Cascade Natural Gas Corporation Announces Fiscal 2005 Fourth Quarter and Full Year Earnings

When adjusted for one-time executive transition and staffreduction costs and non-operating mark-to-market valuations, totaling$2.4 million or $0.13 per share and $181,000 or $0.01 per share,respectively, our full year earnings would have been $0.96 per sharefor fiscal 2005 versus the $0.82 reported above. This falls within ourguidance provided earlier this year of $0.92 to $0.97 excludingone-time organization changes and mark-to-market costs.

Financial and Operating Highlights

Operating Margins

Operating margin (revenue minus gas costs and revenue taxes) isprimarily a function of customer growth and gas usage per customer.Our record net addition of 10,500 residential and commercial customersin fiscal 2005 contributed $3.2 million of additional margin comparedto fiscal 2004. This was mostly offset by reductions in gas usage perresidential and commercial customer of 3.8% and 4.4%, respectively,which reduced margins by $2.5 million. The addition of more efficienthomes and businesses, reduced consumption per consumer and slightlywarmer weather compared to last year drove the lower consumptionrates. Weather statistics indicate that fiscal 2005 was 1% warmer thanfiscal 2004 and 4% warmer than the average of the past five years.

Industrial distribution operating margin decreased by $717,000year to year. This reduction is due to a variety of reasons includingcontract changes reducing minimum requirements, a decline in ournumber of customers and reduced usage by several sectors includingchemical and paper manufacturing.

Cascade's margin on sales to electric generation plants was down$350,000 for the year with the decline attributable to lower-costhydroelectric supplies and the increased wholesale price of gas.

Gas management services margin was down $1.9 million from lastyear. Cascade has lost sales and margin as a result of increasedcompetition for the sale of gas supplies to large-volume customers.The comparison excludes a $181,000 unfavorable mark-to-marketvaluation in fiscal 2005 and an $836,000 positive valuation in 2004.These items had a $0.01 negative and a $0.05 favorable effect onfiscal year 2005 and 2004, respectively.

Increasing our for-fee service activities added $408,000 tomargins. Changes in our estimates of Oregon revenue sharing favorablyimpacted the year-to-year comparison by $851,000.

For the fourth quarter, residential and commercial operatingmargins were up $466,000 compared to the same quarter in fiscal 2004,reflecting an increase in the number of customers served. The fourthquarter traditionally has the lowest level of customer consumptionconsistent with lower space heating needs during the warm months ofJuly, August, and September. For-fee service revenue increased by$167,000 and electric generation operating margin was down $172,000 inthe fourth quarter largely due to the high cost of natural gas.Adversely affecting the comparison were a reported reduction of$308,000 due to fourth quarter mark-to-market adjustments and $200,000of favorable earnings adjustment for Oregon revenue sharing in thefourth quarter of fiscal 2004.

Operating Expenses

Operating expense increased by $4.7 million in fiscal 2005.One-time costs, from organization changes including the transition toa new executive team and severance costs relating to the eliminationof 22 positions in September, drove $2.4 million of the increase. Inaddition, we wrote off $596,000 in projects cancelled during thefourth quarter. Increased bad debts as the result of transitionactivities related to our new call center and higher consumer gasbills also increased operating costs by $325,000. Our Sarbanes-Oxleyefforts resulted in an increase of $337,000 in fees for outsideservices over fiscal 2004. Annual depreciation expense increased by$949,000, as noted below. Favorable items included interest expensereductions totaling $883,000 due to refinancing at reduced interestrates and $625,000 in benefit cost savings, primarily from reducedcosts for employee and retiree medical.

The February 2005 consolidation of our 15 customer service centersinto one center located in Bellingham, Washington resulted in a smallnet decrease in operating costs for fiscal 2005 with most of thesavings being offset by implementation costs. Fiscal 2006 will benefitfrom a full year of approximately $750,000 in reduced costs, inaddition to improved customer service.

In the fourth quarter, operating expense increased by $1.9million. The recognition of the one-time cost for the positioneliminations of $1.1 million and $596,000 in the write-off ofterminated projects drove the increase.

Capital Spending and Funding of Operations

Capital spending in fiscal 2005 was $28 million, an $11 millionreduction from fiscal 2004. Annual depreciation cost rose by $949,000to $17.3 million, reflecting capital spending in support of ourgrowth.

We retired $14 million in notes during fiscal 2005 and $22 millionin notes during fiscal 2004. These retirements were funded with twodebt issues totaling $45 million during fiscal 2005. We retain $65million in S.E.C. "shelf" registration available for future issuanceof debt or equity and have $60 million in a committed bank line. Noneof our outstanding note obligations mature during fiscal 2006.

Dividends, Live Web-cast and Other

The Company previously announced its declaration of a regularquarterly cash dividend of $0.24 per common share, payable November15, 2005 to shareholders of record at October 28, 2005.

