<PAGE>
PROSPECTUS SUPPLEMENT RULE 424(b)(5)
(To Prospectus dated July 24, 1996) File No. 333-08501
1,350,000 SHARES
CASCADE NATURAL GAS CORPORATION
COMMON STOCK
--------------
On August 13, 1996, the last reported sale price of the Common Stock of
Cascade Natural Gas Corporation (the "Company") on the New York Stock Exchange
was $15 1/4 per share. The Common Stock of the Company is listed for trading on
the New York Stock Exchange under the symbol "CGC."
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share........................ $15.25 $.685 $14.565
Total (3)........................ $20,587,500 $924,750 $19,662,750
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $150,000.
(3) The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus Supplement, to purchase up to 202,500
additional shares of Common Stock (the "Option Shares") from the Company at
the Price to Public, less the Underwriting Discount, solely to cover
overallotments, if any. If all of such Option Shares are purchased, the
total Price to Public, Underwriting Discount, and Proceeds to Company will
be $23,675,625, $1,063,463, and $22,612,162, respectively. See
"Underwriting."
-------------------
The shares are offered by the Underwriters, subject to prior sale, when, as
and if issued to and accepted by them and subject to approval of certain legal
matters by counsel for the Underwriters and to certain other conditions. The
Underwriters reserve the right to withdraw, cancel, or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the shares
will be made in New York, New York, on or about August 19, 1996.
-------------------
MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC.
RAGEN MACKENZIE
INCORPORATED
------------
The date of this Prospectus Supplement is August 13, 1996.
<PAGE>
Map of Oregon and Washington showing generalized service area of Cascade, and
the communities served, district offices, and gas pipelines.
[MAP]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE>
SUMMARY INFORMATION
The following material, which is presented herein solely to furnish limited
introductory information regarding the Company, has been selected from or is
based upon the detailed information and financial statements included and
incorporated by reference into this Prospectus Supplement and the accompanying
Prospectus, is qualified in its entirety by reference thereto, and, therefore,
should be read together therewith.
THE OFFERING
<TABLE>
<S> <C>
Company...................................... Cascade Natural Gas Corporation
Securities offered........................... 1,350,000 shares of Common Stock (excluding
up to 202,500 Option Shares)
Use of proceeds.............................. To repay short-term debt incurred in
connection with the Company's capital
construction program and to fund future
capital construction. The Company's
short-term debt bears interest at market
rates. At August 13, 1996, the Company had
$15,000,000 of short-term debt outstanding
that bore interest at a weighted-average
interest rate of 5.65% per annum. See "Use
of Proceeds" in the accompanying Prospectus.
Shares of Common Stock outstanding after
offering.................................... Approximately 10,600,000 (excluding up to
202,500 Option Shares)
Price range on the New York Stock Exchange
from August 14, 1995 through August 13,
1996........................................ High: $17 1/2; Low: $13 3/8
Last reported sale price on the New York
Stock Exchange on August 13, 1996........... $15 1/4
New York Stock Exchange symbol............... CGC
Indicated current annual dividend rate....... $0.96 per share
Book value per share at June 30, 1996........ $9.89
THE COMPANY
Business..................................... A public utility engaged in natural gas
distribution in the States of Oregon and
Washington
Estimated population of service area......... Approximately 724,000
Customers at June 30, 1996................... 151,779
Compound average annual growth in number of
customers, 1991-95.......................... 7.1%
Composition of operating margin for the
twelve months ended June 30, 1996........... Residential customers, 36.4%; commercial
customers, 27.7%; firm industrial customers,
4.7%; interruptible customers, 2.7%;
noncore, large volume customers, 28.5%
</TABLE>
S-3
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA (1)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31, (2)
---------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLAR AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................. $ 184,500 $ 190,725 $ 182,744 $ 192,410 $ 187,454 $ 152,466 $ 154,312
Operating margin.......... 70,563 66,766 68,406 62,827 62,859 53,149 54,047
Earnings before preferred
dividends................ 7,896(3) 7,074 7,732 5,760 9,103 4,843 7,651
Net earnings per common
share.................... 0.81(3) 0.74 0.80 0.60 1.08 0.64 1.14
Dividends per common
share.................... 0.96 0.96 0.96 0.96 0.94 0.93 0.90
Dividend payout ratio..... 119% 130% 120% 161% 87% 146% 79%
Average common shares
outstanding (000's)...... 9,115 8,874 8,997 8,707 7,915 6,681 6,587
OPERATING DATA:
Total customers (end of
period).................. 151,779 143,125 151,005 142,839 132,668 123,356 114,734
Total throughput (in
thousands of therms)..... 957,263 952,289 953,893 905,719 738,862 605,137 558,821
