SCHEDULE 14A INFORMATION
Proxy Statment Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Delta Natural Gas Company, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
DELTA NATURAL GAS COMPANY, INC.
Holders of Common Stock
Appointment of Proxy
For the Annual Meeting of Shareholders
To Be Held November 17, 1994 at 10:00 a.m.
at the Principal Office of the Company at
3617 Lexington Road, Winchester, Kentucky
PROXY:
The undersigned hereby appoints Harrison D. Peet and Glenn R. Jennings, and
either of them with power of substitution, as proxies to vote the shares of
Common Stock of the undersigned in Delta Natural Gas Company, Inc. at the
Annual Meeting of its Shareholders to be held November 17, 1994 and at any
adjournments thereof, upon all matters that may properly come before the
meeting, including the matters identified (and in the manner indicated) on
the reverse side of this proxy and described in the proxy statement furnished
herewith.
(Continued and to be signed and dated on reverse side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
NOTE: This proxy is solicited on behalf of the Board of Directors, which
recommends votes FOR all items. It will be voted as specified. If not
specified, the shares represented by this proxy will be voted FOR all items.
Please sign and date this proxy on the reverse side, and return it promptly
in the enclosed envelope.
Indicate your vote by an (X) in the appropriate boxes:
ITEM:
1. Election of Directors
Nominees for three year term expiring 1997:
FOR
FOR WITHHELD all Nominees
all all EXCEPT those
NOMINEES NOMINEES listed below
___ ___ ___
Jane W. Hylton
Harrison D. Peet
Henry C. Thompson
Nominee for two year term expiring 1996:
Arthur E. Walker, Jr.
____________________________________________________
____________________________________________________
____________________________________________________
FOR AGAINST ABSTAIN
___ ___ ____
2. Appointment of Arthur Ander-
sen LLP as auditors for Delta
for 1995.
SIGN EXACTLY AS NAME(S) APPEARS BELOW:
X_________________________________________________________
X______________________________Date ________________, 1994
If joint account, each joint owner must sign. If signing for a corporation
or partnership or as agent, attorney or fiduciary, indicate the capacity in
which you are signing.
Account Shareholder(s) Number
Number of record of shares
Delta Natural Gas Company, Inc.
3617 Lexington Road
Winchester, Kentucky 40391
Notice To Common Shareholders Of Annual Meeting
To Be Held November 17, 1994
Please take notice that the Annual Meeting of Shareholders of Delta Natural
Gas Company, Inc. will be held at the principal office of the Company, 3617
Lexington Road, Winchester, Kentucky, on Thursday, November 17, 1994 at 10:00
a.m. for the purposes of:
1. Electing three Directors for three year terms expiring in 1997 and
electing one Director for a two year term expiring in 1996;
2. Approving the appointment of Arthur Andersen LLP as auditors of the
Company for 1995 and
3. Acting on such other business as may properly come before the meeting.
Holders of Common Stock of record at the close of business on October 3, 1994
will be entitled to vote at the meeting.
By Order of the Board of Directors
Jane W. Hylton
Vice President - Human
Resources and Secretary
Winchester, Kentucky
October 11, 1994
To insure proper representation at the meeting at a minimum of expense, it
will be very helpful if you fill out, sign and return the
enclosed proxy promptly.
Proxy Statement
Delta Natural Gas Company, Inc.
3617 Lexington Road
Winchester, Kentucky 40391
Information Concerning Proxy
This solicitation of proxies is made by the Board of Directors of Delta
Natural Gas Company, Inc. (Delta or the Company), and the costs associated
with this solicitation will be borne by Delta. Management intends to use the
mails to solicit all Shareholders and intends first to send this proxy
statement and the accompanying form of proxy to Shareholders on or about
October 11, 1994. Delta will provide copies of this proxy statement, the
accompanying proxy and the Annual Report to brokers, dealers, banks and
voting trustees, and their nominees, for mailing to beneficial owners, and
upon request therefor, will reimburse such record holders for their
reasonable expenses in forwarding solicitation materials. In addition to
using the mails, proxies may be solicited by directors, officers and regular
employees of Delta in person or by telephone, but without extra compensation.
You may revoke your proxy at any time before it is exercised by giving notice
to Ms. Jane W. Hylton, Vice President - Human Resources and Secretary of
Delta.
Election of Directors
Delta's Board of Directors is classified into three classes, with terms
expiring in either 1994, 1995 or 1996.
The terms of four Directors, Jane W. Hylton, Harrison D. Peet, Henry C.
Thompson and Arthur E. Walker, Jr. are scheduled to end in 1994. Jane W.
Hylton, Harrison D. Peet, Henry C. Thompson, and Arthur E. Walker, Jr., who
are members of the present Board of Directors, are nominated as Directors for
election at the Annual Meeting of Shareholders. Jane W. Hylton, Harrison D.
