<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 March 31, 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 April 28, 1995
Common Stock, $1.00 par value 8,971,190
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF NET EARNINGS AVAILABLE TO COMMON
SHAREHOLDERS
<TABLE>
<CAPTION>
(Unaudited)
(Dollars in Thousands Except Per Share Data)
THREE MONTHS ENDED
------------------
31-Mar-95 31-Mar-94
--------- ---------
<S> <C> <C>
Operating revenues:
Gas sales $62,110 $63,541
Transportation revenue 2,438 1,145
Other operating income 62 60
-------- --------
64,610 64,746
Less: Gas purchases 37,253 40,067
Revenue taxes 4,332 4,112
-------- --------
Operating margin 23,025 20,567
-------- --------
Cost of operations:
Operating expenses 8,018 7,636
Depreciation and amortization 2,614 2,435
Property and payroll taxes 1,013 1,104
-------- --------
11,645 11,175
-------- --------
Earnings from operations 11,380 9,392
Less interest and other
deductions - net 2,337 1,837
-------- --------
Earnings before income taxes 9,043 7,555
Income taxes 3,310 2,744
-------- --------
Net earnings 5,733 4,811
Preferred dividends 136 141
-------- --------
Net earnings available to
Common Shareholders $5,597 $4,670
-------- --------
Common shares outstanding (thousands):
Weighted average 8,931 8,588
End of period 8,968 8,690
Net earnings per common share $0.63 $0.54
-------- --------
Cash dividends per share $0.24 $0.24
-------- --------
</TABLE>
<PAGE>
PART I. (Continued)
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(Thousands of Dollars)
(UNAUDITED)
31-Mar-95 31-Dec-94
------------ ----------
(dollars in thousands)
<S> <C> <C>
ASSETS
Utility Plant, net after accumulated
depreciation of $130,613 and $127,806 $209,222 $206,057
Construction work in progress 9,388 7,872
--------- ---------
218,610 213,929
--------- ---------
Other Assets:
Investments 919 919
Notes receivable, less current maturities 2,827 2,915
--------- ---------
3,746 3,834
--------- ---------
Current Assets:
Cash and cash equivalents 205 3,949
Securities available for sale 2,255 1,466
Accounts receivable, less allowance of $524
and $461 for doubtful accounts 22,687 28,885
Current maturities of notes receivable 952 988
Materials, supplies and inventories 5,646 5,583
Prepaid expenses and other assets 709 1,653
--------- ---------
32,454 42,524
--------- ---------
Deferred Charges 13,318 12,010
--------- ---------
$268,128 $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 8,967,648
and 8,911,661 shares $8,968 $8,912
Additional paid-in capital 68,676 67,992
Retained earnings 14,249 10,806
--------- ---------
91,893 87,710
--------- ---------
Redeemable Preferred Stocks, aggregate
redemption amount of $7,499 and $7,499 7,217 7,217
--------- ---------
Long-term Debt 100,000 100,000
--------- ---------
<PAGE>
Current Liabilities:
Notes payable 6,000 14,501
Accounts payable 10,039 18,366
Property, payroll and excise taxes 5,030 4,541
Dividends and interest payable 2,423 4,202
Other current liabilities 3,491 1,620
Current maturities of long-term debt 5,000 5,000
--------- ---------
31,983 48,230
--------- ---------
Deferred Credits:
Gas cost changes 11,830 4,407
Other 25,205 24,733
--------- ---------
37,035 29,140
--------- ---------
Commitments and Contingencies - -
--------- ---------
$268,128 $272,297
--------- ---------
</TABLE>
<PAGE>
<TABLE>
PART I (Continued)
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended March 31
-------------------------
1995 1994
(dollars in thousands)
<S> <C> <C>
Operating Activities:
Net earnings $5,733 $4,811
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 2,878 2,687
Amortization of gas cost changes 1,438 (1,061)
Increase in deferred income taxes 502 1,174
Decrease in deferred investment tax credits (60) (68)
Cash provided (used) by changes in operating assets and liabilities:
Accounts receivable 6,198 3,413
Income taxes 2,858 2,356
Inventories 283 47
Gas cost changes 5,086 2,821
Deferred items (553) (606)
Accounts payable and accrued expenses (10,120) (6,714)
Prepaid expenses and other assets 460 148
Other (17) (367)
--------- ---------
Net cash provided by operating activities 14,686 8,641
--------- ---------
Investing Activities:
Capital expenditures (7,731) (5,820)
New consumer loans (312) (501)
Receipts on consumer loans 466 806
Purchase of securities available for sale (802) -
Proceeds from securities available for sale - 102
--------- ---------
Net cash used by investing activities (8,379) (5,413)
--------- ---------
Financing Activities:
Issuance of common stock, net 490 1,821
Repayment of notes payable, net (8,501) (3,250)
Dividends paid (2,040) (2,045)
--------- ---------
Net cash used by financing activities (10,051) (3,474)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (3,744) (246)
Cash and Cash Equivalents:
Beginning of period 3,949 3,138
--------- ---------
End of period $205 $2,892
--------- ---------
</TABLE>
<PAGE>
PART I. (Cont.)