CAPITAL EXPENDITURES........ 35,515 31,838 37,637 27,251 32,990 35,335 19,669
HEATING DEGREE DAYS (4)..... 5,521 5,759 5,238 5,463 6,136 5,073 5,392
Percentage above/(below)
normal................... (2.7)% 1.5% (7.7)% (3.7)% 8.1% (10.6)% (5.0)%
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------------------
ACTUAL AS ADJUSTED (5)
---------------------- ----------------------
AMOUNT PERCENT AMOUNT PERCENT
--------- ----------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Common stock and paid-in capital........................................ $ 81,878 37.8% $ 101,391 46.1%
Retained earnings....................................................... 9,621 4.4 9,621 4.4
--------- ----- --------- -----
Total common stockholders' equity..................................... 91,499 42.2 111,012 50.5
Preferred stock......................................................... 6,851 3.2 6,851 3.1
Long-term debt (including current portion).............................. 101,850 47.0 101,850 46.4
Short-term debt......................................................... 16,500 7.6 -- --
--------- ----- --------- -----
Total capitalization.................................................. $ 216,700 100.0% $ 219,713 100.0%
--------- ----- --------- -----
--------- ----- --------- -----
</TABLE>
- ------------------------------
(1) The Summary Financial and Operating Data for the years ended December 31,
1991 through 1995, other than the dividend payout ratio and the data under
"Operating Data" and "Heating Degree Days," was derived from the Company's
audited financial statements. The financial data with respect to the
twelve-month periods ended June 30, 1995 and 1996, is unaudited, but
includes all adjustments which management considers necessary for a fair
presentation of its results for the periods.
(2) The Company's 1996 fiscal year will end on September 30, 1996, resulting in
a nine-month transition year. The change in fiscal year conforms to common
industry practice and will cause each heating season to fall within a
single fiscal year.
(3) Earnings for the twelve months ended June 30, 1996, include a second
quarter 1996 after-tax charge of $753,000, or $.08 per share. See "Recent
Developments."
(4) A normal year consists of 5,675 heating degree days, based on a 30-year
average of heating degree days (1951-1980). One heating degree day is
accumulated for each whole degree that the mean of the high and low daily
temperatures is below 65 DEG. F.
(5) Adjusted for the sale of the Common Stock (excluding up to 202,500 Option
Shares) and assuming the repayment of outstanding short-term debt with a
portion of the net proceeds thereof.
S-4
<PAGE>
THE COMPANY
Cascade Natural Gas Corporation (the "Company" or "Cascade") is a local gas
distribution utility with operations in the States of Washington and Oregon.
Cascade currently serves over 151,700 customers in 90 communities in the two
states with approximately 81% of its deliveries in the State of Washington. As
of June 30, 1996, Cascade served 127,449 residential customers, 23,847
commercial customers, 324 firm industrial customers, and 24 interruptible
customers, all of which are classified as core customers, as well as 135
noncore, large volume customers. The number of customers served by Cascade is
affected by seasonality. As of June 30, 1996, there were approximately 3,000
customers that had temporarily discontinued service due to warmer weather. These
customers are not included in the numbers of customers set forth above. Core
customers are those who elect to purchase traditional fully bundled services,
which primarily include gas supply and transportation services from the Company;
noncore customers, on the other hand, select supply and transportation services
from the Company's menu of unbundled services. The Company's noncore industrial
customers are served either at tariffed rates or pursuant to
specially-negotiated contracts that require regulatory approval. For the twelve
months ended June 30, 1996, the percentage of operating margin attributable to
each customer class was as follows: residential customers, 36.4%; commercial
customers, 27.7%; firm industrial customers, 4.7%; interruptible customers,
2.7%; and noncore, large volume customers, 28.5%.
Cascade has experienced significant growth in its core customer base during
the last five years due primarily to customer conversion from other energy
sources to gas space and water heating and new residential construction in its
service territory. Cascade's residential customer base increased by 8.3%, 8.3%
and 6.1% during 1993, 1994 and 1995, respectively. At June 30, 1996, Cascade's
residential customer count was 6.4% higher than at June 30, 1995. Cascade
believes its current residential growth rate is one of the highest among
companies in the local gas distribution business in the United States.
RECENT DEVELOPMENTS
WASHINGTON RATE SETTLEMENT
On July 22, 1996, the Washington Utilities and Transportation Commission
(the "WUTC") issued its final order reflecting the terms of a negotiated
settlement among the Company, the WUTC staff, the Public Counsel for the State
of Washington, and the Northwest Industrial Gas Users, of three separate rate
applications filed by the Company. The new rates are effective August 1, 1996.