Peet, and Henry C. Thompson will hold office until the Annual Meeting in 1997
and until their successors have been elected and qualified. Arthur E.
Walker, Jr. will hold office until the Annual Meeting in 1996 and until his
successor has been elected and qualified.
If the enclosed proxy is duly executed and received in time for the meeting,
and if no contrary specification is made as provided therein, the shares
represented by this proxy will be voted for Jane W. Hylton, Harrison D. Peet,
Henry C. Thompson, and Arthur E. Walker, Jr. as Directors of Delta. If one
of them should refuse or be unable to serve, the proxy will be voted for such
person as shall be designated by the Board of Directors to replace them as a
Nominee. Management presently has no knowledge that any of the Nominees will
refuse or be unable to serve.
The names of Directors and Nominees and certain information about them are
set forth below:
Additional Business
Name, Age and Position Experience During Period of Service
Held With Delta Last Five Years As Director
Donald R. Crowe (2) - 60
Director Senior Analyst, 1966 to present
Department of Insurance,
Commonwealth of Kentucky,
Lexington, Kentucky
Billy Joe Hall(2) - 57
Director Investment Broker, 1978 to present
LPL Financial Services
(general brokerage
services); Mount Sterling,
Kentucky
Jane W. Hylton (1) - 64
Vice President - Human
Resources and Secretary,
Director Vice President - Human 1976 to present
Delta Resources, Inc.
(Resources), Delgasco, Inc.
(Delgasco), Deltran, Inc.
(Deltran) and Enpro, Inc.
(Enpro), all subsidiaries of
Delta
Glenn R. Jennings(3) - 45
President and Chief Execu- 1984 to present
tive Officer and Director,
President and Chief Executive
Officer and Director, Resources,
Delgasco, Deltran and Enpro
Additional Business
Name, Age and Position Experience During Period of Service
Held With Delta Last Five Years As Director
Harrison D. Peet(1) - 74 Chairman of the Board, 1950 to present
Chairman of the Board Resources, Delgasco,
Deltran and Enpro;
Retired President and
Chief Executive Officer,
Delta
Virgil E. Scott(3) - 73 Retired Vice President 1950 to present
Director Administration, Delta and
Resources; Director,
Resources, Delgasco,
Deltran and Enpro
Henry C. Thompson(1) - 72 President, Triple Land 1967 to present
Director Company, Inc. (land
development and real
estate rental); Retired
President, Henry Thompson
Construction Company, Inc.
(land development and
commercial real estate
rental), both of Nicholasville,
Kentucky
Arthur E. Walker, Jr.(1)(4) - 49
Director President, Walker Con- 1981 to present
struction Company (general
and highway construction)
and Atlas Concrete Products
Corporation (construction
materials), both of Mount
Sterling, Kentucky
Robert M. Watt III (2) - 47
Director Attorney, Stoll, Keenon & 1983 to present
Park (law firm), Lexington,
Kentucky (5)
(1) Term expires November 17, 1994.
(2) Term expires on date of Annual Meeting of Shareholders in 1995.
(3) Term expires on date of Annual Meeting of Shareholders in 1996.
(4) On November 8, 1993, Arthur E. Walker, Jr., who is nominated for
reelection to Delta's Board of Directors, entered a guilty plea in
Montgomery County, Kentucky, District Court to the charge of making a
political contribution in the name of another, a misdemeanor under
Kentucky law. The Court fined Mr. Walker $1,000 plus court costs.
(5) This law firm is Delta's primary legal counsel.
Committees and Board Meetings
Delta has an Audit Committee comprised of Messrs. Crowe, Hall and Walker.
The Committee, which met one time during fiscal 1994, is empowered to
recommend independent auditors to the Board, review audit results and
financial statements, review the system of internal control and make reports
and recommendations to the Board.
Delta has a Compensation Committee comprised of Messrs. Crowe, Scott and
Watt. The Committee, which met two times during fiscal 1994, is empowered to
make recommendations to the Board as to the compensation of the Board and
Officers and any other personnel matters.
Delta has a Nominating Committee comprised of Messrs. Hall, Thompson and
Walker. The Committee, which met one time during fiscal 1994, is empowered
to present to the Board names of individuals who would make suitable
Directors and to counsel with appropriate Officers of the Company on matters
relating to the organization of the Board. The Nominating Committee will
consider Nominees recommended by Shareholders, if such nominations are
submitted in writing to the attention of Ms. Jane W. Hylton at Delta's
corporate office in Winchester, Kentucky.
Delta has an Executive committee comprised of Messrs. Jennings, Peet and
Watt. The Committee, which did not meet in fiscal 1994, is empowered to act
for and on behalf of the Board of Directors, during the interval between the
meetings of the Board of Directors, in the management and direction of the
business of the Company.
During fiscal 1994, Delta's Board of Directors held four meetings. All
Directors attended 75% or more of the aggregate number of meetings of the
Board of Directors and applicable Committee meetings.
