FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PRUSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1994.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________.
Commission file number 0-8788.
DELTA NATURAL GAS COMPANY, INC.__________
(Exact name of registrant as specified in its charter)
________KENTUCKY_______ ___________61-0458329_____________
(State of Incorporation) (IRS Employer Identification Number)
3617 Lexington Road, Winchester, Kentucky 40391___
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 606-744-6171.
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
_______None________ __________None________
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $1 Par Value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d)
Exchange Act of 1934 during the preceding 12 months (or for 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 by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K [X]
As of August 18, 1994, Delta Natural Gas Company, Inc. had
outstanding 1,842,618 shares of common stock $1 Par Value, and the aggregate
market value of the voting stock held by non-affiliates was approximately
$32,706,469.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive proxy statement to be filed with the
Commission not later than 120 days after June 30, 1994, is incorporated by
reference in Part III of this Report.
TABLE OF CONTENTS
Page Number
PART I
Item 1. Business 1
General 1
Gas Operations and Supply 1
Regulatory Matters 5
Capital Expenditures 7
Employees 7
Consolidated Statistics 8
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote of
Security Holders 10
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 10
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 13
Item 8. Financial Statements and Supplementary
Data 17
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosures 18
PART III
Item 10. Directors and Executive Officers of
the Registrant 18
Item 11. Executive Compensation 18
Item 12. Security Ownership of Certain
Beneficial Owners and Management 18
Item 13. Certain Relationships and Related
Transactions 18
Part IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K 19
Signatures 22
PART I
Item 1. Business
General
Delta Natural Gas Company, Inc. (Delta or the Company) was incorporated
in 1949 in the State of Kentucky. The Company is engaged in the
distribution, transmission and production of natural gas in its service area
in 17 counties in central and southeastern Kentucky. In addition to its
corporate headquarters in Winchester, Delta has warehouse facilities in
Corbin and Winchester and branch offices in Barbourville, Berea, Corbin,
London, Manchester, Middlesboro, Nicholasville, Owingsville, Stanton, and
Williamsburg, with which it serves approximately 32,000 residential,
commercial, industrial and transportation customers. The four largest branch
offices are Corbin, Nicholasville, Berea and Barbourville, where Delta serves
approximately 5,800, 5,300, 3,400 and 3,100 customers, respectively.
The Company purchases and produces gas for distribution to its retail
customers. Additionally, Delta transports gas produced in southeastern
Kentucky to inter-connected pipelines and also transports gas for others to
industrial customers. Delta owns and operates storage facilities and
approximately 1,682 miles of natural gas gathering, transmission,
distribution and service lines.
Delta has four wholly-owned subsidiaries, Delta Resources, Inc.
(Resources), Delgasco, Inc. (Delgasco), Deltran, Inc. (Deltran) and Enpro,
Inc. (Enpro). Resources buys gas and resells it to industrial customers on
Delta's system and to Delta for system supply. Delgasco buys gas and resells
it to Resources and to customers not on Delta's system. Deltran was formed
to engage in potential pipeline projects under consideration and is inactive.
Enpro owns and operates existing production properties. Delta and its
subsidiaries are managed by the same officers.
Gas Operations and Supply
The Company's revenues are affected by various factors, including rates
billed to customers, the cost of natural gas, economic conditions in the
areas that the Company serves, weather conditions and competition. Delta
competes for customers and sales with alternate sources of energy, including
electricity, coal, oil, propane and wood. Gas costs, which the Company is
able to pass through to customers under its purchased gas adjustment clause,
may affect Delta's competitive position or may cause customers to conserve,
or, in the case of industrial customers, to use alternative energy sources.
Also, the potential bypass of Delta's system by industrial customers and
others is a competitive concern that Delta has and will continue to address.
In recent years, regulatory changes at the federal level and changes in the
participants in the natural gas industry have led to a national spot market
for natural gas. The Company's marketing subsidiaries purchase gas and
resell it to various industrial customers and others in competition with
producers and marketers.
Delta's retail sales are seasonal and temperature-sensitive as the
majority of the gas sold by Delta is used for heating. This seasonality
impacts Delta's liquidity position and its management of its working capital
requirements during each 12 month period (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations"). Currently, over
99% of Delta's customers are residential and commercial. Delta's remaining
light industrial customers purchased approximately 7% of the total volume of
gas sold by Delta at retail during 1994.
Retail gas sales in 1994 were 4,334,000 thousand cubic feet (Mcf), as
compared to 3,990,000 Mcf in 1993. Heating degree days for 1994 were
approximately 105.8% of the thirty year average as compared with 99.2% in
1993. Sales volumes increased by 344,000 Mcf, or 8.6% in 1994 reflecting the
colder weather in 1994 as compared to 1993. Also, the number of customers
served increased by 796, or 2.5%, during 1994. Delta continued to convert
customers to natural gas from other fuels. Also, much of Delta's service
area continued to expand, resulting in growth opportunities for the Company.
Industrial parks have been developed in certain areas and have resulted in
new industrial customers, some of whom are on-system transportation
customers.
A total of $2,933,000 of transportation revenues was earned during 1994
as compared with $3,287,000 during 1993. Total volumes transported were
4,183,000 Mcf in 1994 as compared to 4,916,000 Mcf in 1993. As of June 30,
1994, Delta had 73 on-system transportation customers (industrial customers
who purchase their gas from others) and 4 off-system transportation customers
(deliveries made by Delta to other pipelines).
Transportation revenues include $2,310,000 earned during 1994 and
$2,451,000 earned during 1993 for transportation of 2,186,000 Mcf and
2,248,000 Mcf, respectively, on behalf of several on-system customers. Delta
also transports volumes for off-system deliveries, which include deliveries
for interconnected interstate pipeline systems. During 1994 and 1993,
1,997,000 Mcf and 2,668,000 Mcf, respectively, were transported for such off-
system deliveries. The decline in off-system transportation in 1994 was
primarily due to reduced shipments of gas on a 43 mile pipeline that Delta
leased and began operating during 1989. The pipeline extends from Clay
County to Madison County, where it interconnects with the interstate pipeline
facilities of the Columbia Gulf Transmission Company. Delta's agreements to
operate the line and transport gas through it had an initial term of three
years and extend from year-to-year thereafter. Delta's off-system
transportation volumes include 574,000 Mcf transported through this pipeline
in 1993. This pipeline has been inactive since October, 1992. Also, some
producers shipped gas to markets that did not require the use of Delta's
system.
Some producers in Delta's service area can access certain pipeline
delivery systems other than Delta, which provides competition from others for
transportation of such gas. Delta will continue to purchase or transport any
natural gas available that is produced in reasonable proximity to its
facilities.
Recognizing competitive concerns, Delta will continue to maintain an
active gas supply management program that emphasizes long-term reliability
and the pursuit of cost effective sources of gas for its customers. Delta
purchases gas supplies from interstate pipelines, intrastate suppliers and
others. Delta has transportation and storage capacity available on certain
interstate pipelines for deliveries of gas through those facilities. The
Company presently anticipates an adequate gas supply for service to existing
customers and to provide for growth.
Delta receives a portion of its gas supply (including transportation gas
purchased from others) from its interstate sources, Tennessee Gas Pipeline
Company (Tennessee) and Columbia Gas Transmission Corporation (Columbia), which
companies are subject to the Federal Energy Regulatory Commission (FERC)
jurisdiction. A significant portion of Delta's supply comes from gas
producers in southeastern Kentucky. Delta's subsidiary companies obtain
supply from Kentucky producers and others.
During 1992, the FERC ordered a major restructuring of interstate
natural gas pipeline operations, services and rates during its Order 636
proceedings. It required that interstate pipelines provide transportation
and storage services priced separately from sales of gas. The FERC provided
for blanket sales for resale certificates authorizing interstate pipelines to
sell gas at unregulated, market-based rates. Pipelines must provide a new
no-notice firm service in addition to open-access transportation and storage
services. The FERC provided for new capacity assignment mechanisms.
Pipelines are required to design their transportation and storage rates using
the straight-fixed-variable rate design methodology, which provides for
recovery of less costs in the commodity, or unit, component of rates and
correspondingly more costs in the demand, or fixed, component. Pipelines
will be allowed to abandon sales and transportation service upon expiration
or termination of contracts. The FERC established methods for the recovery
of transition costs such as take-or-pay and contract reformation costs by
pipelines.
Delta was involved in restructuring proceedings with both Tennessee and
Columbia. During 1994, Delta entered agreements for transportation and
storage services with these two pipeline suppliers and began purchasing gas
supplies from gas marketers. The FERC approved Tennessee's new rates and
services effective September 1, 1993, and Columbia's new rates and services
effective November 1, 1993.
Delta's agreements with Tennessee expire in the year 2000 and thereafter
will continue on a year-to-year basis until terminated by either party.
During 1994, Tennessee discontinued sales of gas to Delta and other wholesale
customers upon implementation of FERC Order 636. Delta's entitlements under
those agreements were converted to firm transportation and storage rights on
Tennessee, and Delta entered a three-year contract with a gas marketer to
supply gas for those portions of Delta's system formerly served by Tennessee.