The order approves the first general rate increase in the State of Washington by
the Company since 1986, estimated to increase revenues by approximately $3.8
million in the first year. Offsetting the general rate increase for the first
four years are technical credits for core customers amounting to approximately
$263,000 in the first year and increasing to $304,000 by the fourth year. Other
elements of the approved settlement include: (i) increases in monthly customer
service charges per core customer by $1.00 on August 1 in each of 1997 and 1998,
offset by simultaneous decreases in charges to non-core customers in equal
aggregate amounts; (ii) the refund to core customers of deferred gas cost
reductions estimated to aggregate $1,445,000 annually for four years, and the
refund of an additional $13 million in deferred gas cost savings plus accrued
interest beginning in four years, neither of which will have an effect on the
Company's earnings; (iii) an agreement by the Company not to apply for another
general rate increase for at least three years from August 1, 1996; and (iv) an
agreement by the Company to prepare a plan by November 30, 1996, to reduce meter
reading and billing expenses, adjusted for inflation and growth, by more than 30
percent within three years.
Concurrent with the August 1, 1996, effective date of new Washington rates,
Cascade will commence the amortization of deferred postretirement benefits other
than pensions ("PBOP"). Consistent with the WUTC's policy statement issued in
1992 regarding these costs, PBOP expenses attributable to Washington operations
in excess of amounts previously charged on a "pay-as-you-go" basis have been
deferred since 1993. The amount of the incremental expense to be recorded,
including amortization, will be approximately $1.5 million per year.
Amortization will be completed at December 31, 2002. Cascade has accounted for
S-5
<PAGE>
PBOP expense allocable to Oregon customers consistent with the provisions of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions," without any deferral.
RECENT OPERATING RESULTS
Cascade's second quarter 1996 results were a net loss of $1,887,000, or $.20
per share, compared to a net loss of $1,019,000, or $.11 per share, for the
comparable period of 1995. Although Cascade normally experiences a seasonal net
loss in the quarter ended June 30, the higher loss in the 1996 period is
primarily due to the establishment of a $1,158,000 reserve for unrecovered gas
costs resulting in an after-tax charge against income of $753,000, or $.08 per
share. The reserve resulted from management's determination that such costs are
more appropriately recoverable through noncore gas commodity sales, which are
dependent on future competitive conditions for large volume industrial gas
supplies, rather than from the more certain source of recovery through rate
increases to core customers.
The 1996 second quarter operating margins were also negatively affected by
approximately $360,000 due to certain large industrial noncore customers opting
for special contracts instead of tariffed rates. Large industrial customers have
the option of installing their own pipeline connection to the interstate
pipeline and thereby bypassing Cascade. In such instances, Cascade attempts to
negotiate mutually satisfactory special contracts with such customers, subject
to regulatory approval. Cascade expects that this trend will continue as the gas
distribution business becomes more competitive.
For the six months ended June 30, 1996, net earnings were $4,752,000, or
$.52 per share, compared to $4,578,000, or $.51 per share, for the six months
ended June 30, 1995.
SEASONALITY
Cascade's results of operations are significantly affected by seasonality.
Gas revenues are greatest in the winter heating season from October to April.
Accordingly, revenues and earnings are higher in the quarters ended December 31
and March 31. For the years 1995, 1994, and 1993, the percentages of revenues
attributable to the winter season were 66.5%, 66.2%, and 64.5%, respectively.
The percentages of net earnings attributable to operations during the winter
season were 148.3% in 1995, 174.7% in 1994, and 136.4% in 1993.
Tariffs for residential, commercial and firm industrial customers are based
on normal weather, defined as 20-year historical average temperatures. To the
extent temperatures are warmer or colder than normal, the Company's results are
affected. For the years 1986 through 1995, temperatures were warmer than normal
in the Company's service territory except for one year, 1993.
S-6
<PAGE>
COMMON STOCK PRICE RANGE AND DIVIDENDS
The following table sets forth for the periods indicated the high and low
closing prices per share for the Common Stock as reported on the New York Stock
Exchange and the cash dividends paid per share of Common Stock.
<TABLE>
<CAPTION>
PRICE
-------------------- CASH
HIGH LOW DIVIDENDS
--------- --------- ---------
<S> <C> <C> <C>
1994
First quarter....................................... 18 1/8 15 7/8 .23 2/3
Second quarter...................................... 16 3/4 14 .24
Third quarter....................................... 15 13/16 13 1/4 .24
Fourth quarter...................................... 15 1/2 12 3/4 .24
1995
First quarter....................................... 14 7/8 13 1/4 .24
Second quarter...................................... 15 13 1/2 .24
Third quarter....................................... 15 1/2 13 1/2 .24
Fourth quarter...................................... 17 3/8 14 5/8 .24
1996
First quarter....................................... 16 5/8 15 .24
Second quarter...................................... 16 13 3/8 .24
Third quarter (through August 13, 1996)............. 15 1/2 13 7/8 .24
</TABLE>
The last reported sale price of the Common Stock on August 13, 1996, on the
New York Stock Exchange was $15 1/4. There were 9,321 record holders of Common
Stock at June 30, 1996. The book value of the Common Stock on June 30, 1996, was
$9.89 per share.