Directors other than the Chairman of the board are provided a monthly fee of
$300. Mr. Peet is provided, effective June 1, 1994, a monthly fee of $2,500
for his services as Chairman of the Board ($2,100 each month prior to June 1,
1994). Non-Officer Directors other than Mr. Peet receive a fee of $500 for
attending Board or Committee meetings. During fiscal 1994, each Director was
provided with additional compensation of $2,000 and 100 shares of Common
Stock. Mr. Peet was also provided compensation of $7,500.
Officers of Delta
Date Began
in this
Name Position(1) Age Position(2)
John F. Hall Vice President - 51 11/17/88
Regulatory Matters
and Treasurer
Robert C. Hazelrigg Vice President- 47 5/20/93
Public and Consumer
Affairs
Alan L. Heath Vice President - 47 5/21/84
Operations and
Engineering
Jane W. Hylton Vice President - 64 11/17/88
Human Resources
and Secretary
Glenn R. Jennings President and Chief 45 11/17/88
Executive Officer
Thomas A. Kohnle Vice President - 64 11/17/88
Controller
(1) Each Officer is normally elected to serve a one year term. Each
Officer's current term is scheduled to end on November 17, 1994, the date of
the Board of Directors' meeting following the Annual Shareholders' Meeting.
(2) All current Officers have functioned as Officers of Delta for at least
five years.
Board Compensation Committee Report on
Executive Compensation
The Compensation Committee of the Board of Directors (Committee) is composed
of three independent, non-employee Directors. The Committee is responsible
for developing and making recommendations to the Board with respect to
Delta's executive compensation. All decisions by the Committee relating to
the compensation of Delta's executive Officers, including the Chief Executive
Officer, are reviewed and given final approval by the full Board of
Directors. During 1994, no decisions of the Committee were modified in any
material way or rejected by the full Board.
The goals of the Committee in establishing the compensation for the Company's
executive Officers are to provide fair and appropriate levels of compensation
that will insure the Company's ability to attract and retain a competent and
energetic management team.
Salaries for Delta's Officers are determined in a manner similar to that for
all employees, using a pay grade system established with the assistance of a
consulting firm. Salary grades were developed for all positions in the
Company through the use of external comparisons with other companies, and are
periodically adjusted for inflation. The salary grades have a minimum and
maximum compensation level for each grade. Salary increases for executive
Officers are established by the Compensation Committee, considering factors
which include the overall raises budgeted for the Company, individual
performance of the executive Officers and their position in their individual
pay grades. There has been no specific, quantified relationship between
corporate performance and individual compensation.
There is no formal bonus plan for executive Officers. Bonuses have been paid
in the past from time to time, at the discretion of the Company, based on the
Company's overall performance and the contributions and performances of the
individual Officers and other employees. There has been no specific,
quantified relationship between corporate performance and individual bonuses.
The decision to pay bonuses in 1994 was based upon recommendations from the
Compensation Committee, and bonuses were approved by the Company's Board of
Directors.
A summary of the compensation awarded to Glenn R. Jennings, President and
Chief Executive Officer of the Company, is set forth in the "Summary
Compensation Table". The compensation paid to Mr. Jennings for fiscal 1994
reflects a bonus and an increase in base salary, both of which are described
above. The other components of Mr. Jennings' 1994 salary package are
generally consistent with prior years.
The Committee believes Mr. Jennings has positioned the Company well to
address a changing business climate, to provide for total shareholder return
and to continue the Company's growth.
Donald R. Crowe
Virgil E. Scott
Robert M. Watt III
Compensation Committee Interlocks and Insider Participation
Virgil E. Scott is a Director of Delta and serves on the Compensation
Committee. Mr. Scott retired in 1986 as the Vice President - Administration
of Delta.
Robert M. Watt III, a partner in the law firm of Stoll, Keenon & Park in
Lexington, Kentucky, is a Director of Delta and serves on the Compensation
Committee. Stoll, Keenon & Park represents Delta as general counsel in
various legal and regulatory matters. During fiscal 1994, Delta paid Stoll,
Keenon & Park $78,290 for legal services, and it is anticipated that this
firm will continue to perform legal services for the Company during fiscal
1995. In the opinion of Management, transactions with Stoll, Keenon & Park
were on terms as fair as might be expected in transactions with unaffiliated
parties.
Summary Compensation Table
The following table sets forth information concerning the compensation of the
Company's President and Chief Executive Officer for the last three fiscal
years. No other executive officer of the Company earned compensation in
excess of $100,000 for the periods.
Annual
Name and Compensation All Other
Principal Position Year Salary Bonus
Compensation(1)
Glenn R. Jennings(2) 1994 $130,000 $34,101 $12,000
President and Chief 1993 $124,000 $23,118 $12,000
Executive Officer 1992 $121,000 $10,183 $12,000
(1) During each of the preceding three fiscal years, Delta forgave $12,000
of the principal amount of a loan made by Delta to Mr. Jennings (see "Certain
Relationships and Related Transactions" for a discussion of this loan).
