SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 11-K

 

ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2003

 

Commission File Number 1-7196

 

CASCADE NATURAL GAS CORPORATION

EMPLOYEE RETIREMENT SAVINGS PLAN AND TRUST

(Full Title of the Plan)

 

222 Fairview Avenue North, Seattle, WA  98109

(Address of the Plan)

 

CASCADE NATURAL GAS CORPORATION

222 Fairview Avenue North, Seattle, WA  98109

(Name and Address of the Issuer of Securities Under the Plan)

 

 



 

Cascade Natural Gas
Corporation Employee
Retirement Savings
Plan and Trust

 

Financial Statements for the
Years Ended December 31, 2003 and 2002,
Supplemental Schedules for the
Year Ended December 31, 2003, and
Independent Auditors’ Report

 



 

CASCADE NATURAL GAS CORPORATION

EMPLOYEE RETIREMENT SAVINGS PLAN AND TRUST

 

TABLE OF CONTENTS

 

INDEPENDENT AUDITORS’ REPORT

 

 

 

FINANCIAL STATEMENTS FOR THE YEARS ENDED

 

DECEMBER 31, 2003 AND 2002:

 

 

 

Statements of Net Assets Available for Benefits

 

 

 

Statements of Changes in Net Assets Available for Benefits

 

 

 

Notes to Financial Statements

 

 

 

SUPPLEMENTAL SCHEDULES FOR THE YEAR ENDED

 

DECEMBER 31, 2003:

 

 

 

Schedule of Assets Held for Investment

 

 

 

Schedule of Reportable Transactions

 

 



 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Pension Committee

Cascade Natural Gas Corporation

Employee Retirement Savings Plan and Trust

Seattle, Washington

 

We have audited the accompanying statements of net assets available for benefits of the Cascade Natural Gas Corporation Employee Retirement Savings Plan and Trust (the “Plan”) as of December 31, 2003 and 2002, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2003 and 2002, and the changes in net assets available for benefits for the years then ended in conformity with standards of the Public Company Accounting Oversight Board (United States).

 

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment as of December 31, 2003, and of reportable transactions for the year then ended are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplemental information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. Such schedules have been subjected to the auditing procedures applied in the audit of the basic 2003 financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic 2003 financial statements taken as a whole.

 

 

/s/ Deloitte & Touche LLP

 

 

May 28, 2004

 

 

 

Member of
Deloitte Touche Tohmatsu

 



 

CASCADE NATURAL GAS CORPORATION

EMPLOYEE RETIREMENT SAVINGS PLAN AND TRUST

 

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS

YEARS ENDED DECEMBER 31, 2003 AND 2002

 

 

 

2003

 

2002

 

 

 

 

 

 

 

ASSETS:

 

 

 

 

 

Investments—at fair value:

 

 

 

 

 

Mutual funds

 

$

19,947,305

 

$

14,907,527

 

Cascade Natural Gas Corporation common stock fund

 

7,056,846

 

7,009,486

 

 

 

 

 

 

 

 

 

27,004,151

 

21,917,013

 

 

 

 

 

 

 

Due from broker for securities sold

 

11,157

 

 

 

 

 

 

 

 

 

NET ASSETS AVAILABLE FOR BENEFITS

 

$

27,015,308

 

$

21,917,013

 

 

See notes to financial statements.

 

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CASCADE NATURAL GAS CORPORATION

EMPLOYEE RETIREMENT SAVINGS PLAN AND TRUST

 

STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS

YEARS ENDED DECEMBER 31, 2003 AND 2002

 

 

 

2003

 

2002

 

 

 

 

 

 

 

ADDITIONS:

 

 

 

 

 

Contributions:

 

 

 

 

 

Employee

 

$

1,718,572

 

$

1,658,835

 

Employer

 

994,817

 

819,303

 

Investment income

 

553,568

 

536,276

 

Net realized and unrealized appreciation (depreciation) of investments

 

