Cascade Natural Gas Announces Fiscal Year 2005 Second Quarter and Year

    Business Editors/Energy Writers

    SEATTLE--(BUSINESS WIRE)--April 21, 2005--Cascade Natural Gas Corporation (NYSE:CGC) reported earnings of $7.4 million, or $0.65 per share, for the fiscal second quarter ended March 31, 2005, compared to $8.7 million, or $0.77 per share, for the second quarter ended March 31, 2004. Earnings for the six-month period were $14.0 million, or $1.24 per share, compared to $16.6 million, or $1.48 per share, for the six months ended March 31, 2004.

    Financial and Operating Highlights

    Second Quarter Operating Margin (revenue minus gas cost and revenue taxes) decreased $1.3 million compared to the quarter ended March 31, 2004. This includes a $1.9 million reduction in residential and commercial margins primarily due to an 8% decline in per customer consumption. Consumption reductions are attributed to warmer weather, results of conservation efforts spurred by higher natural gas prices, and improved energy efficiency in buildings and appliances. Customer growth was 4.6% in the quarter and contributed $1.1 million to margins, partially offsetting the effects of lower consumption.
    Industrial operating margin was lower by $843,000 in the fiscal 2005 second quarter. Gas Management Services revenue accounted for $525,000 of the decline due to fewer customers and lower margin on gas supply sales. Distribution services margins from sales to industrial customers were down $362,000 as a result of reduced customer usage. These operating margin comparisons exclude the positive effects of mark-to-market (M-to-M) derivative valuations of $549,000 in 2005 and $69,000 in 2004.
    Overall operating margin benefited from a $525,000 accrual reversal resulting from analysis in connection with submittal of management's Spring Earnings Review report to the Oregon PUC for fiscal year 2004. Based on final fiscal 2004 Oregon earnings, management determined there would be no fiscal 2004 earnings sharing. To reflect this change in estimate, the Company reversed the fiscal 2004 earnings-sharing accrual.
    Year-To-Date Operating Margin declined $3.0 million, equal to 4.8%. Important factors were 4% lower degree-days for the six months and $1.3 million lower Gas Management Services sales. Other contributing factors were customer conservation, and continued building and appliance energy efficiency. This comparison excludes a 2005 year-to-date negative M-to-M valuation of $119,000 and the $525,000 Oregon earnings sharing accrual reversal. It also excludes a 2004 positive M-to-M valuation of $475,000.

    Cost of Operations

    Second Quarter Cost of Operations (operating expense, depreciation and amortization, and property and miscellaneous taxes) was up $785,000 in the second quarter comparison. Depreciation and amortization accounted for $345,000 of the increase due to growth in plant-in-service. Operating expense increased $372,000. Significant changes in operating expenses included a $404,000 increase in bad debt expense, executive transition costs of $590,000 and call center consolidation charges of $146,000. These increases were partially offset by lower labor and benefits expense.
    Year-To-Date Cost of Operations was up $1.2 million with $630,000 attributed to depreciation expense, $615,000 to executive transition charges, $313,000 to the call center consolidation, and $124,000 for bad debt expense. Benefits expense was lower by $755,000 year-to-date.

    Capital Spending

    Net capital spending in the quarter was $7.8 million compared to $9.7 million in the second quarter of fiscal year 2004. The $1.9 million decline reflects the September 2004 completion of the automated meter-reading project. For the six months, capital spending was $15.5 million compared to $19.9 million in 2004 and a total fiscal year 2005 capital budget of $28.4 million.

    Full Year Guidance and Other

    Primarily due to year-to-date operating margin declines, management is providing updated full year earnings guidance of $0.92 to $0.97 per share. Projections do not include any effects of mark-to-market valuations or executive transition costs.
    The Company previously announced its declaration of a $0.24 per share quarterly dividend on common stock, payable May 13, 2005 to shareholders of record at the close of business April 29, 2005.
    Cascade Natural Gas Corporation is a local distribution company providing natural gas service to approximately 227,000 customers in the states of Washington and Oregon.

    Statements contained in this report that 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, among others, its ability to successfully implement internal performance goals, competition from alternative forms of energy and other sellers of energy, consolidation in the energy industry, performance issues with key natural gas suppliers, the capital-intensive nature of the Company's business, regulatory issues, including the need for adequate and timely rate relief to recover capital and operating costs and to sustain dividend levels, the weather, 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" or the shift by such customers to special competitive contracts at lower per unit margins, exposure to environmental cleanup requirements, and economic conditions, particularly in the Company's service area.