The initial term of the contract extends through April, 1996, and such
purchases are included in Delta's gas cost recovery filings (see "Regulatory
Matters"). During 1994, Delta purchased approximately 530,000 Mcf from
Tennessee, including the purchase of Delta's allocated portion of the gas in
Tennessee's storage inventory as of September 1, 1993 as required by the
FERC. Delta also purchased approximately 738,000 Mcf from the gas marketer.
Delta's entitlements under agreements with Columbia were also converted
to firm transportation and firm storage services upon implementation of Order
636 by Columbia. The agreements expire in the year 2008 and thereafter will
continue on a year-to-year basis until terminated by either party. Delta
contracted with a gas marketer to supply gas for those portions of Delta's
system formerly served by Columbia. The initial term of the agreement with
the gas marketer extends through April, 1996, and such purchases are included
in Delta's gas cost recovery filings (see "Regulatory Matters"). During
1994, Delta purchased approximately 406,400 Mcf, from Columbia, including the
purchase of Delta's allocated portion of the gas in Columbia's storage
inventory as of November 1, 1993 as required by the FERC. Delta also
purchased approximately 340,000 Mcf from the gas marketer.
During July, 1991, Columbia and its parent company, Columbia Gas System
Inc., filed for protection under Chapter 11 of the U.S. Bankruptcy Code due
to problems related to above-market-price gas purchase contracts. The filing
has not materially affected its service to Delta. Delta will continue to
monitor Columbia's situation and take appropriate actions as required.
Delta has a contract with The Wiser Oil Company (Wiser) to purchase
natural gas from Wiser through 1999. Delta and Wiser annually determine the
daily deliverability from Wiser and Wiser is committed to deliver that
volume. Under this agreement, Wiser is obligated to deliver 11,000 Mcf per
day to Delta. Delta purchased approximately 1,456,000 Mcf from Wiser during
1994.
Delta has four contracts with Enpro to purchase all the natural gas
produced from Enpro's wells on certain leases in Bell, Knox and Whitley
Counties. These agreements remain in force so long as gas is produced in
commercial quantities from the wells on the leases. Also, Delta purchases
gas from Enpro which is produced from the Flat Lick Field in Knox County.
Remaining proved, developed natural gas reserves are estimated at
approximately 5.4 million Mcf. Delta purchased a total of approximately
242,000 Mcf from those properties during 1994. Enpro also produces oil from
certain of these leases, but oil production has not been significant.
Delta receives gas under agreements with various other marketers,
brokers and local producers, most of which are priced as short-term, or spot-
market, purchases. The combined volumes of gas purchased from these sources
in 1994 was approximately 832,000 Mcf.
Resources and Delgasco purchase gas under agreements with various
marketers, brokers and local producers, most of which are priced as short-
term, or spot-market, purchases. The gas is resold to industrial customers
on Delta's system, to Delta for system supply and to others. The combined
volumes of gas purchased by Resources and Delgasco from these sources in 1994
was approximately 1,535,000 Mcf.
Although there are competitors for the acquisition of supplies, Delta
continues to seek additional new gas supplies from all available sources,
including those in the proximity of its facilities in southeastern Kentucky.
Also, Resources and Delgasco continue to pursue acquisitions of new gas
supplies from local producers and others.
As an active participant in many areas of the natural gas industry,
Delta plans to continue its efforts to expand its gas distribution system.
Delta is considering acquisitions of other gas systems, some of which are
contiguous to its existing service areas, as well as continued expansion
within its existing service areas. The Company also anticipates continuing
activity in gas production and transportation areas and plans to pursue and
increase these activities wherever practicable. The Company will continue to
consider the construction or acquisition of additional transmission, storage
and gathering facilities to provide for increased transportation and enhanced
supply and system flexibility.
Regulatory Matters
Delta is subject to the regulatory authority of the Public Service
Commission of Kentucky (PSC) with respect to various aspects of its business,
including rates and service to retail and transportation customers. Delta's
last rate case was filed in 1990. Rates were implemented in May, 1991.
Delta currently has no general rate case filed.
On January 29, 1993, the PSC established an administrative proceeding to
investigate the reasonableness of current state regulatory practices, in
particular purchased gas cost recovery mechanisms, in light of FERC Order
636. Delta is a party to this proceeding. Delta currently has a Gas Cost
Recovery (GCR) clause, which provides for a dollar-tracker that matches
revenues and gas costs and allows eventual full recovery of gas costs. This
clause requires Delta to make quarterly filings with the PSC, but such
procedure does not require a general rate case. The GCR mechanism provides
for any over or under-recovery of purchased gas costs to be reflected in the
rates charged to customers.
In an Order dated December 22, 1993, in its administrative proceeding,
the PSC provided for pipeline transition costs and certain other components
of gas supply costs to appropriately be recovered through regulated
utilities' purchased gas recovery mechanisms. Delta's quarterly GCR filings
include certain pipeline transition costs and various components of gas
supply costs as a result of the FERC Order 636 restructuring. The PSC has
approved such filings and Delta has implemented rates reflecting these
increased costs. The administrative proceeding is a continuing docket
wherein the PSC is considering and evaluating these and other issues relating
to the FERC Order 636 restructuring. Delta will continue to be an active
participant in this proceeding.
In addition to PSC regulation, Delta may obtain non-exclusive franchises
from the cities and communities in which it operates authorizing it to place
its facilities in the streets and public grounds. However, no utility may
obtain a franchise until it has obtained from the PSC a certificate of
convenience and necessity authorizing it to bid on the franchise. Delta
holds unexpired franchises in five of the ten cities in which it maintains a
branch office and in seven other communities it serves. In the other cities
or communities, either Delta's franchises have expired, the communities do
not have governmental organizations authorized to grant franchises, or the
local governments have not required, or do not want to offer, a franchise.
Delta will attempt to acquire or reacquire franchises wherever possible and
feasible.
Without a franchise, a local government could require Delta to cease its
occupation of the streets and public grounds or prohibit Delta from extending
its facilities into any new area of that city or community. To date, the
absence of a franchise has had no adverse effect on Delta's operations.
Capital Expenditures
Capital expenditures during fiscal 1994 were approximately $7.4 million
and for fiscal 1995 are estimated at approximately $8.4 million. These
include expenditures for system extensions and the replacement and
improvement of existing transmission, distribution, gathering and general
facilities.
Employees
Delta employed a total of 174 full-time employees on June 30, 1994.
Delta considers its relationship with its employees to be satisfactory.
Consolidated Statistics
For the Years Ended June 30, 1994 1993 1992 1991 1990
Retail Customers Served,
End of Period
Residential .............. 27,939 27,293 26,488 25,698 25,364
Commercial ............... 4,242 4,093 4,035 4,168 4,049
Industrial ............... 76 75 66 71 63
Total ................. 32,257 31,461 30,589 29,937 29,476
Operating Revenues ($000)
Residential sales ........ 16,597 14,578 13,945 12,453 12,792
Commercial sales ......... 9,663 8,269 7,651 6,294 6,581
Industrial sales ......... 1,671 1,383 1,188 1,299 1,656
On-system transportation . 2,310 2,451 2,348 2,351 2,039
Off-system transportation. 623 836 1,342 1,377 1,126
Subsidiary sales ......... 3,755 3,532 2,580 2,873 2,708
Other .................... 228 172 147 131 280
Total ................. 34,847 31,221 29,201 26,778 27,182
System Throughput
(Million Cu. Ft.)
Residential sales ........ 2,511 2,341 2,202 2,049 2,195
Commercial sales ......... 1,506 1,368 1,235 1,115 1,214
Industrial sales ......... 316 281 229 248 327
Total retail sales .... 4,333 3,990 3,666 3,412 3,736
On-system transportation.. 2,186 2,248 2,061 1,993 1,518
Off-system transportation. 1,997 2,668 4,580 4,903 4,087
Total ................. 8,516 8,906 10,307 10,308 9,341
Average Annual Consumption Per
End of Period Residential
Customer (Mcf) ............ 90 86 83 80 86
Lexington, Kentucky Degree Days
Actual ................... 4,999 4,688 4,370 4,025 4,579
Percent of 30 year average
(4,726) ................. 105.8 99.2 92.5 85.2 96.9
Average Revenue Per Mcf Sold
at Retail ($) ............. 6.44 6.07 6.21 5.88 5.63
Average Gas Cost Per Mcf Sold
at Retail ($) ............. 3.34 2.90 3.01 3.42 3.26
Item 2. Properties
Delta owns the land and buildings containing its corporate headquarters in
Winchester. The buildings house executive, administrative and technical staffs
of Delta. In addition, Delta owns buildings used for branch operations in
Barbourville, Berea, Corbin, London, Manchester, Middlesboro, Nicholasville,
Stanton and Williamsburg and rents an office building in Owingsville for branch
operations. Also, Delta owns a building in Laurel County used for training as
well as equipment and materials storage.
The Company owns approximately 1,682 miles of natural gas field,
transmission, distribution and service lines. These lines range in size up to
eight inches in diameter. There are no significant encumbrances on this
property.