The Company declared a regular quarterly dividend of $.24 per share on the
Common Stock on June 25, 1996, payable on August 15, 1996, to shareholders of
record on July 12, 1996.
The Company has paid consecutive quarterly cash dividends on its Common
Stock since 1964, except in the years 1976, 1977, and 1978, when it paid
dividends in shares of Common Stock in lieu of cash every other quarter. The
timing and amount of future dividends are within the discretion of the Company's
board of directors and will depend on the Company's earnings, capital
requirements, financial condition and other factors. The Company does not
contemplate any increase in its present annual dividend rate of $.96 per share
at least until its net earnings result in a dividend payout ratio of 75% or
less.
The Company's bank credit agreements contain provisions requiring
maintenance of a minimum net worth. Under these provisions, at June 30, 1996,
approximately $19,541,000 was available for dividends on the Common Stock and
the Company's preferred stock.
Under the Company's Dividend Reinvestment Plan, holders of Common Stock may
elect to have the dividends on their shares automatically reinvested in Common
Stock and may invest in additional shares of Common Stock by making optional
cash payments. See "Description of Common Stock -- Dividend Reinvestment Plan"
in the accompanying Prospectus.
FORWARD-LOOKING STATEMENTS
Statements contained in or incorporated by reference into this Prospectus
Supplement or the accompanying Prospectus which are not historical in nature are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements are subject to risks
and uncertainties that may cause actual future results to differ materially.
Such risks and uncertainties with respect to the Company include its ability to
successfully implement internal performance goals, competition from alternative
forms of energy, the effects of state and federal regulation, performance issues
with key natural gas suppliers, the capital-intensive nature of the Company's
business, the other factors discussed under the headings "Recent Developments"
and "Seasonality" herein and "Certain Issues Facing the Company and the Gas
Distribution Industry" in the accompanying Prospectus, and other risks and
uncertainties discussed in the Company's reports filed with the Securities and
Exchange Commission, including its 1995 Form 10-K and 1996 second quarter Form
10-Q. See "Incorporation of Certain Documents by Reference" in the accompanying
Prospectus.
S-7
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to each of the
Underwriters named below (the "Underwriters"), and each of the Underwriters, for
whom Merrill Lynch, Pierce, Fenner & Smith Incorporated, A.G. Edwards & Sons,
Inc., and Ragen MacKenzie Incorporated are acting as representatives (the
"Representatives"), has severally agreed to purchase, the respective number of
shares of Common Stock set forth opposite its name below. In the Underwriting
Agreement, the Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all of the shares of Common Stock if any are
purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................................... 284,000
A.G. Edwards & Sons, Inc......................................................... 283,000
Ragen MacKenzie Incorporated..................................................... 283,000
Dean Witter Reynolds Inc......................................................... 52,000
PaineWebber Incorporated......................................................... 52,000
Piper Jaffray Inc................................................................ 52,000
Prudential Securities Incorporated............................................... 52,000
Smith Barney Inc................................................................. 52,000
Black & Company, Inc............................................................. 30,000
Crowell, Weedon & Co............................................................. 30,000
Dain Bosworth Incorporated....................................................... 30,000
Jensen Securities Co............................................................. 30,000
Edward D. Jones & Co............................................................. 30,000
Pacific Crest Securities......................................................... 30,000
Paulson Investment Company, Inc.................................................. 30,000
Wedbush Morgan Securities........................................................ 30,000
----------
Total.................................................................. 1,350,000
----------
----------
</TABLE>
The Representatives have advised the Company that the Underwriters propose
initially to offer the shares of Common Stock to the public at the public
offering price set forth on the cover page of this Prospectus Supplement, and to
certain dealers at such price less a concession not in excess of $.38 per share.
The Underwriters may allow, and such dealers may reallow, a discount not in
excess of $.10 per share to certain other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
The Company has granted the Underwriters an option, exercisable within 30
days after the date of this Prospectus Supplement, to purchase up to 202,500
Option Shares solely for the purpose of covering overallotments, if any, at the
price to public less the underwriting discount set forth on the cover page of
this Prospectus Supplement. To the extent that the Underwriters exercise this
option, each Underwriter will be severally committed, subject to certain
conditions, to purchase an additional number of shares of Common Stock
proportionate to such Underwriter's initial commitment as indicated in the table
above.
Certain Underwriters and certain affiliates thereof engage in transactions
with and perform services for the Company and its affiliates in the ordinary
course of business. Brooks G. Ragen, one of the members of the Board of
Directors of the Company, is Chairman and Chief Executive Officer and a
shareholder of Ragen MacKenzie Incorporated.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including certain liabilities under the Securities Act of 1933, as
amended, or contribute to payments the Underwriters may be required to make in
respect thereof.