Cascade Natural Gas Corporation Financial Highlights - (Thousands, except per share amounts) Second Quarter Fiscal 2005

Fiscal Year 2005 -----------------------------------------

Three Months Ended Year ------------------------------- to Dec 31 Mar 31 Jun Sep 30 Date 30 --------- --------- --- ------- ---------

Revenues $104,613 $117,711 $222,324 Operating Margin 28,922 30,842 59,764 Cost of Operations 15,584 16,245 31,829 -------- -------- --- ------- --------

Operating Income (Loss) 13,338 14,597 0 0 27,935 Interest and Other 2,894 2,976 5,870 Income Taxes 3,812 4,269 8,081 -------- -------- --- ------- --------

Net Income (Loss) $ 6,632 $ 7,352 $- $- $ 13,984

Common Shares Outstanding: End of Period 11,292 11,338 11,338 Average 11,279 11,312 11,296

Earnings (Loss) Per Share Basic $ 0.59 $ 0.65 $ 1.24 Diluted $ 0.59 $ 0.65 $ 1.24

Dividends Paid per share $ 0.24 $ 0.24 $ 0.48

Capital Expenditures (net) $ 7,770 $ 7,759 $ 15,529

Book Value Per Share $ 10.89 $ 11.32 $ 11.32

Market Closing Price $ 21.20 $ 19.96 $ 19.96

Active Customers (End of Period) 225 228 228

Gas Deliveries (Therms): Residential & Commercial 82,643 92,637 175,280 Industrial & Other 227,779 228,890 456,669

Degree Days 5-Year Average 2,091 2,271 4,362 Actual 1,945 2,230 4,175

Colder (warmer) than 5-year avg. (7%) (2%) (4%)

Colder (warmer) than prior year (8%) (1%) (4%)

Fiscal Year 2004 -------------------------------------

Three Months Ended --------------------------------------

Dec 31 Mar 31 Jun 30 Sep 30 --------- --------- --------- --------

Revenues $104,884 $119,454 $ 52,077 $ 41,663 Operating Margin 30,693 32,142 16,637 14,336 Cost of Operations 15,129 15,460 14,696 15,276 -------- -------- -------- --------

Operating Income (Loss) 15,564 16,682 1,941 (940) Interest and Other 3,116 3,121 3,099 3,050 Income Taxes 4,543 4,892 (492) (1,384) -------- -------- -------- --------

Net Income (Loss) $ 7,905 $ 8,669 $ (666) $ (2,606)

Common Shares Outstanding: End of Period 11,181 11,210 11,241 11,268 Average 11,158 11,196 11,227 11,254

Earnings (Loss) Per Share Basic $ 0.71 $ 0.77 $ (0.06) $ (0.23) Diluted $ 0.71 $ 0.77 $ (0.06) $ (0.23)

Dividends Paid per share $ 0.24 $ 0.24 $ 0.24 $ 0.24

Capital Expenditures (net) $ 10,216 $ 9,672 $ 9,557 $ 9,575

Book Value Per Share $ 10.61 $ 11.17 $ 10.89 $ 10.52

Market Closing Price $ 21.09 $ 21.79 $ 22.07 $ 21.23

Active Customers (End of Period) 216 218 215 214

Gas Deliveries (Therms): Residential & Commercial 86,070 96,038 33,746 21,900 Industrial & Other 260,887 223,894 182,387 229,431

Degree Days 5-Year Average 2,044 2,275 874 229 Actual 2,106 2,249 661 196

Colder (warmer) than 5-year avg. 3% (1%) (24%) (14%)

Colder (warmer) than prior year 4% 10% (20%) 40%

Fiscal Year 2004 --------------------

Year Year Ended to Date Sep 30 Mar 31 --------- ---------

Revenues $318,078 $224,339 Operating Margin 93,808 62,835 Cost of Operations 60,561 30,589 -------- --------

Operating Income (Loss) 33,247 32,246 Interest and Other 12,386 6,237 Income Taxes 7,559 9,436 -------- --------

Net Income (Loss) $ 13,302 $ 16,573

Common Shares Outstanding: End of Period 11,268 11,210 Average 11,209 11,177

Earnings (Loss) Per Share Basic $ 1.19 $ 1.48 Diluted $ 1.19 $ 1.48

Dividends Paid per share $ 0.96 $ 0.48

Capital Expenditures (net) $ 39,020 $ 19,888

Book Value Per Share $ 10.52 $ 11.17

Market Closing Price $ 21.23 $ 21.79

Active Customers (End of Period) 214 218

Gas Deliveries (Therms): Residential & Commercial 237,754 182,108 Industrial & Other 896,599 484,781

Degree Days 5-Year Average 5,422 4,319 Actual 5,212 4,355

Colder (warmer) than 5-year avg. (4%) 1%

Colder (warmer) than prior year 3% 7%

--30--BRM/se*

CONTACT: Cascade Natural Gas Corporation J.D. Wessling, 206-624-3900

KEYWORD: WASHINGTON OREGON INDUSTRY KEYWORD: OIL/GAS ENERGY UTILITIES EARNINGS SOURCE: Cascade Natural Gas Corporation

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