Delta owns the rights to any oil and gas underlying approximately 3,500
acres in Bell County. Portions of these properties are used by Delta for the
storage of natural gas. The maximum capacity of the storage facilities is
approximately 550,000 Mcf. These properties otherwise are currently non-
producing, and no reserve studies have been completed on the properties.
Enpro owns interests in certain oil and gas leases relating to
approximately 11,000 acres located in Bell, Knox and Whitley Counties. There
presently are 56 gas wells and 7 oil wells producing from these properties.
Remaining proved, developed natural gas reserves are estimated at approximately
5.4 million Mcf. The gas production from these properties continues to be
purchased by Delta for system supply, and such purchases amounted to
approximately 242,000 Mcf during 1994. Oil production has not been
significant.
Also, Enpro owns the oil and gas underlying approximately 11,500 additional
acres in Bell, Clay and Knox Counties. These properties are currently non-
producing, and no reserve studies have been completed on the properties. During
1994, Enpro entered an agreement with a producer covering approximately 14,000
acres of Enpro's undeveloped holdings. Under the terms of the agreement, the
producer is to conduct exploration activities on the acreage. Enpro reserved
the option to participate in wells drilled. Enpro also retained certain working
and royalty interests in any production from wells to be drilled.
Item 3. Legal Proceedings
Delta and its subsidiaries are not parties to any legal proceedings which
are expected to have a materially adverse impact on the financial condition or
results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of 1994.
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Delta has paid cash dividends on its common stock each year since 1964.
While it is the intention of the Board of Directors to continue to declare
dividends on a quarterly basis, the frequency and amount of future dividends
will depend upon the Company's earnings, financial requirements and other
relevant factors.
Delta's common stock is traded in the National Association of Securities
Dealers Automated Quotation (NASDAQ) National Market System. The accompanying
table reflects the high and low sales prices during each quarter as reported by
NASDAQ and the quarterly dividends declared per share.
Quarter Range of Stock Dividends
Prices ($) Per Share
High Low ($)
__________________________________________________________________
Fiscal 1994
First 22 1/4 18 3/4 .275
Second 23 1/2 21 .275
Third 21 3/4 19 .275
Fourth 20 1/2 17 1/4 .28
Fiscal 1993
First 18 1/2 15 1/2 .27
Second 18 1/2 17 1/4 .27
Third 19 1/2 17 1/4 .27
Fourt 19 1/2 18 1/2 .275
__________________________________________________________________
There were 2,258 record holders of Delta's common stock as of August 1,
1994.
Item 6. Selected Financial Data
Ended June 30, 1994(a) 1993 1992 1991(b) 1990
Summary of
Operations ($)
Operating
revenues ........ 34,846,941 31,221,410 29,200,834 26,778,255 27,182,104
Operating
income .......... 4,850,673 4,791,816 4,586,323 3,039,045 2,920,238
Net income ...... 2,671,001 2,620,664 2,453,813 1,162,582 1,195,512
Earnings per
common share .... 1.50 1.60 1.52 0.73 0.76
Dividends
declared per
common share .... 1.105 1.085 1.08 1.08 1.08
Average Number of
Common Shares
Outstanding ........ 1,775,068 1,635,945 1,612,437 1,586,235 1,563,588
Total Assets ($).... 61,932,480 55,129,912 50,478,014 47,816,330 44,243,819
Capitalization ($)..
Common share-
holders' equity . 22,164,791 17,501,045 16,227,158 15,147,551 15,369,126
Long-term debt .. 24,500,000 19,596,401 20,187,826 21,473,431 12,231,202
Total
capitalization .. 46,664,791 37,097,446 36,414,984 36,620,982 27,600,328
Short-Term
Debt ($) (c) ....... 2,705,000 7,729,000 4,029,000 2,616,000 7,632,800
Other Items ($)
Capital
expenditures .... 7,374,747 6,289,508 5,074,483 5,213,319 6,275,866
Total plant ..... 77,882,135 71,187,860 66,032,217 61,757,666 57,421,951
(a) During October, 1993, $15 million of debentures and 170,000 shares of
Common Stock were sold, and the proceeds were used to repay short-term
debt and to refinance certain long-term debt.
(b) During May, 1991, $10 million of debentures were sold, and the
proceeds
were used to repay short-term debt.
(c) Includes current portion of long-term debt.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Capital expenditures for Delta for 1995 are expected to be approximately
$8.4 million. Delta generates internally only a portion of the cash necessary
for its capital expenditure requirements and finances the balance of its capital
expenditures on an interim basis through the use of its borrowing capability
under its short-term line of credit. The current line of credit is $15 million,
of which approximately $2.7 million had been borrowed at June 30, 1994 at an
interest rate of 5.5%. Delta had an average interest rate of 4.3% for 1994 on
its line of credit. The current line of credit extends until November, 1994.
Short-term borrowings are periodically repaid with the proceeds from the
issuance of long-term debt and equity securities, as was done in October, 1993,
when the net proceeds of approximately $17.8 million from the sale of $15
million of debentures and 170,000 shares of common stock were used to repay
short-term debt and to refinance certain long-term debt. The amounts and types
of future long-term debt and equity financings will depend upon the Company's
capital needs and market conditions.
Delta's sales are seasonal in nature, and the largest proportion of cash is
received during the winter heating months when sales volumes increase
considerably. During non-heating months, cash needs for operations and
construction are partially met through short-term borrowings. Additionally,
most construction activity takes place during the non-heating season because of
more favorable weather conditions, thus increasing seasonal cash needs.
The primary sources and uses of cash during the last three years are
summarized below:
Sources(Uses) 1994 1993 1992
Provided by operat-
ing activities $ 6,172,019 $ 4,567,023 $ 6,370,685
Capital expenditures $(7,374,747) $(6,289,508) $(5,074,483)
Issuance of deben-
tures, net $ 14,246,937 $ - $ -
Repayment of long-
term debt $(11,330,286) $(591,425) $ (787,605)
Net short-term
borrowings $ (3,765,000) $ 3,700,000 $ 915,000
Common stock
dividends $ (1,972,368) $(1,775,411) $(1,741,661)
Issuance of common
stock, net $ 3,965,113 $ 428,634 $ 367,455
Cash provided by operating activities consists of net income and noncash items
including depreciation, depletion, amortization and deferred income taxes.
Additionally, changes in working capital are also included in cash provided by
operating activities. The Company expects that internally generated cash,
coupled with seasonal short-term borrowings, will continue to be sufficient to
satisfy its operating, capital expenditure and dividend requirements over the
next year.
Results of Operations
The increase in operating revenues for 1994 of approximately $3,625,000 was
due primarily to an increase in retail sales volumes of approximately 344,000
Mcf as a result of the colder winter weather in 1994 (105.8% of thirty year
average weather compared to 99.2% for 1993), and an increase in customers served
of 796, or 2.5%. The increase in operating revenues was partially offset by an
approximately $212,000 decrease in transportation revenues for off-system
customers resulting from decreased volumes of approximately 671,000 Mcf due
primarily to reduced volumes shipped by others on a leased pipeline that has
been inactive since October, 1992, and due to certain producers who shipped gas
into markets that did not require the use of Delta's system.
The increase in operating revenues for 1993 of approximately $2,021,000 was
due primarily to an increase in retail sales volumes of approximately 324,000
Mcf as a result of the colder winter weather in 1993 (99.2% of thirty year
average weather as compared to 92.5% for 1992) and an increase in customers
served of 872, or 2.9%. Contributing to the increase in operating revenues was
an increase in Resources' revenues resulting from increased volumes and cost of
gas for resale to on-system customers and an increase in transportation revenues
resulting from increased volumes of approximately 187,000 Mcf transported for
on-system customers. The increase in operating revenues was partially offset by
an approximately $506,000 decrease in transportation revenues for off-system
customers resulting from decreased volumes of approximately 1,912,000 Mcf due to
reduced volumes shipped by others on a leased pipeline that has been inactive
since October, 1992, and due to certain producers who shipped gas into markets
that did not require the use of Delta's system.
Operating Expenses
The increase in purchased gas expense of approximately $3,016,000 for 1994
was due primarily to an increase in the cost of gas for retail sales due to an
increase in retail sales volumes.
The increase in purchased gas expense of approximately $1,669,000 for 1993
was due primarily to increases in the cost of gas purchased by Resources for
resale to on-system customers. Contributing to the increase was an increase in
the cost of gas for retail sales due to an increase in retail sales volumes.
The increases in depreciation expense during 1994 and 1993 of approximately
$145,000 and $158,000, respectively, were due primarily to additional
depreciable plant.
The increases in taxes other than income taxes during the periods of
approximately $78,000 and $39,000 for 1994 and 1993, respectively, were
primarily due to increased property taxes which resulted from increased plant,
and to increased payroll taxes which resulted from increased wages and payroll
tax rates.