3,352,300

 

(4,178,323

)

 

 

 

 

 

 

 

 

6,619,257

 

(1,163,909

)

 

 

 

 

 

 

DEDUCTIONS—Benefit distributions

 

1,520,962

 

1,647,617

 

 

 

 

 

 

 

NET ADDITIONS (DEDUCTIONS)

 

5,098,295

 

(2,811,526

)

 

 

 

 

 

 

NET ASSETS AVAILABLE FOR BENEFITS:

 

 

 

 

 

Beginning of year

 

21,917,013

 

24,728,539

 

 

 

 

 

 

 

End of year

 

$

27,015,308

 

$

21,917,013

 

 

See notes to financial statements.

 

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CASCADE NATURAL GAS CORPORATION

EMPLOYEE RETIREMENT SAVINGS PLAN AND TRUST

 

NOTES TO FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2003 AND 2002

 

1.                      DESCRIPTION OF THE PLAN

 

The following brief description of the Cascade Natural Gas Corporation Employee Retirement Savings Plan and Trust (the “Plan”) is provided for general information purposes only. Participants should refer to the Plan document for more complete information.

 

GeneralThe Plan was established on January 1, 1991, and is a qualified defined contribution plan. All employees of Cascade Natural Gas Corporation and subsidiaries (the “Company”) (the “Plan Sponsor”) are eligible to participate in the Plan after completion of one year of employment in which the employee rendered no less than 1,000 hours of qualified service and was at least 21 years of age. The Plan is administered by the Pension Committee appointed by the Company’s Board of Directors. Putnam Fiduciary Trust Company (“Putnam”) serves as the trustee of the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”).

 

Under the provisions of the Plan, participants may contribute up to the maximum annual amounts allowable by the Internal Revenue Service (“IRS”).  The Company’s matching contribution equals 75% of the employee’s contribution, up to a maximum of 6% of eligible compensation.  Of the total amount matched, one-third is matched in the form of Cascade Natural Gas Corporation stock.  The remaining two-thirds is invested in any of the fund options at the direction of the participant.  For eligible nonunion employees, a 4% of eligible compensation, non-elective Company contribution began October 1, 2003; a transition contribution of 1% to 4% based on age and service commenced October 1, 2003; a profit sharing component based on fiscal year Company profits was added to the Plan October 1, 2003; and the match was reduced from 75% to 50% of eligible contributions, up to 6% of eligible pay, with no Company stock match, effective July 1, 2003. As the Cascade Natural Gas Stock Fund includes both participant-directed and nonparticipant-directed contributions, and the amounts are not separable, the disclosures in Note 6 include the entire balance of that fund.

 

Participant AccountsEach participant’s account is credited with the participant’s contribution and allocations of (a) the Company’s contribution and (b) Plan earnings and charged with an allocation of administrative expenses. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s account. Participants’ voluntary contributions and employer matching contributions are 100% vested at all times.

 

Loans—The Plan does not allow for participants to make loans from their contributions, unless they are qualifying hardship withdrawals.

 

Investment FundsA participant may direct the investment of his or her account balances and contributions to any one or more of the available investment funds as well as Company stock.

 

Benefit DistributionsOn termination of service due to death, disability, or retirement, a participant will receive a lump-sum amount equal to the value of the participant’s account. To the extent any account under the Plan is invested in Company stock, it will be distributed in whole shares of such stock and cash for fractional shares. To the extent any account under the Plan is invested in mutual funds, it will be distributed to the participant or surviving spouse in cash or rolled in-kind if so requested to

 

4



 

another plan; distribution of such accounts to other death beneficiaries shall be in cash only. Participants who terminate employment prior to reaching retirement age may defer receipt of the distribution until normal retirement age if the account balance has ever exceeded $5,000. Account balances that have never exceeded $5,000 will be distributed as soon as practicable after employment terminates. Participants’ voluntary contributions may be withdrawn earlier, subject to certain hardship withdrawal provisions of the Plan.

