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, 1994
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 No.)
222 Fairview Avenue North
Seattle, Washington 98109
(Address of principal executive offices) (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 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 29, 1994
Common Stock, $1.00 par value 8,733,294
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)
(Thousands of Dollars Except Share Amounts)
THREE MONTHS ENDED
31-Mar-94 31-Mar-93
_________ _________
Operating revenues:
Gas sales $63,541 $60,448
Transportation revenue 1,145 1,172
Other operating income 60 109
-------- --------
64,746 61,729
Less: Gas purchases 40,067 34,974
Revenue taxes 4,112 4,019
-------- --------
Operating margin 20,567 22,736
-------- --------
Cost of operations:
Operating expenses 7,636 7,040
Depreciation and amortization 2,435 2,199
Property and payroll taxes 1,104 1,025
Income taxes 2,744 3,704
-------- --------
13,919 13,968
-------- --------
Earnings from operations 6,648 8,768
Less interest and other
deductions - net 1,837 2,213
-------- --------
Net earnings before cumulative effect of
change in accounting method 4,811 6,555
Cumulative effect of change
in accounting method - 209
-------- --------
Net earnings 4,811 6,764
Preferred dividends 141 147
-------- --------
Net earnings available to
Common Shareholders $4,670 $6,617
======== ========
Common shares outstanding:
Weighted average 8,587,901 7,621,599
End of period 8,690,170 7,636,344
Earnings per common share:
Before cumulative effect of
change in accounting method $0.54 $0.84
Cumulative effect of change
in accounting method - 0.03
-------- --------
Net earnings per common share $0.54 $0.87
======== ========
Cash dividends per share $0.24 $0.23
======== ========
PART I. (Continued)
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Thousands of Dollars)
(UNAUDITED)
31-Mar-94 31-Dec-93
ASSETS
Utility Plant, net after accumulated
depreciation of $120,721 and $117,925 $197,340 $192,363
Construction work in progress 3,019 5,009
--------- ---------
200,359 197,372
--------- ---------
Other Assets:
Investments, at cost 1,144 1,149
Notes receivable, less current maturities 3,277 3,508
--------- ---------
4,421 4,657
--------- ---------
Current Assets:
Cash and cash equivalents 2,892 3,138
Temporary investments 651 757
Accounts receivable, less allowance of
$548 and $490 for doubtful accounts 23,126 26,539
Current maturities of notes receivable 1,228 1,331
Materials, supplies and inventories 6,582 6,416
Prepaid expenses and other assets 726 444
--------- ---------
35,205 38,625
--------- ---------
Deferred Charges 12,349 12,036
--------- ---------
$252,334 $252,690
--------- ---------
COMMON SHAREHOLDERS' EQUITY,
PREFERRED STOCKS AND LIABILITIES
Common Shareholders' Equity:
Common stock, par value $1 per share
Authorized, 10,000,000 shares
Issued and outstanding 8,690,170
and 8,566,374 shares $8,690 $8,566
Additional paid-in capital 64,939 63,060
Retained earnings 16,659 14,076
--------- ---------
90,288 85,702
--------- ---------
Redeemable Preferred Stocks, aggregate
redemption amount of $7,826
and $7,826 7,528 7,528
--------- ---------
Long-term Debt 87,000 87,000
--------- ---------
Current Liabilities:
Notes payable 10,252 13,502
Accounts payable 14,645 22,362
Property, payroll and excise taxes 4,563 3,960
Dividends and interest payable 5,268 3,665
Other current liabilities 3,578 2,395
--------- ---------
38,306 45,884
--------- ---------
Deferred Credits:
Gas cost changes 5,327 3,568
Other 23,885 23,008
--------- ---------
29,212 26,576
--------- ---------
Commitments and Contingencies - -
--------- ---------
$252,334 $252,690
========= =========
PART I (Continued)
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1994 AND MARCH 31, 1993
(Unaudited)
(Thousands of Dollars)
March 31
---------------------
1994 1993
Operating Activities
Net earnings $4,811 $6,764
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 2,687 2,441
Amortization of gas cost changes (1,061) (5,667)
Increase in deferred income taxes 1,174 (1,317)
Cumulative effect of change in accounting method - (209)
Decrease in deferred investment tax credits (68) (68)
Cash provided (used) by changes in operating
assets and liabilities:
Accounts receivable 3,413 1,903
Income taxes 2,356 3,366
Inventories 47 899
Gas cost changes 2,821 3,057
Deferred items (606) 2,512
Accounts payable and accrued expenses (6,714) (1,865)
Other (219) (48)
--------- ---------
Net cash provided by operating activities 8,641 11,768
--------- ---------
Investing Activities
Capital expenditures (5,820) (6,381)
New consumer loans (501) (665)
Receipts on consumer loans 806 810
Other 102 -
--------- ---------
Net cash used by investing activities (5,413) (6,236)
--------- ---------
Financing Activities
Issuance of common stock, net 1,821 196
Redemption of preferred stock - (5)
Proceeds from long-term debt - 23,760
Repayment of long-term debt - (22,761)
Repayment of notes payable, net (3,250) (2,000)
Dividends paid (2,045) (1,796)
--------- ---------
Net cash used by financing activities (3,474) (2,606)
--------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents (246) 2,926
Cash and Cash Equivalents:
Beginning of period 3,138 3,332
--------- ---------
End of period $2,892 $6,258
========= =========
PART I. (Cont.)