Changes in income taxes during the periods of approximately $34,100 and
$102,000 for 1994 and 1993, respectively, were primarily due to changes in net
income. The Omnibus Budget Reconciliation Act of 1993 did not result in
additional income taxes for Delta. The Company adopted Statement of Financial
Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes", effective
July 1, 1993, as required. SFAS No. 109, which replaces SFAS No. 96, adopts the
liability method of accounting for income taxes, requiring deferred income tax
assets and liabilities to be computed using tax rates that will be in effect
when the book and tax temporary differences reverse. For regulated companies,
the change in tax rates applied to accumulated deferred income taxes may not be
immediately recognized in operating results because of ratemaking treatment. A
regulatory liability has been established to recognize the future revenue
requirement impact from these deferred taxes. As a result, the adoption of SFAS
No. 109 did not have a material impact on the results of operations or financial
position of the Company.
Statement of Financial Accounting Standard (SFAS) No. 106, "Employers'
Accounting for Post-Retirement Benefits", and SFAS No. 112, "Employers'
Accounting for Post-Employment Benefits", did not affect the Company as Delta
does not provide benefits for post-retirement or post-employment other than the
pension plan for retired employees.
Interest Charges
The decrease in long-term interest for 1993 of approximately $62,000 was
due to less long-term debt outstanding during the period. The increase in other
interest charges for 1993 of approximately $106,000 was due primarily to
increased average short-term borrowings that were partially offset by lower
interest rates for the period.
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES PAGE
Management's Statement of Responsibility for
Financial Reporting and Accounting 24
Report of Independent Public Accountants 25
Consolidated Statements of Income for the years
ended June 30, 1994, 1993 and 1992 26
Consolidated Statements of Cash Flows for the years
ended June 30, 1994, 1993 and 1992 27
Consolidated Balance Sheets as of June 30, 1994 and 1993 29
Consolidated Statements of Changes in Shareholders'
Equity for the years ended June 30, 1994, 1993
and 1992 31
Consolidated Statements of Capitalization as of
June 30, 1994 and 1993 32
Notes to Consolidated Financial Statements 33
Schedule II - Amounts Receivable from Related
Parties and Underwriters, Promoters and
Employees Other than Related Parties for the
years ended June 30, 1994, 1993 and 1992 41
Schedule V - Property, Plant and Equipment for
the years ended June 30, 1994, 1993 and 1992 42
Schedule VI - Accumulated Depreciation,
Depletion and Amortization of Property, Plant
and Equipment for the Years Ended June 30,
1994, 1993 and 1992 45
Schedule VIII - Valuation and Qualifying Accounts
for the years ended June 30, 1994,
1993 and 1992 48
Schedule IX - Short-term Borrowings for the years
ended June 30, 1994, 1993 and 1992 49
Schedule X - Supplementary Income Statement
Information for the years ended June 30, 1994,
1993 and 1992 50
Schedules other than those listed above are omitted because they are not
required, not applicable or the required information is shown in the financial
statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
Registrant intends to file a definitive proxy statement with the Commission
pursuant to Regulation 14A (17 CFR 240.14a) not later than 120 days after the
close of the fiscal year. In accordance with General Instruction G(3) to Form
10-K, the information called for by Items 10, 11, 12 and 13 is incorporated
herein by reference to the definitive proxy statement. Neither the report on
Executive Compensation nor the performance graph included in the Company's
definitive proxy statement shall be deemed incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a) - Financial Statements, Schedules and Exhibits
(1) - Financial Statements
See Index at Item 8
(2) - Financial Statement Schedules
See Index at Item 8
(3) - Exhibits
Exhibit No.
3(a) - Delta's Amended and Restated Articles of
Incorporation are incorporated herein by
reference to Exhibit 3(a) to Delta's Form
10-Q for the period ended March 31, 1990.
3(b) - Delta's By-Laws as amended August 19, 1993
are incorporated herein by reference to
Exhibit 3(b) to Delta's Form 10-K for the
year ended June 30, 1993.
4(a) - The Indenture dated April 1, 1991 in respect
of 9% Debentures due April 30, 2011, is
incorporated herein by reference to Exhibit
4(e) to Delta's Form S-2 dated April 23,
1991.
4(b) - The Indenture dated September 1, 1993 in
respect of 6 5/8% Debentures due October 1,
2023, is incorporated herein by reference
to Exhibit 4(e) to Delta's Form S-2 dated
September 2, 1993.
10(a) - Certain of Delta's material natural gas
supply contracts are incorporated herein
by reference to Exhibit 10 to Delta's
Form 10 for the year ended June 30, 1978
and by reference to Exhibits C and D to
Delta's Form 10-K for the year ended
June 30, 1980.
10(b) - Gas Purchase Contract between Delta and
Wiser is incorporated herein by reference
to Exhibit 2(C) to Delta's Form 8-K dated
February 9, 1981.
10(c) - Assignment to Delta by Wiser of its Columbia
Service Agreement, including a copy of said
Service Agreement, is incorporated herein by
reference to Exhibit 2(D) to Delta's Form
8-K dated February 9, 1981.
10(d) - Contract between Tennessee and Delta for the
sale of gas by Tennessee to Delta (amends
earlier contract for Nicholasville and
Wilmore Service Areas) is incorporated
herein by reference to Exhibit 10(d) to
Delta's Form 10-Q for the period ended
September 30, 1990.
10(e) - Contract between Tennessee and Delta for the
sale of gas by Tennessee to Delta (amends
earlier contract for Jeffersonville Service
Area) is incorporated herein by reference
to Exhibit 10(e) to Delta's Form 10-Q for
the period ended September 30, 1990.
10(f) - Contract between Tennessee and Delta for the
sale of gas by Tennessee to Delta (amends
earlier contract for Salt Lick Service
Area) is incorporated herein by reference
to Exhibit 10(f) to Delta's Form 10-Q for
the period ended September 30, 1990.
10(g) - Contract between Tennessee and Delta for the
sale of gas by Tennessee to Delta (amends
earlier contract for Berea Service Area) is
incorporated herein by reference to Exhibit
10(g) to Delta's Form 10-Q for the period
ended September 30, 1990.
10(h) - Service Agreements between Columbia and Delta
for the sale of gas by Columbia to Delta
(amends earlier service agreements for
Cumberland, Stanton and Owingsville service
areas) are incorporated herein by reference
to Exhibit 10(h) to Delta's Form 10-Q for
the period ended September 30, 1990.
10(i) - Amendment to Gas Purchase Contract between
Delta and Wiser is incorporated herein by
reference to Exhibit 10(c) to Delta's Form
10-Q for the period ended December 31, 1988.
10(j) - Second amendment to Gas Purchase Contract
between Delta and Wiser, dated August 20, 1993.
10(k) - Employment agreements between Delta and three
officers, those being Alan L. Heath, Jane W.
Hylton, and Thomas A. Kohnle, are incorporated
herein by reference to Exhibit 10(k) to Delta's
Form 10-Q for the period ended December 31,
1985.
10(l) - Employment agreements between Delta and two
officers, those being John F. Hall and
Robert C. Hazelrigg, are incorporated herein
by reference to Exhibit 10(m) to Delta's Form
10-Q for the period ended December 31, 1988.
10(m) - Employment agreement dated June 1, 1992 between
Delta and Glenn R. Jennings, an officer, is
incorporated herein by reference to Exhibit
10(l) to Delta's Form 10-K for the period
ended June 30, 1992.
12 - Computation of the Consolidated Ratio of
Earnings to Fixed Charges.
21 - Subsidiaries of the Registrant are incorporated
herein by reference to Exhibit 22 to Delta's
Form 10-K for the period ended June 30, 1986.
24 - Consent of Independent Public Accountants.
(b) Reports on 8-K.
No reports on Form 8-K were filed during the three months
ended June 30, 1994.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the 26th day of
August, 1994.
DELTA NATURAL GAS COMPANY, INC.
By /s/Glenn R. Jennings
Glenn R. Jennings, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
(i) Principal Executive Officer:
/s/Glenn R. Jennings President, Chief August 26, 1994
(Glenn R. Jennings) Executive Officer
and Director
(ii) Principal Financial Officer:
/s/John F. Hall Vice President - August 26, 1994
(John F. Hall) Regulatory Matters
and Treasurer
(iii) Principal Accounting Officer:
/s/Thomas A. Kohnle Vice President - August 26, 1994
(Thomas A. Kohnle) Controller
(iv) A Majority of the Board of Directors:
/s/H. D. Peet Chairman of the August 26, 1994
(H. D. Peet) Board
/s/Donald R. Crowe Director August 26, 1994
(Donald R. Crowe)
/s/Billy Joe Hall Director August 26, 1994
(Billy Joe Hall)
/s/Jane W. Hylton Vice President - August 26, 1994
(Jane W. Hylton) Human Resources,
Secretary and
Director
/s/Virgil E. Scott Director August 26, 1994
(Virgil E. Scott)
/s/Henry C. Thompson Director August 26, 1994
(Henry C. Thompson)
/s/Arthur E. Walker, Jr. Director August 26, 1994
(Arthur E. Walker, Jr.)
/s/Robert M. Watt III Director August 26, 1994
(Robert M. Watt III)
Management's Statement of Responsibility for Financial Reporting and Accounting
Management is responsible for the preparation, presentation and integrity
of the financial statements and other financial information in this report. The
statements, which were prepared in accordance with generally accepted accounting
principles, include some amounts which are based on management's best estimates
and judgments.