S-8
<PAGE>
PROSPECTUS
CASCADE NATURAL GAS CORPORATION
COMMON STOCK
($1.00 PAR VALUE)
Cascade Natural Gas Corporation ("the Company" or "Cascade") may offer and
sell up to 3,500,000 shares of its Common Stock, $1.00 par value per share (the
"Common Stock"), in one or more issuances at prices and on terms to be
determined at the time of sale. The number of shares being sold, the purchase
price, the initial public offering price, the proceeds to the Company, and the
other terms of the offering of such shares of Common Stock will be set forth in
a Prospectus Supplement to be delivered at the time of any such offering.
The Common Stock of the Company is listed for trading on the New York Stock
Exchange under the symbol "CGC." The shares of Common Stock offered hereby will
be listed, subject to notice of issuance, on such exchange.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
The shares of Common Stock offered hereby may be sold directly by the
Company or through agents, underwriters or dealers designated from time to time.
If any agents of the Company or any underwriters are involved in the sale of
shares of Common Stock in respect of which this Prospectus is being delivered,
the names of such agents or underwriters and any applicable discounts or
commissions with respect to such shares of Common Stock will also be set forth
in a Prospectus Supplement.
THE DATE OF THIS PROSPECTUS IS JULY 24, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549; Seven World Trade Center, Suite 1300, New York, New York
10048; and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies
of such materials can be obtained at prescribed rates by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549. Such material can also be inspected and copied at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005. The Commission
maintains an Internet Web site that contains reports, proxy and information
statements and other information regarding reporting companies under the
Exchange Act. The address of such Internet Web site is http:// www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information in the Registration Statement and in the exhibits
thereto, certain portions of which have been omitted as permitted by the rules
and regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is made to the
Registration Statement, including the schedules and exhibits thereto, which may
be inspected without charge at the principal office of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and copies of which may be obtained
from the Commission at prescribed rates.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed with the Commission are hereby
incorporated by reference in this Prospectus, and shall be deemed to be a part
hereof:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996.
3. The Company's Current Reports on Form 8-K dated February 7, 1996, and
July 18, 1996.
4. The description of the Company's Common Stock and related preferred
stock purchase rights included as Exhibit 99 to the Company's Current
Report on Form 8-K dated July 18, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of such
documents. The documents described above, and such later-filed documents, are
hereinafter referred to as "Incorporated Documents." Any statement contained in
an Incorporated Document shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed Incorporated Document modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
THE INFORMATION RELATING TO THE COMPANY CONTAINED IN THIS PROSPECTUS
SUMMARIZES, IS BASED UPON, OR REFERS TO, INFORMATION AND FINANCIAL STATEMENTS
CONTAINED IN ONE OR MORE OF THE INCORPORATED DOCUMENTS; ACCORDINGLY, SUCH
INFORMATION CONTAINED HEREIN IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
INCORPORATED DOCUMENTS AND SHOULD BE READ IN CONJUNCTION THEREWITH.
The Company undertakes to provide without charge to each person to whom a
copy of this Prospectus has been delivered, upon the written or oral request of
any such person, a copy of the documents referred to above, which have been
incorporated in this Prospectus by reference, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference into
documents.) Requests for such copies should be directed to: J.D. Wessling, Vice
President-Finance, Cascade Natural Gas Corporation, 222 Fairview Avenue North,
Seattle, Washington 98109 (telephone 206-624-3900).
2
<PAGE>
THE COMPANY
Incorporated in 1953 in the State of Washington, Cascade is a local gas
distribution utility with operations in the States of Washington and Oregon.
Cascade currently serves over 151,000 customers in 90 communities in the two
states with approximately 81% of its deliveries in the State of Washington. As
of March 31, 1996, Cascade served 128,653 residential customers, 23,993
commercial customers, 328 firm industrial customers, and 25 interruptible
customers, all of which are classified as core customers, and 121 noncore, large
volume customers. Core customers are those who elect to purchase traditional
fully bundled services, which primarily include gas supply and transportation
services from the Company; noncore customers, on the other hand, select supply
and transportation services from the Company's menu of unbundled services. The
Company's noncore industrial customers are served at tariffed rates or pursuant
to specially-negotiated contracts which require regulatory approval. For the
twelve months ended March 31, 1996, the percentage of operating margin
attributable to each customer class was as follows: residential customers, 35%;
commercial customers, 27%; firm industrial customers, 5%; interruptible
customers, 3%; and noncore, large volume customers, 30%.
Cascade has experienced significant growth in its core customer base during
the last five years due primarily to customer conversion from other energy
sources to gas space and water heating and new residential construction in its
service territory. Cascade's residential customer base increased by 8.3%, 8.3%
and 6.1% during 1993, 1994 and 1995, respectively. At March 31, 1996, Cascade's
residential customer count was 6.2% higher than at March 31, 1995. Cascade
believes its current residential growth rate is one of the highest among
companies in the local gas distribution business in the United States.