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three Month Period Ending March 31, 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 "Managements'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 Corporation's business creates short-term
cash requirements to finance customer accounts receivable and construction
expenditures. To provide working capital for these requirements, the
Corporation has $25,000,000 of committed lines from two banks which are used
to support a money market facility of a similar amount. The Corporation 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 $2,040,000 there was
$12,646,000, of cash flow from year-to-date operations. This cash flow and
proceeds of $490,000 from common stock issued to participants in the
Corporation's dividend reinvestment plan and 401(k) plan were used primarily
for capital expenditures of $7,731,000 and reductions in short-term borrowing.
Capital expenditures for the remainder of the year are budgeted at $31,769,000
which will be funded initially with operating cash flow and secondly from the
lines of credit described above.
Results of Operations
Net earnings available to common shareholders for the first quarter of
1995 were $5,597,000, or $0.63 per share, compared to $4,670,000, or $0.54 per
share, for the first quarter of 1994, an increase of 16.7%.
A major factor in the improved earnings was the increase in operating
margin. Despite weather estimated to be 8% warmer than normal for the quarter
and about the same as was experienced in the first quarter last year, core
residential and commercial margin increased 9.5% and non-core industrial
margin increased 21%. Core margins were up, in part, as a result of continued
customer growth. Total core customers at March 31, 1995 were 144,534, an
increase of 9,475 from the customer base at March 31, 1994. Also contributing
to core margin improvement were 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.
Increases in non-core margins for the quarter came from a broad
spectrum of the industrial base. The largest impact came from the addition of
a new large cogeneration customer in the Spring of 1994. During the quarter
ended March 31, 1995, total margins from these customers was $1.2 million on
an investment of $25 million in facilities to serve them.
Margin and Throughput Changes
First Quarter 1995 Compared to First Quarter 1994
Margin Contribution Throughput
($ in thousands) (thousands of therms)
Increase (Decrease) Increase (Decrease)
Amount Percent Amount Percent
-------- -------- --------- ---------
Core $ 1,524 9.0% 4,215 5.0%
Non-Core 934 21.0% 39,077 26.0%
-------- -------- --------- ---------
Total $ 2,458 12.0% 43,292 19.0%
Total customer growth continues at one of the fastest rates in the
industry. The rate during the twelve months ended March 31, 1995 was 7.0%,
which is down from the 7.8% growth rate experienced for the twelve months
ended March 31, 1994. Growth in residential customers was 7.6% for the twelve
months ended March 31, 1995.
Operating expenses for the quarter were up $382,000, or 5%, over the
quarter ended March 31, 1994. Payroll and fringe benefit costs associated
with general salary and wage increases and the addition of four employees
accounted for 65.5% of the operating expense increase. Depreciation expense
increased 7.4% which is related to increased capital spending in response to
the high customer growth. Property and payroll taxes decreased 8.2% due to
general property tax reductions in the state of Oregon and savings realized
from a detail review of all Cascade taxable property with the Departments of
Revenue in Washington and Oregon.
Interest expense and other deductions increased $500,000 from March
31, 1994 to March 31, 1995 primarily due to a $14,000,000 net increase in
average short and long-term debt outstanding and, to a lesser extent, an
increase in short-term interest rates.
PART II OTHER INFORMATION
Item 2. Changes in Securities
Under the terms of its bank credit agreement, the Corporation is
required to maintain a minimum of $64,468,000 of net worth. Under this
restriction approximately $27,425,000 was available for the payment of
dividends at March 31, 1995.
Item 4. Submission of Matters to a Vote of Security Holders
The 1995 annual meeting of Shareholders of the Corporation was held on
April 26, 1995.