(2) The amounts reflected in this table do not include amounts received as a
member of Delta's Board of Directors (see "Committees and Board Meetings").
Comparison of Five Year Cumulative Total Return
Among the Company, S & P 500 Index, and
Natural Gas Distribution Industry Index
The following graph sets forth a comparison of five year cumulative total
return among the common shares of the Company, the S & P 500 Index and the
Edward D. Jones & Co. Natural Gas Distribution Industry Index ("Industry
Index") for the fiscal years indicated. Information reflected on the graph
assumes an investment of $100 on June 30, 1989 in each of the common shares
of the Company, the S & P 500 Index and the Industry Index. Cumulative total
return assumes reinvestment of dividends. The Industry Index consists of
thirty natural gas distribution companies chosen by Edward D. Jones & Co.
The Company is among the thirty companies included in the Industry Index.
1989 1990 1991 1992 1993 1994
Delta 100 95.6 111.7 142.0 187.2 210.5
S & P 500 Index 100 116.4 125.0 141.8 161.0 163.3
Industry Index 100 109.8 124.0 150.4 202.0 193.6
Estimated Annual Benefits Upon Retirement
Delta has a trusteed, non-contributory, defined benefit retirement plan. The
following table illustrates the approximate pension benefits payable under
the terms of the plan to employees retiring at the normal retirement age of
65 assuming five years' average annual compensation and years of service as
indicated:
Average Annual Estimated Annual Benefits For
Compensation Years of Service Indicated
(Five Year
Average) 15 20 25 30 35
$100,000 $ 24,000 $ 32,000 $ 40,000 $ 48,000 $ 56,000
$125,000 $ 30,000 $ 40,000 $ 50,000 $ 60,000 $ 70,000
$150,000 $ 36,000 $ 48,000 $ 60,000 $ 72,000 $ 84,000
$175,000 $ 42,000 $ 46,000 $ 70,000 $ 84,000 $ 98,000
$200,000 $ 48,000 $ 64,000 $ 80,000 $ 96,000 $112,000
The plan is available to all employees as they become eligible. The basic
retirement benefit is payable for 120 months certain and life thereafter,
based upon a formula of 1.6% of the highest five years average monthly salary
for each year of service. The compensation used to determine the average
monthly salary under the plan includes only base salary of employees (see
"Salary" in the Summary Compensation Table). An employee may also elect from
various joint, survivor, lump sum and annuitant provisions that would change
the above amounts. Social security benefits would be in addition to the
amounts received under Delta's pension plan.
Mr. Jennings has fifteen years of credited service in the plan.
Employment Contract and Termination of
Employment and Change in Control Agreement
Delta entered into an agreement with Mr. Jennings on June 1, 1992. The
agreement provides for Mr. Jennings' employment in his present capacity
through November 30, 1997, and such agreement continues on a year-to-year
basis thereafter. This agreement provides for the termination of Mr.
Jennings' employment in the event of his death or incapacity or for cause.
In addition, Mr. Jennings may terminate his employment following a change in
control if he determines in good faith that, due to the change in control,
his continued employment is not in Delta's best interests or he is unable to
carry out his duties effectively. A change in control is defined as a change
in control that would be required to be reported under Regulation 14A of the
Securities and Exchange Act of 1934 or an acquisition by any person or entity
of twenty percent or more of Delta's issued and outstanding voting Common
Stock.
Under the agreement, if Mr. Jennings is terminated by Delta without cause
during the three year period immediately following a change in control, his
compensation and service credits under the employee benefit plans will be
continued for the remainder of the contract period, but in no event for less
than three years following termination of employment. In addition, the
agreement provides for the continuance, at not less than present levels, of
employee benefit plans and practices, including the retirement plan, 401-K
Plan, stock purchase plan, life and accidental death and dismemberment
insurance, company furnished automobile and office, vacation plan, and
medical, dental, health and long-term disability plans. If Mr. Jennings
determines that in good faith he cannot continue to fulfill his
responsibilities as a result of a change in control, then that is to be
considered termination without cause. Further, Delta has indemnified Mr.
Jennings for actions taken by him in good faith while performing services for
Delta and has agreed to provide liability insurance for lawsuits and to pay
legal expenses arising from any such proceedings. In the event Delta
terminates Mr. Jennings in violation of the agreement or in the event Mr.
Jennings so terminates his employment following a change in control, Delta is
required to pay Mr. Jennings a minimum of the greater of the number of years
remaining under the agreement or three years' salary, either in lump sum, if
Mr. Jennings elects to so terminate following a change in control, or on a
monthly basis over the life of the obligation. Mr. Jennings' current yearly
base salary is $136,000. Additionally, in the event Mr. Jennings so
terminates his employment following a change in control, Delta will forgive
any unpaid principal outstanding on a loan made to him (see "Certain
Relationships and Related Transactions" for a description of this loan).