The Company's executive offices are located at 222 Fairview Avenue North,
Seattle, Washington 98109. Its telephone number is (206) 624-3900.
CERTAIN ISSUES FACING THE COMPANY AND THE GAS DISTRIBUTION INDUSTRY
Cascade is subject to factors affecting both the natural gas distribution
industry generally and those companies which, like itself, are experiencing
customer growth, including: the need for adequate and timely rate relief to
recover increased capital and operating costs resulting from customer growth and
to sustain dividend levels; increasing competition brought on by deregulation
initiatives at the federal and state regulatory levels; the potential loss of
large volume industrial customers due to bypass (bypass occurs when a natural
gas customer connects directly to an interstate pipeline and "bypasses" the
local gas distribution company) or the shift by such customers to special
competitive contracts at lower per unit margins; exposure to environmental
cleanup requirements; and general economic conditions.
USE OF PROCEEDS
Except as may otherwise be set forth in any Prospectus Supplement, the net
proceeds, after deduction of expenses, from the sale of the shares of Common
Stock offered hereby will be used by the Company to repay short-term debt
incurred in connection with the Company's capital construction program, to fund
future capital construction under the program, and for other corporate purposes.
CAPITAL CONSTRUCTION PROGRAM
The Company's capital expenditures in 1993, 1994, and 1995 were $32,990,000,
$27,251,000, and $37,637,000, respectively. The 1996 capital expenditure budget
is $35,147,000 of which $5,200,000 had been expended through March 31, 1996.
Approximately 59% of the 1996 budget will be expended for equipment and
facilities to service additional customers, with the remaining 41% being
expended to maintain customer service and upgrade equipment and facilities. The
percentage of capital expenditures expended in connection with servicing new
customers has declined from 74% in 1995 and 82% in 1994 due to the commencement
in 1995 of a construction program to reinforce the Company's system on the
Kitsap Peninsula in the State of Washington, which is expected to be completed
in 1997.
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Including the budgeted 1996 expenditures, Cascade will have invested over
$168,000,000 on new plant facilities in the five years ending in 1996, compared
to a total of $133,252,000 in the 12-year period from 1980 through 1991. The
Company presently anticipates that capital expenditures will total approximately
$150,000,000 during the five-year period ending in 2001.
DESCRIPTION OF COMMON STOCK
GENERAL
The number of authorized shares of Common Stock of Cascade is 15,000,000
shares, with 9,249,611 shares issued and outstanding as of June 30, 1996. Also
at that date, Cascade had outstanding 156,560 shares of preferred stock
("Preferred Stock"), consisting of 96,560 shares of $.55 cumulative senior
preferred stock, without par value (the "$.55 Preferred Stock"), and 60,000
shares of 7.85% cumulative preferred stock, $1.00 par value (the "7.85%
Preferred Stock"). An additional 940,000 shares of preferred stock, $1.00 par
value, are authorized for issuance pursuant to Cascade's Restated Articles of
Incorporation, as amended (the "Restated Articles"), including 110,000 shares
reserved for issuance as Series Z Junior Participating Preferred Stock (the
"Series Z Preferred Stock"). See "Preferred Stock Purchase Rights" below.
The following statements summarize certain provisions of the Restated
Articles. Such summary does not purport to be complete and is qualified in its
entirety by reference to the Restated Articles, which are filed as an exhibit to
the Registration Statement of which this Prospectus is a part.
DIVIDENDS
After the payment of all preferential dividends on shares of the Preferred
Stock, holders of the Common Stock are entitled to dividends when and as
declared by the Board of Directors. The Company's bank loan agreements contain
provisions requiring maintenance of a minimum net worth. Under these provisions,
approximately $23,220,000 was available for dividends on the Common Stock and
the Preferred Stock at March 31, 1996.
VOTING RIGHTS
Except as described below and except as otherwise provided by law, holders
of the Common Stock have exclusive voting power and are entitled to one vote for
each share held of record. Approval of matters brought before the shareholders
requires the affirmative vote of a plurality of the shares of Common Stock
present and voting, except as otherwise required by law or by the Restated
Articles in the case of certain business combinations. The holders of Common
Stock are entitled to cumulate their votes in electing directors.
