Exhibit 99.1
Cascade Natural Gas Corporation Announces Second Quarter Earnings
SEATTLE--(BUSINESS WIRE)--April 26, 2006--Cascade Natural Gas
Corporation (NYSE:CGC) reported earnings of $9.0 million, or $0.78 per
share, for the fiscal second quarter ended March 31, 2006, compared to
$7.4 million, or $0.65 per share, for the second quarter ended March
31, 2005. Earnings for the six-month period were $17.0 million, or
$1.49 per share, compared to $14.0 million, or $1.24 per share, for
the six months ended March 31, 2005. These reported earnings represent
22% improvements for both the quarter and the six-month periods.
Financial and Operating Highlights
Operating Margins
Second quarter total operating margin (revenue minus gas cost and
revenue taxes) increased $2.4 million compared to the quarter ended
March 31, 2005.
Residential and commercial margins increased by $2.7 million for
the quarter. Customer growth at 4.5% contributed $1.1 million to
margins and higher average consumption contributed $544,000. Slightly
colder weather drove the increased consumption. Reductions in incurred
gas costs under our Oregon tariff contributed another $1.6 million and
miscellaneous services added $221,000. These benefits to margin were
partially offset by changes to the Company's Oregon purchased gas
adjustment filing (PGA) last fall, which has the effect of
reallocating certain demand charge recoveries within each fiscal year.
For the second quarter, this change reduced the reported margin by
$696,000 when compared to the same quarter in fiscal 2005, but it is
not expected to impact full-year earnings.
Margins from sales to electric generation plants were $745,000
higher for the quarter as the result of a settlement for early
termination of a sales agreement. Industrial operating margins were
flat from the same period in the prior year, when mark-to-market
(M-to-M) derivative valuation adjustments are excluded. No M-to-M
adjustment was recorded in the second quarter of fiscal 2006 as
compared to a positive adjustment of $549,000 in the same period in
the prior year.
Prior year fiscal second quarter operating margins benefited from
a $525,000 accrual reversal in connection with the determination that
no earnings sharing would be required in Oregon related to fiscal
2004.
Year-to-date operating margin increased $4.3 million. Primary
contributors were residential and commercial customer growth adding
$2.1 million and higher consumption per customer adding another $2.1
million. Average consumption was 5.1% higher for the period primarily
due to colder weather than last year. Reductions in incurred Oregon
gas cost of $948,000, $1.0 million in electric generation customer
settlements and $374,000 of increased services revenue further
contributed to the improvement. Offsetting these items were $1.2
million resulting from the Oregon PGA changes, year-to-year changes in
M-to-M valuations of $460,000 and the $525,000 Oregon earnings sharing
accrual reversal in fiscal 2005.
Cost of Operations
Cost of operations (operating expense, depreciation and
amortization, and property and miscellaneous taxes) is down by
$185,000, compared to the second quarter of fiscal year 2005.
Management initiatives resulted in $1.8 million in reduced quarterly
operating costs. Last fall's reduction in force, combined with other
reduction opportunities, a continued focus on managing overtime and
last year's one-time executive transition costs resulted in reduced
direct-labor spending of $1.1 million. Outsourcing our retiree medical
obligations to an insurance company contributed toward the $462,000 in
reduced benefit costs. Another $206,000 in year-to-year cost
reductions was achieved in various corporate and administrative areas.
These cost savings are offset by a $518,000 reduction in capitalized
costs, incentive compensation accruals of $1.4 million and $155,000 of
increased depreciation and amortization. Bad debt expense was $327,000
lower, primarily due to unusual commercial account write-offs last
year. In addition, property tax expense declined by $74,000, due to
reduced tax rates.
Year-to-date cost of operations was down $725,000 reflecting
management initiatives delivering $3.6 million in direct labor,
benefits and other overhead spending reductions. Reductions in
bad-debt expense of $147,000 were due to prior year write offs.
Incentive compensation accruals of $2.1 million, reflecting the 22%
earnings improvement, reduced capitalized operating costs of $727,000,
and increased depreciation of $364,000 partially offset these savings.
Capital Spending and Funding of Operations
Capital spending during the quarter was $3.8 million compared to
$7.8 million in the second quarter of fiscal year 2005. Part of the
difference was due to $678,000 relating to specific one-time system
reinforcement projects in the second quarter of fiscal year 2005. The
remaining reduction is primarily attributable to the investment
evaluation process implemented in the first quarter to assure that all
capital spending provides an adequate return or is required for safety
or regulatory compliance.
Year-to-date capital spending is down to $7.3 million from $15.5
million when compared to fiscal year 2005. Part of the difference was
due to $2.0 million of one-time specific system reinforcement
expenditures and $1.0 million relating to the completed AMR and call
center centralization projects in the first half of fiscal year 2005.
The remainder reflects Cascade's new investment evaluation process.
Our current expectation is that we will end the year below our fiscal
2006 capital budget of $22.0 million.
We have adequate liquidity and borrowing lines to meet our
anticipated needs, and estimate that cash flow will be sufficient to
support operations, fund capital spending and pay dividends at their
current level.
Other Items
Management is expecting earnings for fiscal year 2006 to be in the
range of $1.02 to $1.10. Our outlook assumes average weather for the
rest of the fiscal year.
The Company previously announced its declaration of a regular
quarterly cash dividend of $0.24 per common share, payable May 15 to
shareholders of record at April 28, 2006.
The Company entered into a three-year agreement, commencing April
1, with the union representing its field operations personnel as
previously disclosed in its April 17, 2006, 8-K filing.