Security Ownership Of Certain
Beneficial Owners and Management (1)
Amount and Nature
Of Beneficial Percent Of
Name Of Owner Ownership(2)(3)(4) Stock
Donald R. Crowe 2,629 *
(329 shares jointly owned)
Billy Joe Hall 2,799 *
Amount and Nature
Of Beneficial Percent Of
Name Of Owner Ownership(2)(3)(4) Stock
Jane W. Hylton 5,627
(551 shares jointly owned) *
Glenn R. Jennings 4,285 *
Harrison D. Peet (5) 18,256 *
Virgil E. Scott 12,242 *
Henry C. Thompson 4,067 *
Arthur E. Walker, Jr. (6) 10,190 *
(3,489 shares jointly owned)
Robert M. Watt III (7) 2,284 *
(517 shares jointly owned)
All Directors and 62,379 3.4%
Officers as a (4,886 shares jointly owned)
Group (13 persons)
* Less than 1%.
(1) The only class of stock issued and outstanding is Common Stock.
(2) Under the terms of Delta's Employee Stock Purchase Plan, all Officers
and employees (with certain limited exceptions) have the right to contribute
1% of their July 1, 1994 annual salary level on a monthly basis. At the end
of fiscal 1995, Delta will issue its Common Stock, based upon 1995
contributions, using an average of the last sale price of Delta's stock as
quoted in the National Association of Securities Dealers Automated Quotation
National Market System at the close of business for the last five business
days in June, 1995, and will match those share so purchased. If employees
cease to participate in the plan prior to year end, their contribution will
be returned with no matching Company portion. The continuation and terms of
the plan are subject to approval by Delta's Board of Directors on an annual
basis. Accordingly, all the persons listed who are Officers (Directors,
however, have no rights under this plan, unless they are also Officers) have
the right to purchase shares of Delta's Common Stock and the right to receive
shares without charge. This stock will not be issued until July, 1995. The
ownership figures in the above table do not reflect these rights.
(3) The persons listed, unless otherwise indicated in this column, are the
sole owners of the reported securities and accordingly exercise both sole
voting and sole investment power over the securities.
(4) The figures, which are as of August 1, 1994, are based on information
supplied to Delta by its Officers and Directors.
(5) The listed shares include 15,000 shares held by Mr. Peet's wife in a
voting trust, which is administered and voted by Mr. Peet.
(6) The listed shares include 2,911 share held by Mr. Walker as guardian for
his children and 578 shares held by his wife.
(7) The listed shares include 517 shares held by Mr. Watt as guardian for
his children.
Certain Relationships and Related Transactions
Robert M. Watt III, a partner in the law firm of Stoll, Keenon & Park in
Lexington, Kentucky, is a Director of Delta. Stoll, Keenon & Park represents
Delta as general counsel in various legal and regulatory matters. During
fiscal 1994, Delta paid Stoll, Keenon & Park $78,290 for legal services, and
it is anticipated that this firm will continue to perform legal services for
the Company during fiscal 1995. In the opinion of Management, transactions
with Stoll, Keenon & Park were on terms as fair as might be expected in
transactions with unaffiliated parties.
Delta has an agreement with Glenn R. Jennings, President and Chief Executive
Officer and a Director of Delta, under the terms of which Mr. Jennings
received a secured loan of $108,000. The agreement provides that interest is
to be paid by Mr. Jennings at the annual rate of 8%, payable monthly, with
Delta forgiving, effective September 1, 1994, $2,000 of the principal amount
for each month of service Mr. Jennings completes ($1,000 each month prior to
September 1, 1994). The outstanding balance on this loan was $81,000 as of
September 1, 1994. The largest amount outstanding during fiscal 1994 was
$95,000.
Appointment of Auditors
(Delta's Board of Directors recommends voting FOR this Proposal, which is
designated in the Proxy as Item 2.)
Subject to approval of Delta's Common Shareholders, the Board of Directors of
Delta has appointed Arthur Andersen LLP as independent public accountants and
auditors in connection with Delta's accounting matters and to make an annual
audit of the accounts of Delta and its subsidiary companies for the fiscal
year ending June 30, 1995. Arthur Andersen LLP have been auditors for Delta
since 1962 and, both by virtue of their long familiarity with Delta's affairs
and their ability, are considered to be well qualified to perform this
important function. Representatives of Arthur Andersen LLP are expected to
be present at the Annual Meeting of Shareholders, and they will have an
opportunity to make a statement, if they so desire, and will be available to
respond to questions.
Shareholders' Proposals
Proposals of security holders intended to be presented at Delta's 1995 annual
meeting must be received by Delta no later than June 13, 1995, in order to be
included in Delta's proxy statement and form of proxy related to that
meeting.