The Company maintains a system of accounting and internal controls which
management believes provides reasonable assurance that the accounting records
are reliable for purposes of preparing financial statements and that the assets
are properly accounted for and protected.
The Board of Directors pursues its oversight role for these financial
statements through its Audit Committee which consists of three outside
directors. The Audit Committee meets periodically with management to review the
work and monitor the discharge of their responsibilities. The Audit Committee
also meets periodically with the Company's internal auditor as well as Arthur
Andersen LLP, the independent auditors, who have full and free access to the
Audit Committee, with or without management present, to discuss internal
accounting control, auditing and financial reporting matters.
Report of Independent Public Accountants
To the Board of Directors and Shareholders of Delta Natural Gas Company, Inc.:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of DELTA NATURAL GAS COMPANY, INC. (a Kentucky corporation)
and subsidiary companies as of June 30, 1994 and 1993, and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for each of the three years in the period ended June 30, 1994. These
consolidated financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion of these consolidated financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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 financial position of Delta Natural Gas Company,
Inc. and subsidiary companies as of June 30, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1994, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements,
effective July 1, 1993, the Company changed its method of accounting
for income taxes.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the Index to
Consolidated Financial Statements and Schedules are presented for purposes of
complying with the Securities and Exchange Commission rules and are not part of
the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Louisville, Kentucky
August 12, 1994
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Income
For the Years Ended June 30, 1994 1993 1992
Operating Revenues ............ $34,846,941 $31,221,410 $29,200,834
Operating Expenses
Purchased gas .............. $17,250,556 $14,234,258 $12,564,947
Operation and maintenance
(Note 1) ................. 8,382,767 8,020,622 8,173,070
Depreciation and depletion
(Note 1) ................. 1,977,868 1,833,072 1,675,540
Taxes other than income
taxes .................... 875,477 797,942 759,354
Income taxes (Note 1) ...... 1,509,600 1,543,700 1,441,600
Total operating expenses. $29,996,268 $26,429,594 $24,614,511
Operating Income .............. $ 4,850,673 $ 4,791,816 $ 4,586,323
Other Income and Deductions, Net 34,987 39,681 34,087
Income Before Interest Charges. $ 4,885,660 $ 4,831,497 $ 4,620,410
Interest Charges
Interest on long-term debt.. $ 1,879,526 $ 1,875,901 $ 1,938,389
Other interest ............. 243,729 258,405 152,728
Amortization of debt expense 91,404 76,527 75,480
Total interest charges .. $ 2,214,659 $ 2,210,833 $ 2,166,597
Net Income $ 2,671,001 $ 2,620,664 $ 2,453,813
Weighted Average Number of
Common Shares Outstanding ..... 1,775,068 1,635,945 1,612,437
Earnings Per Common Share ..... $ 1.50 $ 1.60 $ 1.52
Dividends Declared Per Common
Share ......................... $ 1.105 $ 1.085 $ 1.08
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Cash Flows
For the Years Ended June 30, 1994 1993 1992
Cash Flows From Operating
Activities:
Net income ...................... $ 2,671,001 $ 2,620,664 $ 2,453,813
Adjustments to reconcile net
income to net cash from
operating activities:
Depreciation, depletion and
amortization ............... 2,069,013 1,922,102 1,751,020
Deferred income taxes and
investment tax credits ..... 874,800 839,100 467,600
Other - net .................. 446,969 493,848 565,756
(Increase) decrease in assets:
Accounts receivable .......... 802,197 (707,605) 343,423
Unamortized debt expense and
other ...................... - (1,616) (160,401)
Materials and supplies ....... (229,275) 155,358 122,092
Prepayments .................. 25,701 8,096 (39,997)
Other assets ................. (780) (93,948) (119,703)
Increase (decrease) in other
liabilities:
Accounts payable ............. 513,265 438,897 424,898
Refunds due customers ........ 358,270 37,226 (20,752)
Accrued taxes ................ (34,543) (162,982) 297,368
Other current liabilities .... 38,675 16,435 (213,594)
Advance (deferred) recovery
of gas cost ................ (1,372,030) (993,136) 463,870
Advances for construction and
other ...................... 8,756 (5,416) 35,292
Net cash provided by
operating activities .... $ 6,172,019 $ 4,567,023 $ 6,370,685
Cash Flows From Investing
Activities:
Capital expenditures ............ $(7,374,747) $(6,289,508) $(5,074,483)
Net cash used in investing
activities .............. $(7,374,747) $(6,289,508) $(5,074,483)
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Cash Flows (continued)
For the Years Ended June 30, 1994 1993 1992
Cash Flows From Financing
Activities:
Dividends on common stock ....... $(1,972,368) $(1,775,411) $(1,741,661)
Issuance of common stock,net .... 3,965,113 428,634 367,455
Issuance of debentures,net ...... 14,246,937 - -
Repayment of long-term debt ..... (11,330,286) (591,425) (787,605)
Increase (decrease) in notes
payable ....................... (3,765,000) 3,700,000 915,000
Net cash provided by (used
in) financing activities $ 1,144,396 $ 1,761,798 $(1,246,811)
Net Increase (Decrease) in Cash and
Cash Equivalents ................... $ (58,332) $ 39,313 $ 49,391
Cash and Cash Equivalents,
Beginning of Year .................. 214,879 175,566 126,175
Cash and Cash Equivalents,
End of Year ........................ $ 156,547 $ 214,879 $ 175,566
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest $ 2,141,705 $ 2,107,168 $ 2,154,055
Income taxes $ 715,000 $ 952,851 $ 867,382
The accompanying notes to consolidated financial statements are an integral
part of these statements.
<PAGE>
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Balance Sheets
As of June 30, 1994 1993
Assets
Gas Utility Plant, at cost .............. $77,882,135 $71,187,860
Less - Accumulated provision for
depreciation .......................... (22,862,469) (21,118,363)
Net gas plant $55,019,666 $50,069,497
Current Assets
Cash and cash equivalents ............ $ 156,547 $ 214,879
Accounts receivable, less accumulated
provisions for doubtful accounts of
$131,324 and $208,182 in 1994 and
1993, respectively ................. 1,117,962 1,920,159
Gas in storage, at average cost ...... 352,572 364,508
Deferred Gas Costs (Note 1) .......... 1,471,342 99,312
Materials and supplies, at first-in,
first-out cost ..................... 700,761 471,486
Prepayments .......................... 317,343 343,044
Total current assets $ 4,116,527 $ 3,413,388
Other Assets
Cash surrender value of officers' life
insurance (face amount of $1,031,000
and $1,020,000 in 1994 and 1993,
respectively) ...................... $ 269,029 $ 244,313
Note receivable from officer ......... 83,000 95,000
Unamortized debt expense and other
(Note 5) ........................... 2,444,258 1,307,714
Total other assets $ 2,796,287 $ 1,647,027
Total assets $61,932,480 $55,129,912
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Balance Sheets (continued)
As of June 30, 1994 1993
Liabilities and Shareholders' Equity
Capitalization (See Consolidated Statements
of Capitalization)
Common Shareholders' equity .......... $22,164,791 $17,501,045
Long-term debt (Note 5) .............. 24,500,000 19,596,401
Total capitalization .............. $46,664,791 $37,097,446
Current Liabilities
Notes payable (Note 4) ............... $ 2,705,000 $ 6,470,000
Current portion of long-term debt
(Note 5) ........................... 500,000 1,259,000
Accounts payable ..................... 2,133,840 1,620,575
Accrued taxes ........................ 436,158 470,701
Refunds due customers ................ 396,065 37,795
Customers' deposits .................. 342,979 377,402
Accrued interest on debt ............. 427,338 445,788
Accrued vacation ..................... 454,362 420,675
Other accrued liabilities ............ 314,888 257,027
Total current liabilities $ 7,710,630 $11,358,963
Deferred Credits and Other
Deferred income taxes ................ $ 5,116,400 $ 5,482,600
Investment tax credits ............... 921,800 993,300
Regulatory liability (Note 1) ........ 1,312,500 -
Advances for construction and other .. 206,359 197,603
Total deferred credits and other $ 7,557,059 $ 6,673,503
Commitments and Contingencies (Note 6) ..
Total Liabilities and
shareholders' equity ............ $61,932,480 $55,129,912
The accompanying notes to consolidated financial statements are an
integral part of these statements.