The Company will host a live web-cast to discuss the quarter andfull-year results on November 16 at 7:30 a.m. Pacific Time. To listento the call, log on to our web site, www.cngc.com and select"Investors," then click the live web cast icon.

Cascade Natural Gas Corporation is a local distribution companyproviding natural gas service to approximately 225,000 residential,commercial, and large industrial customers in the states of Washingtonand Oregon.

Forward-Looking Statements

The Company's discussion in this report, or in any informationincorporated herein by reference, may contain forward-lookingstatements within the meaning of the Private Securities LitigationReform Act of 1995. All statements, other than statements ofhistorical facts, are forward-looking statements, including statementsconcerning plans, objectives, goals, strategies, and future events orperformance. The disclaimers under the caption "Forward-LookingStatements," included in the Company's Quarterly Report on Form 10-Qfiled on August 8, 2005 for the quarter ended June 30, 2005, apply intheir entirety to all forward-looking statements contained in thisreport.
Cascade Natural Gas Corporation
Financial Highlights - (Thousands, except per share amounts)
Fiscal 2005

Fiscal Year 2005
-------------------------------------------------
Three Months Ended Year
------------------------------------- Ended
Dec 31 Mar 31 Jun 30 Sep 30 Sep 30
--------- --------- -------- -------- -----------

Revenues $104,613 $117,711 $ 56,315 $ 47,861 $326,500
Operating Margin 28,922 30,842 17,674 14,277 91,715
Cost of Operations 15,584 16,245 16,412 17,042 65,283
-------- -------- -------- -------- --------

Operating Income
(Loss) 13,338 14,597 1,262 (2,765) 26,432
Interest and Other 2,894 2,976 2,891 2,792 11,553
Income Taxes 3,812 4,269 (502) (1,947) 5,632
-------- -------- -------- -------- --------

Net Income (Loss) $ 6,632 $ 7,352 $ (1,127) $ (3,610) $ 9,247

Common Shares
Outstanding:
End of Period 11,292 11,338 11,384 11,413 11,413
Average 11,279 11,312 11,367 11,396 11,339

Earnings (Loss) Per
Share
Basic and diluted $ 0.59 $ 0.65 $ (0.10) $ (0.32) $ 0.82

Dividends Paid per
share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.96

Capital Expenditures
(net) $ 7,770 $ 7,759 $ 6,038 $ 6,444 $ 28,011

Book Value Per Share $ 10.89 $ 11.32 $ 10.99 $ 10.47 $ 10.47

Market Closing Price $ 21.20 $ 19.96 $ 20.50 $ 21.77 $ 21.77

Active Customers (End
of Period) 225 228 225 227 227

Gas Deliveries
(Therms):
Residential &
Commercial 82,643 92,637 39,632 22,843 237,755
Industrial & Other 227,779 228,890 176,178 211,305 844,152

Degree Days
5-Year Average 2,091 2,271 806 212 5,380
Actual 1,945 2,230 769 226 5,170

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

Colder (warmer) than
prior year (8%) (1%) 16% 15% (1%)



Fiscal Year 2004
-----------------------------------------------
Three Months Ended Year
-------------------------------------- Ended
Dec 31 Mar 31 Jun 30 Sep 30 Sep 30
--------- --------- --------- -------- ---------

Revenues $104,884 $119,454 $ 52,077 $ 41,663 $318,078
Operating Margin 30,693 32,142 16,637 14,336 93,808
Cost of Operations 15,129 15,460 14,696 15,276 60,561
-------- -------- -------- -------- --------

Operating Income
(Loss) 15,564 16,682 1,941 (940) 33,247
Interest and Other 3,116 3,121 3,099 3,050 12,386
Income Taxes 4,543 4,892 (492) (1,384) 7,559
-------- -------- -------- -------- --------

Net Income (Loss) $ 7,905 $ 8,669 $ (666) $ (2,606) $ 13,302

Common Shares
Outstanding:
End of Period 11,181 11,210 11,241 11,268 11,268
Average 11,158 11,196 11,227 11,254 11,209

Earnings (Loss) Per
Share
Basic and diluted $ 0.71 $ 0.77 $ (0.06) $ (0.23) $ 1.19

Dividends Paid per
share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.96

Capital Expenditures
(net) $ 10,216 $ 9,672 $ 9,557 $ 9,575 $ 39,020

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

Market Closing Price $ 21.09 $ 21.79 $ 22.07 $ 21.23 $ 21.23

Active Customers
(End of Period) 216 218 215 214 214

Gas Deliveries
(Therms):
Residential &
Commercial 86,070 96,038 33,746 21,900 237,754
Industrial & Other 260,887 223,894 182,387 229,431 896,599

Degree Days
5-Year Average 2,044 2,275 874 229 5,422
Actual 2,106 2,249 661 196 5,212

Colder (warmer) than
5-year avg. 3% (1%) (24%) (14%) (4%)

Colder (warmer) than
prior year 4% 10% (20%) 40% 3%