Financial Statements
Delta's 1994 Annual Report to Shareholders containing financial statements
will precede or accompany the mailing of this proxy to Common Shareholders.
Other Matters
Management is not aware of any other matters to be presented at the meeting
of Shareholders to be held on November 17, 1994. However, if any other
matters come before the meeting, it is intended that the Holders of proxies
solicited hereby will vote such shares thereon in their discretion.
As of the close of business on October 3, 1994, the record date fixed for
determination of voting rights, Delta had outstanding 1,845,693 shares of
Common Stock, each share having one vote. A majority of the shares entitled
to be cast on a matter constitutes a quorum for action on that matter. Once
a share is represented for any purpose at the meeting, it will be deemed
present for quorum purposes for the remainder of the meeting and any
adjournment of the meeting (unless a new record date is set). If a quorum
exists, action on a matter (other than the election of Directors) will be
approved if the votes cast favoring the action exceed the votes cast opposing
the action unless a higher vote is required by law.
Under applicable Kentucky law, each Common Shareholder of Delta is entitled
to vote cumulatively for the election of Directors. This means that each
Common Shareholder has the right to give one Nominee votes equal to the
number of Directors to be elected multiplied by the number of shares of
Common Stock the Shareholder possesses or to distribute such votes among two
or more Nominees as the Shareholder desires. The four nominees for Director
receiving the highest number of votes will be elected.
There are no conditions precedent to the exercise of cumulative voting
rights.
Shares represented by a limited proxy, such as where a broker may not vote on
a particular matter without instructions from the beneficial owner and no
instructions have been received (i.e., "broker non-vote"), will be counted to
determine the presence of a quorum but will not be deemed present for other
purposes and will not be the equivalent of a "no" vote on a proposition.
Shares represented by a proxy with instructions to abstain on a matter will
be counted in determining whether a quorum is in attendance. An abstention
is not the equivalent of a "no" vote on a proposition.
Under Kentucky law, there are no appraisal or similar rights of dissenters
with respect to any matter to be acted upon at the Shareholders' meeting.
Any stockholder may obtain without charge a copy of Delta's Annual Report on
Form 10-K, as filed with the Securities and Exchange Commission for the year
1994, by submitting a request in writing to: John F. Hall, Vice President -
Regulatory Matters and Treasurer, Delta Natural Gas Company, Inc., 3617
Lexington Road, Winchester, KY 40391.
The above Notice and Proxy Statement are sent by order of the Board of
Directors.
Jane W. Hylton
Vice President - Human
Resources and Secretary
October 11, 1994
The Company
Delta Natural Gas Company, Inc. (Delta or 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. 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.
Unless the context requires otherwise, references to Delta include Delta and
its 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 presently is
inactive. Enpro owns and operates existing production properties. Delta and
its subsidiaries are managed by the same officers.
Selected Consolidated Financial Information
For the Years
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 ($) (c) ..... 3,205,000 7,729,000 4,029,000 2,616,000 7,632,800
Other Items ($)
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.
Corporate Mission
Delta will provide safe, reliable, high quality service to all its customers at
competitive prices; strive for the best achievable customer satisfaction;
ensure an optimal work environment for all its employees, including the best
possible compensation and benefits; enhance the quality of its shareholders'
investments by maximizing shareholder income and stock price; and maintain
positive relationships with governmental officials, regulatory agencies and the
general public.
Letter to Shareholders
1994 was a continuation of the strong operating results Delta has had now
for the past three years. Net income increased as compared with 1993 and was
at a record level. Earnings per share declined due to the additional common
shares issued during 1993. Retail sales volumes increased by 8.6% as compared
with 1993. This was due to the colder weather and our continued growth in
customers (2.5% in 1994). Degree days were 105.8% of 30 year averages in 1994
as compared with 99.2% in 1993.
Our service area experienced some very severe weather this past winter,
with temperatures as low as -28 degrees Fahrenheit in January, 1994. We also
had heavy snow as well as ice storms. Through all this adverse weather, our
well trained and equipped employees demonstrated their willingness and ability
to serve our customers well. Industry changes in the past few years resulted
in some anxiety over how the national supply system would perform in severe
winter weather. We are pleased to report that natural gas supplies delivered
on interstate pipelines and from local Kentucky production were adequate to
meet our customer's needs.
Our industry has continued to evolve this past year, with natural gas
prices deregulated at the well head while transportation and distribution are
regulated by either federal or state agencies. Delta plans to respond
effectively to industry changes. We continue to expand our transportation and
distribution system to meet customer needs. Delta transports gas for
industrial customers, marketers and producers. We maintain interconnects with
several intrastate and interstate pipeline systems. Our subsidiaries stimulate
production of Kentucky reserves and maximize the throughput on our system by
buying and selling gas.