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Changes in
Shareholders' Equity
For the Years Ended June 30, 1994 1993 1992
Common Shares
Balance, beginning of year ............$ 1,648,485 $ 1,624,878 $ 1,600,033
$1.00 par value of 190,855, 23,607
and 24,845 shares issued in 1994,
1993 and 1992, respectively -
Public issuance of common shares .. 170,000 - -
Dividend reinvestment and stock
purchase plan ................... 15,355 16,265 18,067
Employee stock purchase plan and
other ........................... 5,500 7,342 6,778
Balance, end of year ..................$ 1,839,340 $ 1,648,485 $ 1,624,878
Premium on Common Shares
Balance, beginning of year ............$15,562,427 $15,157,400 $14,814,790
Premium on issuance of common shares-
Public issuance of common shares .. 3,570,000 - -
Dividend reinvestment and stock
purchase plan ................... 293,782 281,074 245,801
Employee stock purchase plan and
other ........................... 106,700 123,953 96,809
Balance, end of year ..................$19,532,909 $15,562,427 $15,157,400
Capital Stock Expense
Balance, beginning of year ............$(1,391,801) $(1,391,801) $(1,391,801)
Public issuance of common shares (196,224) - -
Balance, end of year ..................$(1,588,025) $(1,391,801) $(1,391,801)
Retained Earnings
Balance, beginning of year ............$ 1,681,934 $ 836,681 $ 124,529
Net income .......................... 2,671,001 2,620,664 2,453,813
Cash dividends declared on common
shares - (See Consolidated
Statements of Income for rates) ... (1,972,368) (1,775,411) (1,741,661)
Balance, end of year ..................$ 2,380,567 $ 1,681,934 $ 836,681
The accompanying notes to consolidated financial statements are an integral part
of these statements.
<PAGE>
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Capitalization
As of June 30, 1994 1993
Common Shareholders' Equity
Common shares, par value $1.00 per share
(Notes 2 and 3) Authorized - 6,000,000
shares - Issued and outstanding -
1,839,340 and 1,648,485 shares in
1994 and 1993, respectively ......... $ 1,839,340 $ 1,648,485
Premium on common shares ................ 19,532,909 15,562,427
Capital stock expense ................... (1,588,025) (1,391,801)
Retained earnings (Note 5) .............. 2,380,567 1,681,934
Total common shareholders' equity .... $22,164,791 $17,501,045
Long-Term Debt (Note 5)
Debentures, 6 5/8%, due 2023 $15,000,000 -
Debentures, 9%, due 2011 ................ 10,000,000 $10,000,000
Debentures, 8 5/8%, due 2007 ............ - 10,553,000
First mortgage loan payable to bank, at
9 1/4%, due in monthly installments
through 1997, secured by first
mortgage on corporate office building . - 177,401
Sinking fund debentures, 9 1/2% due in
annual installments to 1996 ........... - 125,000
$25,000,000 $20,855,401
Less - Amounts due within one year,
included in current liabilities ....... (500,000) (1,259,000)
Total long-term debt ................. $24,500,000 $19,596,401
Total capitalization .............. $46,664,791 $37,097,446
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<PAGE>
Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies:
(a) Principles of Consolidation -- Delta Natural Gas Company, Inc. (Delta or
the Company) has four wholly-owned subsidiaries. Delta Resources, Inc.
(Resources) buys gas and resells it to industrial customers on Delta's system
and to Delta for system supply. Delgasco, Inc. buys gas and resells it to
Resources and to customers not on Delta's system. Deltran, Inc. was formed to
engage in potential pipeline projects under consideration and is inactive.
Enpro, Inc. owns and operates existing production properties. All subsidiaries
of Delta are included in the consolidated financial statements. Intercompany
balances and transactions have been eliminated.
(b) Cash Equivalents -- For the purposes of the Consolidated Statements of Cash
Flows, all temporary cash investments with a maturity of three months or less at
the date of purchase are considered cash equivalents.
(c) Depreciation -- The Company determines its provision for depreciation using
the straight-line method and by the application of rates to various classes of
utility plant. The rates are based upon the estimated service lives of the
properties and were equivalent to composite rates of 2.7% of average depreciable
plant.
(d) Maintenance -- All expenditures for maintenance and repairs of units of
property are charged to the appropriate maintenance expense accounts. A
betterment or replacement of a unit of property is accounted for as an addition
and retirement of utility plant. At the time of such a retirement, the
accumulated provision for depreciation is charged with the original cost of the
property retired and also for the net cost of removal.
(e) Gas Cost Recovery -- Delta has a Gas Cost Recovery (GCR) clause that
matches revenues and gas costs and provides eventual dollar-for-dollar recovery
of all gas costs incurred. The Company expenses gas costs based on the amount
of gas cost recovered through revenue. Any differences between actual gas costs
and those estimated costs billed are deferred and reflected in the computation
of future billings to customers using the GCR mechanism.
(f) Revenue Recognition -- The Company records revenues as billed to its
customers on a monthly meter reading cycle. At the end of each month, gas
service which has been rendered from the latest date of each cycle meter reading
to the month-end is unbilled.
(g) Revenues and Customer Receivables -- The Company supplies natural gas to
approximately 32,000 customers in central and southeastern Kentucky. Revenues
and customer receivables arise primarily from sales of natural gas to customers
and from transportation services for others. Provisions for doubtful accounts
are recorded to reflect the expected net realizable value of accounts
receivable.
(h) Income Taxes -- The Company provides for income taxes on timing differences
resulting from the use of alternative methods of income and expense recognition
for financial and tax reporting purposes. The differences result primarily from
the use of accelerated tax depreciation methods for certain properties versus
the straight-line depreciation method for financial purposes, differences in
recognition of purchased gas cost recoveries and certain other accruals which
are not currently deductible for income tax purposes. Investment tax credits
were deferred for certain periods prior to fiscal 1987 and are being amortized
to income over the estimated useful lives of the applicable properties.
The Company adopted Statement of Financial Accounting Standard (SFAS) No. 109,
"Accounting for Income Taxes", effective July 1, 1993, as required. SFAS No.
109, which replaces SFAS No. 96, adopts the liability method of accounting for
income taxes, requiring deferred income tax assets and liabilities to be
computed using tax rates that will be in effect when the book and tax temporary
differences reverse. For regulated companies, the change in tax rates applied
to accumulated deferred income taxes may not be immediately recognized in
operating results because of ratemaking treatment. A regulatory liability has
been established to recognize the future revenue requirement impact from these
deferred taxes. As a result, the adoption of SFAS No. 109 did not have a
material impact on the results of operations or financial position of the
Company. The temporary differences which gave rise to the following net
deferred tax liability at June 30, 1994 were as follows:
Deferred Tax Assets
Unamortized investment tax credit $ 363,600
Regulatory liabilities 517,700
Alternative minimum tax credits 667,200
Other 402,100
$ 1,950,600
Deferred Tax Liabilities
Accelerated depreciation $(6,257,200)
Deferred Gas Cost (580,400)
Other (229,400)
$(7,067,000)
Net Accumulated Deferred
Income Tax Liability $(5,116,400)
The components of the income tax provision are comprised of the following for
the years ended June 30:
1994 1993 1992
Components of income tax expense:
Payable currently:
Federal 306,300 $ 432,300 $ 968,300
State 100,800 121,900 260,100
Total 407,100 $ 554,200 $1,228,400
Deferred to future years from:
Use of accelerated depreciation 675,000 660,300 575,000
Deferred (advance) recovery of 541,200 418,000 (238,600)
gas cost
Amortization of investment
tax credits, net (71,500) (71,800) (72,100)
Other deferred tax effects, net (42,200) (17,000) (51,100)
Income tax expense 1,509,600 $1,543,700 $1,441,600
Reconciliation of the statutory Federal income tax rate is shown in the table
below:
1994 1993 1992
Statutory Federal income
tax rate 34.0% 34.0% 34.0%
State income taxes net of
Federal benefit 5.2 5.2 5.2
Amortization of investment
tax credit (1.8) (1.7) (1.9)
Other differences - net (.9) - -
Effective Income Tax Rate 36.5% 37.5% 37.3%
(2) Employee Benefit Plans:
(a) Defined Benefit Retirement Plan - Delta has a trusteed, noncontributory,
defined benefit pension plan covering all eligible employees. Retirement income
is based on the number of years of service and annual rates of compensation.
The Company makes annual contributions equal to the amounts necessary to
adequately fund the plan. The funded status of the pension plan and the amounts
recognized in the Company's consolidated balance sheets at June 30 were as
follows:
1994 1993 1992
Plan assets at fair value $5,251,296 $ 4,931,658 $4,357,255
Actuarial present value of
benefit obligation:
Vested benefits $4,114,517 $ 4,042,029 $3,335,604
Non-vested benefits 30,562 37,777 32,019
Accumulated benefit obligation $4,145,079 $ 4,079,806 $3,367,623
Additional amounts related
to projected salary increases 1,734,413 1,881,303 1,528,180
Total projected benefit
obligation $5,879,492 $ 5,961,109 $4,895,803
Projected benefit obligation
in excess of plan assets $ (628,196) $(1,029,451) $ (538,548)
Unrecognized net assets at date of
initial application being
amortized over 15 years (339,153) (381,547) (423,941)
Unrecognized net loss 950,735 1,407,072 873,813
Accrued pension liability $ (16,614) $ (3,926) $ (88,676)
The assets of the plan consist primarily of common stock, bonds and
certificates of deposit. Net pension costs for the years ended June 30
include the following:
1994 1993 1992
Benefits earned during the year -
service cost $ 455,097 $ 401,054 $ 339,359
Interest cost on projected
benefit obligation 357,372 317,897 271,382
Actual return on plan assets (45,100) (356,971) (442,461)
Net amortization and deferral (353,530) (24,856) 123,892
Net periodic pension cost $ 413,839 $ 337,124 $ 292,172
The weighted average discount rates and the assumed rates of increase in future
compensation levels used in determining the actuarial present values of the
projected benefit obligation at June 30, 1994, 1993 and 1992 were 6.0%, 6.5% and
7.0%, respectively (discount rates), and 4% (rates of increase). The expected
long-term rates of return on plan assets were 8%.