The following directors were elected at the meeting for terms of
office expiring in 1996 by the vote indicated below:
Abstentions and
For Withheld Broker Non-Votes
Donald E. Bennett 7,657,821 114,912 -0-
Carl Burnham, Jr. 7,655,599 117,134 -0-
Melvin C. Clapp 7,658,760 113,973 -0-
David A. Ederer 7,654,399 118,334 -0-
Howard L. Hubbard 7,656,574 116,159 -0-
W. Brian Matsuyama 7,656,248 116,485 -0-
Brooks G. Ragen 7,650,023 122,710 -0-
Andrew V. Smith 7,655,524 117,209 -0-
Mary A. Williams 7,655,524 117,209 -0-
<PAGE>
Item 5. Other Information
Ratio of Earnings to Fixed Charges
Twelve Months
Ended March 31, Year Ended December 31
1995 1994 1994 1993 1992 1991 1990
---- ---- ---------------------------------------------
2.16 2.50 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
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.
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 CORPORATION
(Registrant)
By /s/ Donald E. Bennett
Donald E. Bennett
Executive Vice President,
Chief Financial Officer
and Secretary
DATED: May 9, 1995
<PAGE>
<PAGE>
<TABLE>
EXHIBIT 12
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED DIVIDEND REQUIREMENTS
<CAPTION>
Twelve Months Ended
March 31 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 $8,670 7,031 8,090 7,038 7,478 7,793 $8,374
Amortization of debt issuance expense 596 578 593 562 402 362 373
-------- ------- ------- ------- ------- ------- --------
Total fixed charges 9,266 7,609 8,683 7,600 7,880 8,155 8,747
-------- ------- ------- ------- ------- ------- --------
Earnings, as defined:
Net earnings 6,682 7,150 5,760 9,103 4,843 7,651 8,376
Add (deduct):
Income taxes 4,071 4,264 3,505 5,224 2,817 4,206 4,547
Cumulative effect of change
in accounting method - - - (209) - - -
Fixed charges 9,266 7,609 8,683 7,600 7,880 8,155 8,747
-------- ------- ------- ------- ------- ------- --------
Total earnings $20,019 19,023 17,948 21,718 15,540 20,012 $21,670
-------- ------- ------- ------- ------- ------- --------
Ratio of earnings to fixed charges 2.16 2.50 2.07 2.86 1.97 2.45 2.48
-------- ------- ------- ------- ------- ------- --------
Fixed charges and preferred
dividend requirements:
Fixed charges $9,266 7,609 8,683 7,600 7,880 8,155 $8,747
Preferred dividend requirements 890 916 898 913 941 229 238
-------- ------- ------- ------- ------- ------- --------
Total $10,156 8,525 9,581 8,513 8,821 8,384 $8,985
-------- ------- ------- ------- ------- ------- --------
Ratio of earnings to fixed charges
and preferred dividend requirements 1.97 2.23 1.87 2.55 1.76 2.39 2.41
-------- ------- ------- ------- ------- ------- --------
</TABLE>
<PAGE>
<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 March 31, 1995 and is
qualified in its entirety by reference to such financial
statements.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<S> <C>
<TOTAL-NET-UTILITY-PLANT> 218,610
<OTHER-PROPERTY-AND-INVEST> 3,746
<TOTAL-CURRENT-ASSETS> 32,454
<TOTAL-DEFERRED-CHARGES> 13,318
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 268,128
<COMMON> 8,968
<CAPITAL-SURPLUS-PAID-IN> 68,676
<RETAINED-EARNINGS> 14,249
<TOTAL-COMMON-STOCKHOLDERS-EQ> 91,893
7,217
0
<LONG-TERM-DEBT-NET> 100,000
<SHORT-TERM-NOTES> 6,000
<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> 58,018
<TOT-CAPITALIZATION-AND-LIAB> 268,128
<GROSS-OPERATING-REVENUE> 64,610
<INCOME-TAX-EXPENSE> 3,310
<OTHER-OPERATING-EXPENSES> 53,230
<TOTAL-OPERATING-EXPENSES> 56,540
<OPERATING-INCOME-LOSS> 8,070
<OTHER-INCOME-NET> 135
<INCOME-BEFORE-INTEREST-EXPEN> 8,205
<TOTAL-INTEREST-EXPENSE> 2,472
<NET-INCOME> 5,733
136
<EARNINGS-AVAILABLE-FOR-COMM> 5,597
<COMMON-STOCK-DIVIDENDS> 2,153 <F1>
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 14,686
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
<FN>
<F1> Amount represents total common stock dividends declared. This amount
differs from the $2,040 shown on the Consolidated Statement of Cash
Flows, which is net of reinvested dividends of $249, and includes $136 of
preferred dividends.
</FN>
</TABLE>