We will continue to pursue growth for Delta, including acquisitions of
distribution and transportation systems where appropriate. We will also
investigate other business options, including storage properties, to enhance
our system capabilities.
Thank you for your support.
Sincerely,
H. D. Peet Glenn R. Jennings
Chairman of the Board President and Chief
Executive Officer
August 15, 1994
SUMMARY OF OPERATIONS
Gas Operations and Supply
Delta provides retail gas distribution and transportation service to over
32,000 customers in its service area in 17 predominantly rural counties in
Kentucky. The economy of Delta's service area in southeastern Kentucky is
based principally on coal mining, farming and light industry. The four largest
service areas are Corbin, Nicholasville, Berea and Barbourville, where Delta
serves approximately 5,800, 5,300, 3,400 and 3,100 customers, respectively.
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 generally 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 addressed 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 (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. As a result
of this colder weather, sales volumes increased by 344,000 Mcf, or 8.6%, in
1994. Also, the number of customers served increased by 796, or 2.5%, during
1994. We 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 on-system customers. Delta's off-system
transportation includes deliveries for interconnected interstate pipeline
systems. During 1994 and 1993, 1,997,000 Mcf and 2,668,000 Mcf, respectively,
were transported for 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 its efforts 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.
During 1992, the Federal Energy Regulatory Commission (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 were 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 are 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 its interstate
pipeline suppliers, Tennessee Gas Pipeline Company (Tennessee) and Columbia Gas
Transmission Corporation (Columbia). Delta contracted for transportation and
storage services with these two pipeline suppliers, with gas supplies purchased
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.
Enpro produces oil and gas from leases it owns in southeastern Kentucky.
Natural gas production is purchased by the Company for system supply.
Remaining proved, developed natural gas reserves are estimated at approximately
5.4 million Mcf. During 1994, Delta purchased approximately 242,000 Mcf from
these properties. Oil production has not been significant.
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 and settled 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.
Other issues, including those related to the FERC Order 636 restructuring, are
currently the subject of consideration in this continuing administrative
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.
Financing
The Company's capital expenditures and operating cash requirements are met
through the use of internally generated funds and a short-term line of credit.
The line of credit at June 30, 1994 was $15 million, of which approximately
$2.7 million had been borrowed. These short-term borrowings are periodically
repaid with 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 refinance
certain long-term debt and to repay short-term notes payable.
Present plans are to utilize the short-term line of credit to help meet planned
capital expenditures and operating cash requirements. The amounts and types of
future long-term debt and equity financings will depend upon the Company's
capital needs and market conditions.
During 1994 the requirements of the Employee Stock Purchase Plan were met
through the issuance of 4,400 shares of common stock, resulting in an increase
of $93,225 in Delta's common shareholders' equity and the Dividend Reinvestment
and Stock Purchase Plan (see Note 3 of the Notes to Consolidated Financial
Statements) resulted in the issuance of 15,355 shares of common stock,
providing an increase of $309,137 in Delta's common shareholders' equity.
Common Stock Dividends and Prices
Delta has paid cash dividends on its common stock each year since 1964. While
it is the intention of the Board of Directors to continue to declare dividends
on a quarterly basis, the frequency and amount of future dividends will depend
upon the Company's earnings, financial requirements and other relevant factors.
Delta's common stock is traded in the National Association of Securities
Dealers Automated Quotation (NASDAQ) National Market System. The accompanying
table reflects the high and low sales prices during each quarter as reported by
NASDAQ and the quarterly dividends declared per share.
Range of Stock Prices ($) Dividends
Quarter High Low Per Share
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
Fourth 19 1/2 18 1/2 .275
There were 2,258 record holders of Delta's common stock as of August 1, 1994.
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. 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 $ (3,765,0000) $ 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
Operating Revenues
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 Standards (SFAS) No. 109, "Accounting for Income Taxes", effective
on 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.
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.
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.
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 $ 1,144,394 $ 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.
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.
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.
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
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 which
provides for a dollar-tracker 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 costs 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 Standards (SFAS) No. 109,
"Accounting for Income Taxes", effective on 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 are 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 to the effective 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 (1.3) (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
approximately $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.
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
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 are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements 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.
Arthur Andersen & Co.
Louisville, Kentucky
August 12, 1994
Management Report
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 & Co., 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.
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 ($000)
Residential sales ........ 16,597 14,578 13,945 12,453 12,792
Commercial sales ......... 9,663 8,269 7,651 6,294 6,581
Industrial sales ......... 1,671 1,383 1,188 1,299 1,656
On-system transportation . 2,310 2,451 2,348 2,351 2,039
Off-system transportation. 623 836 1,342 1,377 1,126
Subsidiary sales ......... 3,755 3,532 2,580 2,873 2,708
Other .................... 228 172 147 131 280
Total ................. 34,847 31,221 29,201 26,778 27,182
System Throughput
(Million Cu. Ft.)