SFAS No. 106, "Employers' Accounting for Post-Retirement Benefits", and SFAS No.
112, "Employers' Accounting for Post-Employment Benefits", did not affect the
Company as Delta does not provide benefits for post-retirement or post-
employment other than the pension plan for retired employees.
(b) Employee Savings Plan - The Company has an Employee Savings Plan (Savings
Plan) under which eligible employees may elect to contribute any whole
percentage between 2% and 15% of their annual compensation. The Company will
match 50% of the employee's contribution up to a maximum Company contribution of
2% of the employee's annual compensation. For the years ended June 30, 1994,
1993 and 1992, Delta's Savings Plan expense was $106,863, $93,749 and $87,966,
respectively.
(c) Employee Stock Purchase Plan - The Company has an Employee Stock Purchase
Plan (the Stock Plan) under which qualified permanent employees are eligible to
participate. Under the terms of the Stock Plan, such employees can contribute
on a monthly basis 1% of their annual salary level (as of July 1 of each year)
to be used to purchase Delta's common stock. After June 30, the Company will
issue Delta common stock, based upon the fiscal year contributions, using an
average of the last sale price of Delta's stock as quoted in NASDAQ's national
market system at the close of business for the last five business days in June,
and will match those shares so purchased. Therefore, stock equivalent to
$47,653 will be issued in July, 1994. The continuation and terms of the Stock
Plan are subject to approval by Delta's Board of Directors on an annual basis.
(3) Dividend Reinvestment and Stock Purchase Plan:
The Company's Dividend Reinvestment and Stock Purchase Plan (Reinvestment Plan)
provides that shareholders of record can reinvest dividends and also make
limited additional investments of up to $3,000 per quarter in shares of common
stock of the Company. Shares purchased under the Reinvestment Plan are
authorized but unissued shares of common stock of the Company, and 15,355 shares
were issued in 1994. Delta reserved 200,000 shares under the Reinvestment Plan
in 1989, and, as of June 30, 1994 there were 122,020 shares still available for
issuance.
(4) Notes Payable and Line of Credit:
Substantially all of the cash balances of Delta are maintained to compensate the
respective banks for banking services and to obtain lines of credit; however, no
specific amounts have been designated as compensating balances, and Delta has
the right of withdrawal of such funds. At June 30, 1994, the line of credit was
$15,000,000, of which $2,705,000 had been borrowed at an interest rate of 5.5%.
The maximum amount borrowed during 1994 was $9,065,000. The interest on this
line is either at the daily prime rate or is based upon certificate of deposit
rates. The current line of credit expires on November 15, 1994.
(5) Long-Term Debt:
On October 18, 1993, Delta issued $15,000,000 of 6 5/8% Debentures that mature
in October, 2023. Commencing in October, 1995, each holder may require
redemption of up to $25,000 of the 6 5/8% Debentures annually, subject to an
annual aggregate limitation of $500,000. Such redemption will also be made on
behalf of deceased holders within sixty days of notice, subject to the annual
aggregate $500,000 limitation. The 6 5/8% Debentures can be redeemed by the
Company beginning in October, 1998 at a 5% premium, such premium declining
ratably until it ceases in October, 2003. Restrictions under the indenture
agreement covering the 6 5/8% Debentures include, among other things, a
restriction whereby dividend payments cannot be made unless consolidated
shareholders' equity of the company exceeds $12 million. As of June 30, 1994,
no retained earnings were restricted under the provisions of the indenture.
On May 1, 1991, Delta issued $10,000,000 of 9% Debentures that mature in April,
2011. Each holder may require redemption of up to $25,000 of the 9% Debentures
annually, subject to an annual aggregate limitation of $500,000. Such
redemption will also be made on behalf of deceased holders within sixty days of
notice, subject to the annual aggregate $500,000 limitation. The 9% Debentures
can be redeemed by the Company beginning in April, 1996 at a 5% premium, such
premium declining ratably until it ceases in April, 2001. The Company may not
assume any additional mortgage indebtedness in excess of $1 million without
effectively securing the 9% Debentures equally to such additional indebtedness.
Debt issuance expenses are deferred and amortized over the terms of the related
debt. Call premium in 1994 of approximately $475,000 was deferred and will be
amortized over the term of the related debt consistent with regulatory
treatment.
(6) Commitments and Contingencies:
The Company has entered into individual employment agreements with its six
officers. The agreements expire or may be terminated at various times. The
agreements provide for continuing monthly payments or lump sum payments and
continuation of certain benefits over varying periods in the event employment is
altered or terminated following certain changes in ownership of the Company.
(7) Rates:
Reference is made to "Regulatory Matters" herein with respect to rate matters.
(8) Quarterly Financial Data (Unaudited):
Earnings
Net (Loss) per
Operating Operating Income Common
Quarter Ended Revenues Income (Loss) Share(a)
Fiscal 1994
September 30 $ 3,585,499 $ 11,056 $ (542,285) $(.33)
December 31 7,814,638 1,117,871 578,448 .32
March 31 16,494,674 3,270,274 2,713,563 1.48
June 30 6,952,130 451,472 (78,725) (.04)
Fiscal 1993
September 30 $ 3,466,378 $ 46,208 $ (475,979) $(.29)
December 31 7,712,590 1,269,509 716,010 .44
March 31 13,479,132 2,786,379 2,228,909 1.40
June 30 6,563,310 689,720 151,724 .09
______________________________________________________________
(a) Quarterly earnings per share may not equal annual earnings per share due to
changes in shares outstanding.
<TABLE>
SCHEDULE II
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS
AND EMPLOYEES OTHER THAN RELATED PARTIES
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
<CAPTION>
Column A Column B Column C Column D Column E
<S> <C> <C> <C> <C> <C> <C>
Balance at
Beginning of Balance at End
Name of Debtor Period Additions Deductions of Period
Amounts
Amounts written
collected off Current Non-Current
Glenn R. Jennings (a):
June 30, 1994 $ 95,000 $ - $ - $ 12,000 $ - $ 83,000
June 30, 1993 $ 107,000 $ - $ - $ 12,000 $ - $ 95,000
June 30, 1992 $ 91,000 $ 28,000 $ - $ 12,000 $ - $107,000
(a) Interest is to be paid at the annual rate of 8% payable monthly with the Company forgiving
$1,000 of the principal amount for each month of service Mr. Jennings completes. Effective
September 1, 1994, the loan forgiveness was amended to $2,000 per month. The loan
is secured by a mortgage on certain property.
</TABLE>
<TABLE>
SCHEDULE V
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED JUNE 30, 1994
<CAPTION>
Column A Column B Column C Column D Column E Column F
<S> <C> <C> <C> <C> <C> <C>
Other
Balance at Additions Changes Add Balance at
June 30, 1993 at Cost Retirements (Deduct)(a) June 30, 1994
Classification
Production $ 4,633,905 $ 40,764 $ 13,297 $ - $ 4,661,372
Storage 545,157 - - - 545,157
Transmission 15,575,862 1,467,119 61,883 - 16,981,098
Distribution 41,514,312 3,762,532 90,023 - 45,186,821
General 8,724,704 1,280,813 515,269 - 9,490,248
Construction Work
In Progress 193,920 823,519 (b) - - 1,017,439
Acquisition - - - - -
Adjustment
$71,187,860 $ 7,374,747 $ 680,472 $ - $77,882,135
(a) These amounts represent customer contributions in aid of construction, reclassifications and
other.
(b) Additions to construction work in progress are net of transfers to plant in service.
</TABLE>
<TABLE>
SCHEDULE V
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED JUNE 30, 1993
<CAPTION>
Column A Column B Column C Column D Column E Column F
<S> <C> <C> <C> <C> <C> <C>
Other
Balance at Additions Changes Add Balance at
June 30, 1992 at Cost Retirements (Deduct)(a) June 30, 1993
Classification
Production $ 4,800,777 $ 35,787 $ 207,659 $ 5,000 $ 4,633,905
Storage 550,157 - - (5,000) 545,157
Transmission 13,596,575 2,059,165 79,878 - 15,575,862
Distribution 38,167,687 3,489,218 138,253 (4,340) 41,514,312
General 7,901,993 1,115,286 285,315 (7,260) 8,724,704
Construction Work
In Progress 603,868 (409,948) (b) - - 193,920
Acquisition Adjustment 411,160 - - (411,160) -
$66,032,217 $ 6,289,508 $ 711,105 $ (422,760) $71,187,860
(a) These amounts represent customer contributions in aid of construction, reclassifications and
other.
(b) Additions to construction work in progress are net of transfers to plant in service.
