EXPENSES> 116,147
<OPERATING-INCOME-LOSS> 9,690
<OTHER-INCOME-NET> 384
<INCOME-BEFORE-INTEREST-EXPEN> 10,074
<TOTAL-INTEREST-EXPENSE> 7,541
<NET-INCOME> 2,533
408
<EARNINGS-AVAILABLE-FOR-COMM> 2,125
<COMMON-STOCK-DIVIDENDS> 6,507 <F1>
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 19,079
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
<FN>
<F1> Amount represents total common stock dividends declared. This amounts
differs from the $6,144 shown on the Consolidated Statements of Cash Flows,
which is net of reinvested dividends of $771, and includes $408 of preferred
dividends.
</FN>
</TABLE>