 

Termination of the PlanThe Company reserves the right to discontinue contributions or terminate the Plan at any time. In the event of any total or partial termination or discontinuance, the accounts of all affected participants shall remain fully vested and nonforfeitable. Upon termination of the Plan, the Company may either liquidate the trust or continue it to pay benefits as they mature. If the trust is liquidated, the net assets, after payment of expenses, will be allocated among participants and beneficiaries in proportion to their interests.

 

2.                      SIGNIFICANT ACCOUNTING POLICIES

 

Method of AccountingThe accounts of the Plan are maintained on an accrual basis in accordance with accounting principles generally accepted in the United States of America.

 

Use of EstimatesThe preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of net assets available for benefits and changes therein. Actual results could differ from those estimates.

 

Valuation of InvestmentsInvestments, except for the S&P 500 Index Fund, are recorded at quoted market prices. There is no active market for the S&P 500 Index Fund. The S&P 500 Index Fund is recorded at estimated fair value based on the net asset value of the units of the fund. Purchases and sales of securities are recorded on a trade-date basis. Dividends and interest income from investments are recorded as earned on an accrual basis and allocated to participants based upon participants’ proportionate investment in each fund. The Plan presents in the statements of changes in net assets available for benefits, the net appreciation (depreciation) in the fair value of its investments, which consists of the realized gains or losses and the unrealized appreciation or depreciation of those investments, from the beginning of the Plan year or the date of purchase, whichever is later.

 

Administrative ExpensesCosts of administering the Plan are paid by the Company.

 

Payment of BenefitsBenefits are recorded when paid.

 

3.                      FEDERAL INCOME TAXES

 

The IRS has determined and informed the Company by a letter dated January 26, 1996, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (“IRC”). The Plan has been amended since receiving the determination letter. The Plan administrator and the Plan’s tax counsel believe that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC; however, the Company has filed a request for a new determination letter from the IRS.

 

5



 

4.                      INVESTMENTS

 

A summary of investments, all of which represent 5% or more of the Plan’s net assets at December 31, is as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Cascade Natural Gas Corporation common stock fund

 

$

7,056,846

 

$

7,009,486

 

Mutual funds:

 

 

 

 

 

Putnam Fund for Growth and Income*

 

2,692,056

 

2,197,989

 

Putnam Voyager Fund*

 

5,307,239

 

5,003,003

 

PIMCO Total Return

 

2,800,082

 

1,934,416

 

Putnam Money Market Fund*

 

2,110,627

 

2,146,094

 

Putnam International Equity Fund*

 

2,562,043

 

2,137,861

 

Growth Fund of America

 

1,439,146

 

 

 

 

During 2003, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in value by $3,352,300 as follows:

 

Investments at fair value as determined by quoted market price:

 

 

 

Cascade Natural Gas Corporation common stock fund

 

$

362,709

 

Mutual funds

 

2,879,599

 

 

 

 

 

Investments at estimated fair value:

 

 

 

Putnam S&P 500 Index Fund*

 

109,992

 

 

 

 

 

 

 

$

3,352,300

 

 


*Party-in-interest

 

5.                      RELATED PARTY TRANSACTIONS

 

Certain Plan investments are shares of mutual funds managed by Putnam Investments, Inc., the parent company of Putnam. Putnam is the trustee as defined by the Plan and, therefore, these transactions qualify as party-in-interest transactions. Additionally, as the plan holds investments in common stock of the Plan Sponsor, these transactions qualify as party-in-interest transactions.  All administrative fees paid to Putnam were paid by the Company.