</TABLE>
<TABLE>
SCHEDULE V
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED JUNE 30, 1992
<CAPTION>
Column A Column B Column C Column D Column E Column F
<S> <C> <C> <C> <C> <C> <C> <C>
Other
Balance at Additions Changes Add Balance at
June 30, 1991 at Cost Retirements (Deduct)(a) June 30, 1992
Classification
Production $ 4,812,652 $ 89,832 $ 12,751 $ (88,956) $ 4,800,777
Storage 550,157 - - - 550,157
Transmission 12,904,313 722,386 30,124 - 13,596,575
Distribution 35,059,511 3,343,271 174,195 (60,900) 38,167,687
General 7,647,258 687,741 432,740 (266) 7,901,993
Construction Work
In Progress 372,615 231,253 (b) - - 603,868
Acquisition Adjustment 411,160 - - - 411,160
$61,757,666 $5,074,483 $ 649,810 $ (150,122) $66,032,217
(a) These amounts represent customer contributions in aid of construction, reclassifications and
other.
(b) Additions to construction work in progress are net of transfers to plant in service.
</TABLE>
<TABLE>
SCHEDULE VI
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED JUNE 30, 1994
<CAPTION>
Column A Column B Column C Column D Column E Column F
<S> <C> <C> <C> <C> <C> <C> <C>
Additions Deductions
Charged to Salvage and Other
Balance at Charged to Transportation Cost of Changes Add Balance at
Description June 30, 1993 Expenses Clearing Retirements Removal, Net (Deduct) June 30, 1994
Production $ 1,216,575 $ 150,418 $ - $ 13,297 $ - $ - $ 1,353,696
Storage 137,289 8,583 - - - - 145,872
Transmission 5,273,357 451,985 - 61,883 (10,794) - 5,674,253
Distribution 9,998,157 1,118,420 - 90,023 11,949 - 11,014,605
General 4,492,985 248,462 360,941 515,269 (86,924) - 4,674,043
Acquisition
Adjustment - - - - - - -
$21,118,363 $1,977,868 $ 360,941 $ 680,472 $ (85,769) $ - $22,862,469
</TABLE>
<TABLE>
SCHEDULE VI
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED JUNE 30, 1993
<CAPTION>
Column A Column B Column C Column D Column E Column F
<S> <C> <C> <C> <C> <C> <C> <C>
Additions Deductions
Charged to Salvage and Other
Balance at Charged to Transportation Cost of Changes Add Balance at
Description June 30, 1992 Expenses Clearing Retirements Removal, Net (Deduct) June 30, 1993
Production $ 1,185,221 $ 179,013 $ - $ 207,659 $ (60,000) $ - $ 1,216,575
Storage 128,706 8,583 - - - - 137,289
Transmission 4,937,553 409,050 - 79,878 (6,632) - 5,273,357
Distribution 9,095,321 1,029,507 - 138,253 (11,582) - 9,998,157
General 4,167,347 206,919 344,136 285,315 (59,898) - 4,492,985
Acquisition
Adjustment 411,160 - - - - (411,160) -
$19,925,308 $1,833,072 $ 344,136 $ 711,105 $ (138,112) $(411,160) $21,118,363
</TABLE>
<TABLE>
SCHEDULE VI
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
FOR THE YEAR ENDED JUNE 30, 1992
<CAPTION>
Column A Column B Column C Column D Column E Column F
<S> <C> <C> <C> <C> <C> <C> <C>
Additions Deductions
Charged to Salvage and Other
Balance at Charged to Transportation Cost of Changes Add Balance at
Description June 30, 1991 Expenses Clearing Retirements Removal, Net (Deduct) June 30, 1992
Production $ 1,021,866 $ 179,631 $ - $ 12,751 $ 3,525 $ $ 1,185,221
Storage 119,873 8,833 - - - - 128,706
Transmission 4,594,835 372,842 - 30,124 - - 4,937,553
Distribution 8,332,540 944,332 - 174,195 7,356 - 9,095,321
General 4,003,670 169,902 328,535 432,740 (97,980) - 4,167,347
Acquisition
Adjustment 411,160 - - - - - 411,160
$18,483,944 $ 1,675,540 $ 328,535 $ 649,810 $ (87,099) $ - $ 19,925,308
</TABLE>
<TABLE>
SCHEDULE VIII
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
<CAPTION>
Column A Column B Column C Column D Column E
<S> <C> <C> <C> <C> <C>
Additions
Balance Charged to Deductions
at Charged to Other Amounts Balance
Beginning Costs and Accounts- Charged Off at End
Description of Period Expenses Recoveries or Paid of Period
Deducted From the Asset to
Which it Applies - Allowance
for doubtful accounts for
the years ended:
June 30, 1994 $ 208,182 $ 100,800 $ 25,906 $ 203,564 $ 131,324
June 30, 1993 $ 208,212 $ 100,800 $ 20,018 $ 120,848 $ 208,182
June 30, 1992 $ 45,262 $ 295,400 $ 27,176 $ 159,626 $ 208,212
</TABLE>
<TABLE>
SCHEDULE IX
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
<CAPTION>
Maximum Amount Average Amount
Balance Weighted Outstanding Outstanding Weighted Average
Category of aggregate at End of Average During During Interest Rate During
short-term borrowings Period Interest Rate the Period the Period (b) the Period (b)
<C> <C> <C> <C> <C> <C>
Bank Notes Payable (a)
1994 $2,705,000 5.5% $ 9,065,000 $ 4,230,945 4.3%
1993 $6,470,000 4.2% $ 7,815,000 $ 5,350,779 4.3%
1992 $2,770,000 5.0% $ 3,825,000 $ 2,117,896 5.9%
(a) Bank loans consist of a demand grid note. The interest rate fluctuated with either the daily prime
or various certificate of deposit rates for the periods.
(b) Computed by using the daily weighted average borrowings for the periods.
</TABLE>
SCHEDULE X
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED JUNE 30, 1994, 1993 AND 1992
Column A Column B
Charged to Income for the Year
Ended June 30_________
1994 1993 1992
Item (a)
Maintenance and Repairs $ 408,498 $436,455 $524,976
Property Taxes $ 408,361 $360,745 $356,061
(a) Items omitted do not exceed one percent of total consoli-
dated revenues as reported in the related consolidated
statements of income or are reported separately in the
consolidated financial statements.
EXHIBIT INDEX
Exhibit 12 Computation of the Consolidated Ratio of Earnings to Fixed
Charges
Exhibit 23 Consent of Independent Public Accountants
Exhibit 27 Financial Data Schedule
<TABLE>
EXHIBIT 12
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF THE CONSOLIDATED RATIO OF EARNINGS
TO FIXED CHARGES
<CAPTION>
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Earnings:
Net income ............ $2,671,001 $2,620,664 $2,453,813 $1,162,582 $1,195,512
Provisions for income
taxes ............... 1,509,600 1,543,700 1,441,600 560,500 608,200
Fixed charges ......... 2,214,659 2,210,833 2,166,597 1,968,390 1,757,772
Total $6,395,260 $6,375,197 $6,062,010 $3,691,472 $3,561,484
Fixed Charges:
Interest on debt ...... $2,123,255 $2,134,306 $2,091,117 $1,914,894 $1,708,296
Amortization of debt
expense ............. 91,404 76,527 75,480 53,496 49,476
Total $2,214,659 $2,210,833 $2,166,597 $1,968,390 $1,757,772
Ratio of Earnings to
Fixed Charges: 2.89 x 2.88 x 2.80 x 1.88 x 2.03 x
</TABLE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report dated August 12, 1994, included in this
Form 10-K, into the Company's previously filed Registration Statement
No. 33-31457, relating to the Dividend Reinvestment and Stock Purchase
Plan of the Company.
Arthur Andersen LLP
Louisville, Kentucky
August 26, 1994
<TABLE> <S> <C>
<ARTICLE> OPUR1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 55,019,666
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 4,116,527
<TOTAL-DEFERRED-CHARGES> 2,444,258
<OTHER-ASSETS> 352,029
<TOTAL-ASSETS> 61,932,480
<COMMON> (1,839,340)
<CAPITAL-SURPLUS-PAID-IN> (17,944,884)
<RETAINED-EARNINGS> (2,380,567)
<TOTAL-COMMON-STOCKHOLDERS-EQ> (22,164,791)
0
0
<LONG-TERM-DEBT-NET> (24,500,000)
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> (500,000)
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> (12,062,689)
<TOT-CAPITALIZATION-AND-LIAB> (61,932,480)
<GROSS-OPERATING-REVENUE> (34,846,941)
<INCOME-TAX-EXPENSE> 1,509,600
<OTHER-OPERATING-EXPENSES> 28,486,668
<TOTAL-OPERATING-EXPENSES> 29,996,268
<OPERATING-INCOME-LOSS> (4,850,673)
<OTHER-INCOME-NET> (34,987)
<INCOME-BEFORE-INTEREST-EXPEN> (4,885,660)
<TOTAL-INTEREST-EXPENSE> (2,214,659)
<NET-INCOME> (2,671,001)
0
<EARNINGS-AVAILABLE-FOR-COMM> (2,671,001)
<COMMON-STOCK-DIVIDENDS> 1,972,368
<TOTAL-INTEREST-ON-BONDS> 1,879,526
<CASH-FLOW-OPERATIONS> 6,172,019
<EPS-PRIMARY> 1.50
<EPS-DILUTED> 1.50
</TABLE>