If the Company fails to pay six full quarterly dividends on the $.55
Preferred Stock, the holders of such stock will have the right to elect, voting
as a class to the exclusion of the holders of Common Stock and the 7.85%
Preferred Stock, three members of the Board of Directors until all arrears and
dividends have been paid in full, whereupon all voting rights will revest in the
holders of Common Stock and, to the extent applicable, the holders of the 7.85%
Preferred Stock. In addition, the Company, without obtaining the affirmative
vote of the holders of at least two-thirds of the shares of $.55 Preferred Stock
then outstanding, may not increase the authorized number of shares of $.55
Preferred Stock, 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, amend the Restated Articles so as to affect adversely any rights of the
$.55 Preferred Stock, or merge or consolidate with or into any other corporation
or dispose of all or substantially all of its assets. The holders of the 7.85%
Preferred Stock have similar voting rights with respect to the election of
directors in the event of dividend arrearages; provided that, if the holders of
the $.55 Preferred Stock then have the right to elect three directors, the
holders of the 7.85% Preferred Stock may exercise their voting rights as to the
election of directors only to the extent that the holders of the $.55 Preferred
Stock have elected fewer than three directors, such that the total number of
directors elected by the holders of the $.55 Preferred Stock and the 7.85%
Preferred Stock is not more than three. The holders of the 7.85% Preferred Stock
also have approval rights comparable to those of the $.55 Preferred Stock with
respect to changes in the rights or priority of the 7.85% Preferred Stock and
certain other extraordinary corporate events.
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<PAGE>
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of Cascade, the
holders of the Common Stock are entitled to receive pro rata all assets of
Cascade, if any, remaining after payment of all debt and payment to the holders
of any outstanding preferred stock of the full preferential amounts fixed for
such stock.
DIVIDEND REINVESTMENT PLAN
The Company maintains an Automatic Dividend Reinvestment Plan (the "Plan").
All holders of Common Stock may participate in the Plan and may have cash
dividends on their shares of Common Stock automatically reinvested in additional
shares of Common Stock and may invest in additional shares of Common Stock by
making optional cash payments without the payment of brokerage commissions or
service charges. Participation in the Plan is offered only through a separate
prospectus available from the Company.
The Company may issue authorized but unissued shares or, at its option,
direct an independent agent, who acts on behalf of participants, to purchase
shares in the open market for the Plan. The Company has been issuing authorized
but unissued shares for such purpose. During the 12 months ended March 31, 1996,
approximately 181,089 shares of Common Stock were issued under the Plan.
CHANGES IN CONTROL AND BUSINESS COMBINATIONS
The Restated Articles and Washington law contain certain provisions that may
have the effect of delaying or discouraging a hostile takeover of the Company.
Article XII of the Restated Articles provides that certain business combinations
involving the Company and any person who is or who has announced a plan to
become the beneficial owner of 10% or more of the outstanding Common Stock (an
"Interested Shareholder"), must be approved by the affirmative vote of the
holders of at least 80% of the outstanding shares of the capital stock of the
Company which are not owned by the Interested Shareholder or its affiliates. The
80% voting requirement does not apply in the case of a business combination
which provides for conversion of Common Stock into cash, securities or property
with a fair market value not less than the highest per share price paid by the
Interested Shareholder or its affiliates for any of their shares of Common Stock
or, under certain circumstances, if the business combination is approved by the
Board of Directors.
In addition, Chapter 23B.19 of the Washington Business Corporation Act
prohibits certain Washington corporations, including the Company, from engaging
in certain significant business transactions, such as a merger, share exchange
or consolidation, sale, exchange or mortgage of significant assets, or
termination of more than 5% of the employees of such a corporation, for a period
of five years following an acquiring person's acquisition of beneficial
ownership of 10% or more of the outstanding voting shares of such corporation,
unless the significant business transaction or the purchase of such shares is
approved in advance of the share acquisition by a majority of the members of the
board of directors of such corporation.
PREFERRED STOCK PURCHASE RIGHTS
In May 1993, the Company distributed to holders of Common Stock rights
("Rights") to purchase shares of Series Z Preferred Stock on the basis of one
Right for each share of Common Stock. Each share of Common Stock offered hereby
will, upon issuance, be accompanied by one Right. The Rights may not be
exercised and will be attached to and trade with shares of Common Stock until
the Distribution Date, which will occur on the earlier of (i) the tenth day
following a public announcement that there has been a "Share Acquisition," i.e.,
that a person or group (other than the Company and certain other persons) has
acquired or obtained the right to acquire 20% or more of the outstanding Common
Stock and (ii) the tenth business day following the commencement or announcement
of certain offers to acquire beneficial ownership of 30% or more of the
outstanding Common Stock. Subject to restrictions on exercisability while the
Rights are redeemable as discussed below, each Right entitles the holder to buy
from the Company one one-hundredth of a share of Series Z Preferred Stock at a
price of $85, subject to adjustment. Upon the occurrence of a Share Acquisition,
and provided that all necessary regulatory approvals have been obtained, each
Right will thereafter entitle the holder (other than the acquiring person or
group and transferees) to buy from the Company for $85 shares of Common Stock
having a market value of $170, subject to adjustment.