CASCADE NATURAL GAS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Three Month Period Ending March 31, 1994
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 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 1993 Annual Report on Form 10-K and comments included herein
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 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 through the issuance of Medium-Term Notes of which there were
$82,000,000 outstanding at the end of the quarter. An additional $68,000,000
of unissued Medium-Term-Notes are registered under the Securities Act of 1933
and available for issuance.
Changes in the Corporation's dividend reinvestment plan allowing residential
customers to participate in the plan have resulted in cash received for
investment in stock of the Corporation of $1,887,000.
Operating cash flow was $8,641,000 for the first quarter of 1994. After
preferred and common dividends of $2,045,000, with $6,596,000 of cash available
which was used primarily for capital expenditures of $5,820,000. Capital
expenditures for the remainder of the year are budgeted at $29,300,000 which
will be funded initially with operating cash flow and secondly from the lines
of credit described above.
Results of Operations
Net Earnings for the first quarter of 1994 were $4,670,000 or $.54 per share
compared to $6,617,000 or $.87 per share for the first quarter of 1993.
Composite service area temperatures, as measured in degree days, in the first
quarter of 1994 were 8.2% warmer than normal and 22.5% warmer than the first
quarter of 1993. The warmer temperatures had the effect of reducing the weather
sensitive core market therm deliveries by 10.3% compared to the first quarter
of 1993. However, the industrial non-core deliveries were up 12.9% due to the
addition of a new cogeneration facility in the third quarter of 1993 and one in
the first quarter of 1994.
Margin and Through-put Changes
First Quarter 1994 Compared to 1993
Margin Contribution Through-Put
(in thousands) (thousands of therms)
Increase (Decrease) Increase (Decrease)
____________________ _______________________
Core ($2,296) (12.5%) ( 9,393) (10.3%)
Non-Core 127 2.9% 17,152 12.9%
_______ ______ _______ ______
Total ($2,169) (9.5%) 7,759 3.5%
======= ====== ======= ======
Total customers served at March 31, 1994 were 135,150 compared to
125,341 at the end of the first quarter of 1993, a 7.8% increase. This
percentage increase is greater than the increase of 7.5% experienced in the
1993 first quarter. Residential customers accounted for an increase of 8.6%.
Operating and maintenance expense for the quarter increased $596,000 or
8.5% compared to the first quarter of 1993. Salary, wages and commissions
increased $179,000 due to the addition of 3 employees and general wage
increases. Benefits cost increases amounted to $217,000 which was due, in part,
to increases in pension cost accruals resulting from changes disclosed in the
notes to the 1993 financial statements. The total increase for payroll and
fringe benefit costs accounted for 66.4% of the total expense increase.
Depreciation expense increased $236,000 which is related to increased capital
spending in response to the high customer growth. Also related to the levels of
capital spending is the 7.7% increase in property and payroll taxes.
Interest expense and other deductions decreased $376,000 due to $244,000
of costs, in the first quarter of 1993, related to drilling activities in
northwestern Washington and other subsidiary valuation adjustments. Total
interest charges increased $66,000 which was due to increases in interest rates
from the first quarter of 1993. Offsetting, to some extent, the increase in
interest rates was a swap agreement entered into by the Corporation and a major
bank in the first quarter of 1994. The Corporation does not expect the swap
agreement to have a material effect on interest expense in the future.
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 $61,896,000 of net worth. Under this restriction
approximately $28,392,000 was available for the payment of dividends at March
31, 1994.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Common Stockholders of the Corporation was held on
April 27, 1994.
The following directors were elected at the meeting for terms of office
expiring in 1995 by the vote indicated below.
Abstentions and
For Withheld Broker Non-Votes
Donald E. Bennett 7,400,052 96,106 -0-
Carl Burnham, Jr. 7,403,404 92,754 -0-
Melvin C. Clapp 7,403,040 93,118 -0-
David A. Ederer 7,395,732 100,426 -0-
Howard L. Hubbard 7,400,501 95,657 -0-
W. Brian Matsuyama 7,400,839 95,319 -0-
Brooks G. Ragen 7,400,295 95,863 -0-
Andrew V. Smith 7,389,691 106,467 -0-
Mary A. Williams 7,398,454 97,704 -0-
Article V of the Articles of Incorporation was amended to increase from
10,000,000 to 15,000,000 the number of authorized shares of common stock of the
Corporation. The vote was 7,044,727 for, 288,975 against and 162,456
abstensions and broker non-votes.
Item 5. Other Information
Ratio of Earnings to Fixed Charges
Twelve Months
Ended March 31, Year Ended December 31
____ ____ ________________________________
1994 1993 1993 1992 1991 1990 1989
____ ____ ________________________________
2.50 2.53 2.86 1.97 2.45 2.48 2.62
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
3A Restated articles of incorporation as amended through May
9, 1994.
12 Computation of Ratio of Earnings to Fixed Charges.
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, 1994