Residential sales ........ 2,511 2,341 2,202 2,049 2,195
Commercial sales ......... 1,506 1,368 1,235 1,115 1,214
Industrial sales ......... 316 281 229 248 327
Total retail sales .... 4,333 3,990 3,666 3,412 3,736
On-system transportation.. 2,186 2,248 2,061 1,993 1,518
Off-system transportation. 1,997 2,668 4,580 4,903 4,087
Total ................. 8,516 8,906 10,307 10,308 9,341
Average Annual Consumption Per
End of Period Residential
Customer (Thousand Cu. Ft.). 90 86 83 80 86
Lexington, Kentucky Degree Days
Actual .................... 4,999 4,688 4,370 4,025 4,579
Percent of 30 year average
(4,726) ................. 105.8 99.2 92.5 85.2 96.9
Average Revenue Per Mcf Sold
at Retail ($) ............. 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
Directors and Officers
Board of Directors
Donald R. Crowe (b)(c)
Senior Analyst, Kentucky Department
of Insurance, Lexington, Kentucky
Billy Joe Hall (a)(c)
Investment Broker, LPL Financial
Services, Mount Sterling, Kentucky
Jane W. Hylton
Vice President - Human Resources and
Corporate Secretary
Glenn R. Jennings (d)
President and Chief Executive Officer
Harrison D. Peet (d)
Chairman of the Board; Retired President
and Chief Executive Officer
Virgil E. Scott (b)
Retired Vice President - Administration
Henry C. Thompson (a)
President, Triple Land Co., Inc.;
Retired President, Henry Thompson
Construction Co., Inc.; both of
Nicholasville, Kentucky
Arthur E. Walker, Jr. (a)(c)
President, Walker Construction Company;
Atlas Concrete Products Corporation; both
of Mount Sterling, Kentucky
Robert M. Watt III (b)(d)
Attorney, Stoll, Keenon & Park,
Lexington, Kentucky
_________________
Directors Emeriti
Roger A. Byron
John D. Harrison
(a) Member of Nominating Committee
(b) Member of Compensation Committee
(c) Member of Audit Committee
(d) Member of Executive Committee
Officers
John F. Hall
Vice President - Regulatory Matters and Treasurer
Robert C. Hazelrigg
Vice President - Consumer and Public Affairs
Alan L. Heath
Vice President - Operations and Engineering
Jane W. Hylton
Vice President - Human Resources and Secretary
Glenn R. Jennings
President and Chief Executive Officer
Thomas A. Kohnle
Vice President - Controller
Corporate Information
Shareholders' Inquiries
Communications regarding stock transfer requirements, lost certificates,
changes of address or other items may be directed to the Transfer Agent and
Registrar. Communications regarding dividends, the above items or any other
shareholder inquiries may be directed to Investor Relations, Delta Natural Gas
Company, Inc., 3617 Lexington Road, Winchester, Kentucky 40391.
Independent Public Accountants
Arthur Andersen & Co.
2300 Meidinger Tower
The Louisville Galleria
Louisville, Kentucky 40202
Disbursement Agent, Transfer Agent and Registrar for Common Shares
Liberty National Bank & Trust Co.
P. O. Box 32500
Louisville, Kentucky 40232
Trustee and Interest Paying Agents for Debentures
6 5/8% due 2023; 9% due 2011
Liberty National Bank & Trust Co.
P. O. Box 32500
Louisville, Kentucky 40232
Dividend Reinvestment and Stock Purchase Plan Administrator and Agent
Liberty National Bank & Trust Co.
P. O. Box 32500
Louisville, Kentucky 40232
1994 Annual Report
This annual report and the financial statements contained herein are submitted
to the shareholders of the Company for their general information and not in
connection with any sale or offer to sell, or solicitation of any offer to buy,
any securities.
1994 Annual Meeting
The annual meeting of shareholders of the Company will be held at the General
Office of the Company in Winchester, Kentucky on November 17, 1994, at 10:00
a.m. Proxies for the annual meeting will be requested from shareholders when
notice of meeting, proxy statement and form of proxy are mailed on or about
October 11, 1994.
SEC Form 10-K
A copy of Delta's most recent annual report on SEC Form 10-K is available,
without charge, upon written request to John F. Hall, Vice President -
Regulatory Matters and Treasurer, Delta Natural Gas Company, Inc., 3617
Lexington Road, Winchester, Kentucky 40391.
Dividend Reinvestment and Stock Purchase Plan
This plan provides shareholders of record with a convenient way to acquire
additional shares of the Company's common stock without paying brokerage fees.
Participants may reinvest their dividends and make optional cash payments to
acquire additional shares. Liberty National Bank and Trust Company of
Louisville administers the Plan and is the agent for the participants. For
more information, inquiries may be directed to Investor Relations, Delta
Natural Gas Company, Inc., 3617 Lexington Road, Winchester, Kentucky 40391.