 

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6.                      NONPARTICIPANT-DIRECTED INVESTMENTS

 

Information about the assets and the changes in net assets related to the Cascade Natural Gas Stock Fund, which includes both participant-directed and nonparticipant-directed contributions, is as follows:

 

 

 

2003

 

2002

 

 

 

 

 

 

 

Assets available for benefits—January 1

 

$

7,009,486

 

$

7,849,823

 

 

 

 

 

 

 

Employee contributions

 

168,299

 

193,248

 

Employer contributions

 

290,929

 

335,335

 

Investment income

 

328,948

 

403,981

 

Net realized and unrealized appreciation of investments

 

362,709

 

(776,760

)

Benefit distributions

 

(338,855

)

(484,083

)

Transfers

 

(764,670

)

(512,058

)

 

 

 

 

 

 

Assets available for benefits—December 31

 

$

7,056,846

 

$

7,009,486

 

 

7.                      SUBSEQUENT EVENTS

 

During June 2004, the Company elected to change the plan’s trustee Putnam Investments to Diversified Investment Advisors Inc.

 

*  *  *  *  *  *

 

7



 

CASCADE NATURAL GAS CORPORATION

EMPLOYEE RETIREMENT SAVINGS PLAN AND TRUST

 

SCHEDULE OF ASSETS HELD FOR INVESTMENT

DECEMBER 31, 2003

 

Issuer

 

Description

 

Shares

 

Fair Value

 

Cascade Natural Gas Corporation*

 

Common stock

 

334,606

 

$

7,056,846

 

Putnam*

 

Fund for Growth and Income

 

152,094

 

2,692,056

 

Putnam*

 

Investors Fund

 

75,332

 

842,211

 

Putnam*

 

Voyager Fund

 

334,842

 

5,307,239

 

Putnam*

 

S&P 500 Index Fund

 

19,637

 

545,517

 

Putnam*

 

International Equity Fund

 

124,010

 

2,562,043

 

Putnam*

 

Money Market Fund

 

2,110,627

 

2,110,627

 

Putnam*

 

Small Cap Value Fund

 

25,517

 

429,457

 

Putnam*

 

Equity Income Fund

 

26,932

 

423,913

 

American Funds

 

Growth Fund of America

 

58,645

 

1,439,146

 

American Funds

 

Europacific Growth

 

6,445

 

194,700

 

Washington Mutual

 

Investors Fund

 

6,528

 

187,887

 

PIMCO

 

Small Cap Value Fund

 

16,458

 

412,427

 

PIMCO

 

Total Return

 

261,446

 

2,800,082

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

27,004,151

 

 


*Party-in-interest

 

8



 

CASCADE NATURAL GAS CORPORATION

EMPLOYEE RETIREMENT SAVINGS PLAN AND TRUST

 

SCHEDULE OF REPORTABLE TRANSACTIONS

YEAR ENDED DECEMBER 31, 2003

 

 

 

Number of
Transactions

 

Purchase
Price

 

Selling
Price

 

Cost of
Assets

 

Net
Gain (Loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

Series of transactions:

 

 

 

 

 

 

 

 

 

 

 

Putnam Voyager Fund*

 

99

 

 

 

1,580,271

 

2,036,500

 

(456,229

)

Cascade Natural Gas Stock*

 

111

 

 

 

1,348,690

 

1,158,434

 

190,256

 

Putnam Money Market Fund*

 

191

 

1,406,875

 

 

 

1,406,875

 

 

 

Putnam Money Market Fund*

 

68

 

1,442,525

 

1,442,525

 

 

 

 

 

Growth Fund America

 

82

 

1,384,705

 

 

 

1,384,705

 

 

 

Pimco Total Return Fund

 

186

 

1,472,958

 

 

 

1,472,958

 

 

 

 


* Party-in-interest

 

9



 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustee (or other persons who administer the employee benefit plan) has duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

CASCADE NATURAL GAS CORPORATION

 

EMPLOYEE RETIREMENT SAVINGS

 

PLAN AND TRUST

 

 

 

 

 

 

DATE:

June 18, 2004

 

/s/  J. D. Wessling

 

 

 

 

J. D. Wessling, Trustee

 

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