Until a Right is exercised, the holder of a Right will not thereby have any
rights as a shareholder of the Company, including, without limitation, the right
to vote or to receive dividends. There is no assurance that
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<PAGE>
all regulatory approvals for the exercise of the Rights or the issuance of the
underlying securities could be obtained in a timely fashion or at all.
Furthermore, prior to the Distribution Date, the Company may, without the
consent of holders of the Rights, amend the Rights in any manner, including
amendments which result in the cancellation of the Rights. Until the tenth day
following a Share Acquisition, the Company may redeem all outstanding Rights at
a redemption price of $.01 per Right, subject to adjustment. While the Rights
are so subject to redemption, they are not exercisable. Accordingly, no
purchaser of shares of Common Stock offered hereby should buy such shares with
the expectation that the Rights will be of material benefit to the holders of
Common Stock.
The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not sanctioned by the Board of Directors, except pursuant to an offer
conditioned on a substantial number of Rights being acquired. The Rights should
not interfere with any merger or other business combination sanctioned by the
Board of Directors at a time when the Rights are redeemable.
The foregoing description of the Rights is subject to and qualified by
reference to the Rights Agreement dated as of March 19, 1993, and the First
Amendment to Rights Agreement dated as of June 15, 1993, which are filed as
exhibits to the Registration Statement of which this Prospectus is a part. A
more complete description of the Rights is set forth in Exhibit 99 to the
Company's Current Report on Form 8-K dated July 18, 1996, which description has
been incorporated by reference herein. See "Incorporation of Certain Documents
by Reference."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York, New York, New York.
MISCELLANEOUS
All shares of Common Stock presently outstanding are fully paid and
nonassessable and the shares of Common Stock offered hereby, upon issuance and
payment therefor, will be fully paid and nonassessable. Holders of Common Stock
have no preemptive or similar rights to subscribe for additional securities of
the Company.
PLAN OF DISTRIBUTION
The Company may offer the Common Stock offered hereby in any of three ways:
(i) through underwriters or dealers; (ii) directly to a limited number of
purchasers or to a single purchaser; or (iii) through agents. Any Prospectus
Supplement with respect to shares of the Common Stock offered hereby will set
forth the terms of the offering and the proceeds to the Company from the sale
thereof, any underwriting discounts and other items constituting underwriters'
compensation, any initial public offering price, and any discounts or
concessions allowed or reallowed or paid to dealers. Any initial public offering
price and any discounts or concessions allowed or reallowed or paid to dealers
may be changed from time to time.
If underwriters are utilized, the Common Stock being sold to them will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The underwriter or underwriters with respect to the Common Stock being offered
will be named in the Prospectus Supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will be
set forth on the cover page of such Prospectus Supplement. Any underwriting
agreement will provide that the obligations of the underwriters are subject to
certain conditions precedent, and that, in general, the underwriters will be
obligated to purchase all of the shares of Common Stock to which such
underwriting agreement relates if any is purchased. The Company will agree to
indemnify any underwriters against certain civil liabilities, including
liabilities under the Securities Act of 1933, as amended.
The Common Stock offered hereby may be sold directly by the Company or
through agents designated by the Company from time to time. Any agent involved
in the offer or sale of the Common Stock in respect of
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<PAGE>
which this Prospectus is delivered will be named, and any commissions payable by
the Company to such agent will be set forth, in the Prospectus Supplement.
Unless otherwise indicated in the Prospectus Supplement, any such agent will be
acting on a best efforts basis for the period of its appointment.
LEGAL MATTERS
The legality of the securities offered hereby and certain other legal
matters will be passed upon for the Company by Miller, Nash, Wiener, Hager &
Carlsen LLP, Seattle, Washington, and certain legal matters will be passed upon
for any underwriters, dealers or agents by Winthrop, Stimson, Putnam & Roberts,
New York, New York.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference from the Company's annual report on Form 10-K for the year ended
December 31, 1995, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH
THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE HEREUNDER AND THEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
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TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Cascade Natural Gas Corporation Service Area... S-2
Summary Information............................ S-3
Summary Financial and Operating Data........... S-4
The Company.................................... S-5
Recent Developments............................ S-5
Seasonality.................................... S-6
Common Stock Price Range and Dividends......... S-7
Forward-Looking Statements..................... S-7
Underwriting................................... S-8
PROSPECTUS
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
The Company.................................... 3
Certain Issues Facing the Company and the Gas
Distribution Industry........................ 3
Use of Proceeds................................ 3
Capital Construction Program................... 3
Description of Common Stock.................... 4
Plan of Distribution........................... 6
Legal Matters.................................. 7
Experts........................................ 7
</TABLE>
1,350,000 SHARES
CASCADE NATURAL GAS CORPORATION
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
A.G. EDWARDS & SONS, INC.
RAGEN MACKENZIE INCORPORATED
AUGUST 13, 1996
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