The Company previously announced that its Board of Directors had
engaged J. P. Morgan Securities, Inc. to assist the Company in
evaluating strategic alternatives to enhance shareholder value. In
conjunction with this review, the Company filed a rate case, including
its Conservation Alliance Plan (decoupling), on February 14 with the
Washington Utilities and Transportation Commission and expects to
receive a final decision no later than January 2007. On April 19, the
Oregon Public Utility Commission approved the Company's Conservation
Alliance Plan for its Oregon customers. In addition, the Company is
considering other strategic alternatives, including a possible
business combination. The Company plans to make no further
announcement until its evaluation of strategic alternatives is
concluded.
Live Web-cast
The Company will host a live web-cast to discuss the quarterly
results April 27 at 10:30 a.m. Pacific Daylight Time or 1:30 p.m.
Eastern Daylight Time. To listen to the call, log on to our web site,
cngc.com and select "Investors," then click the live web-cast icon.
Cascade Natural Gas Corporation is a local distribution company
providing natural gas service to approximately 235,000 residential,
commercial, and large industrial customers in the states of Washington
and Oregon.
Forward-Looking Statements
The Company's discussion in this report, or in any information
incorporated herein by reference, may contain forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. All statements, other than statements of
historical facts, are forward-looking statements, including statements
concerning plans, objectives, goals, strategies, and future events or
performance. The disclaimers under the caption "Forward-Looking
Statements," included in the Company's Quarterly Report on Form 10-Q
filed on February 8, 2006, for the quarter ended December 31, 2005,
apply in their entirety to all forward-looking statements contained in
this report.
Cascade Natural Gas Corporation
Financial Highlights - (Thousands, except per share amounts)
Second Quarter Fiscal 2006
Fiscal Year 2006
--------------------------------------------
Three Months Ended
---------------------------------- Year
to
Dec 31 Mar 31 Jun 30 Sep 30 Date
--------- --------- ------- ------ ---------
Revenues $158,632 $162,796 $321,428
Operating Margin 30,791 33,231 64,022
Cost of Operations 15,042 16,060 31,103
-------- -------- ------- ------ --------
Operating Income (Loss) 15,749 17,171 - - 32,919
Interest and Other 2,972 2,884 5,855
Income Taxes 4,737 5,301 10,038
-------- -------- ------- ------ --------
Net Income (Loss) $ 8,040 $ 8,986 $ 17,026
Common Shares
Outstanding:
End of Period 11,439 11,471 11,471
Average 11,428 11,455 11,441
Earnings (Loss) Per Share
Basic and diluted $ 0.70 $ 0.78 $ 1.49
Dividends Paid per share $ 0.24 $ 0.24 $ 0.48
Capital Expenditures
(net) $ 3,756 $ 4,306 $ 8,062
Book Value Per Share $ 10.88 $ 11.40 $ 11.40
Market Closing Price $ 19.51 $ 19.70 $ 19.70
Active Customers (End of
Period) 235 238 238
Gas Deliveries (Therms):
Residential & Commercial 95,682 97,231 192,913
Industrial & Other 230,396 211,874 442,270
Degree Days
5-Year Average 2,106 2,299 4,405
Actual 2,250 2,269 4,519
Colder (warmer) than
5-year avg. 7% (1%) 3%
Colder (warmer) than
prior year 16% 2% 8%
Fiscal Year 2005
---------------------------------------------
Three Months Ended
------------------------------------ Year Year
ended to Date
Dec 31 Mar 31 Jun 30 Sep 30 Sep 30 Mar 31
-------- --------- -------- ------- -------- ---------
Revenues $104,613 $117,711 $56,315 $47,861 $326,500 $222,324
Operating
Margin 28,922 30,842 17,674 14,277 91,715 59,764
Cost of
Operations 15,584 16,245 16,412 17,042 65,283 31,829
-------- -------- -------- -------- -------- --------
Operating
Income (Loss) 13,338 14,597 1,262 (2,765) 26,432 27,935
Interest and
Other 2,894 2,976 2,891 2,792 11,553 5,870
Income Taxes 3,812 4,269 (502) (1,947) 5,632 8,081
-------- -------- -------- -------- -------- --------
Net Income
(Loss) $ 6,632 $ 7,352 $(1,127) $(3,610)$ 9,247 $ 13,984
Common
Shares
Outstanding:
End of Period 11,292 11,338 11,384 11,413 11,413 11,338
Average 11,279 11,312 11,367 11,396 11,339 11,296
Earnings (Loss)
Per Share
Basic and
diluted $ 0.59 $ 0.65 $(0.10) $ (0.32)$ 0.82 $ 1.24
Dividends Paid
per share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.96 $ 0.48
Capital
Expenditures
(net) $ 7,770 $ 7,759 $6,038 $ 6,444 $ 28,011 $ 15,529
Book Value Per
Share $ 10.89 $ 11.32 $10.99 $ 10.39 $ 10.39 $ 11.32
Market Closing
Price $ 21.20 $ 19.96 $20.50 $ 21.77 $ 21.77 $ 19.96
Active
Customers (End
of Period) 225 228 225 227 227 228
Gas
Deliveries
(Therms):
Residential &
Commercial 82,643 92,637 39,632 22,843 237,755 175,280
Industrial &
Other 227,779 228,890 176,178 211,305 844,152 456,669
Degree Days
5-Year Average 2,091 2,271 806 212 5,380 4,362
Actual 1,945 2,230 769 226 5,170 4,175
Colder (warmer)
than 5-year
avg. (7%) (2%) (5%) 7% (4%) (4%)
Colder (warmer)
than prior
year (8%) (1%) 16% 15% (1%) (4%)
CONTACT: Cascade Natural Gas Corporation, Seattle
Rick Davis, 206-624-3900