As filed with the Securities and Exchange Commission on December 1, 1994.
Registration No. 33-
____________________________________________________________________________
____________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________
FORM S-2
Registration Statement
Under
The Securities Act of 1933
__________
DELTA NATURAL GAS COMPANY, INC.
(Exact name of registrant as specified in its charter)
Kentucky 61-0458329
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
3617 Lexington Road, Winchester, Kentucky 40391
(606) 744-6171
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
__________
GLENN R. JENNINGS
President and Chief Executive Officer
Delta Natural Gas Company, Inc.
3617 Lexington Road, Winchester, Kentucky 40391
(606) 744-6171
(Name, address, including zip code, and telephone number,
including area code, of Agent for Service)
__________
Copy to:
RUTHEFORD B CAMPBELL, JR., Esq.
Stoll, Keenon & Park
201 E. Main Street
Lexington, KY 40507
(606) 231-3000
__________
Approximate date of commencement of proposed sale to the public:
As soon as practiciable after the effective date of this Registration
Statement.
__________
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box. _X_
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. _X_
CALCULATION OF REGISTRATION FEE
_____________________________________________________________________________
Proposed Proposed
maximum maximum
Amount offering aggregate Amount of
to be price per offering registration
registered share* price* fee
Title of each class of
securities to be registered
_____________________________________________________________________________
Common Stock, $1 par value..200,000 shares $16.75 $3,350,000 $1,156
_____________________________________________________________________________
*Estimated solely for purposes of determining the registration fee and based,
in accordance with Rule 457(c), on the price of the last sale reported of
Registrant's common stock as of November 28, 1994.
_______________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission, acting
pursuant to said Section 8(a), may determine.
CROSS-REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
Form S-2 Item No. and Caption Caption in Prospectus
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus . . . . . Outside Front Cover Page of
Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus. . . . . Inside Front and Outside Back
Cover Pages of Prospectus;
Available Information;
Incorporation of Certain
Documents by Reference
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges . . . . . . . . . The Company
4. Use of Proceeds. . . . . . . . . . Use of Proceeds
5. Determination of Offering Price. . Not Applicable
6. Dilution. . . . . . . . . . . . . Not Applicable
7. Selling Security Holders . . . . . Not Applicable
8. Plan of Distribution . . . . . . . Description of the Plan
9. Description of Securities
to be Registered . . . . . . . . . Description of Common Stock
10. Interests of Named Experts
and Counsel. . . . . . . . . . . . Experts; Legal Opinion
11. Information with Respect
to the Registrant. . . . . . . . . The Company; Price Range of Common
Stock and Dividends; Informa-
tion Provided with Prospectus
12. Incorporation of Certain
Information by Reference . . . . . Incorporation of Certain
Documents by Reference
13. Disclosure of Commission
Position on the Indemnification
for Securities Act Liabilities . . Not Applicable
PROSPECTUS
DELTA NATURAL GAS COMPANY, INC.
DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN
Common Stock
($1 par value)
_______________
As more fully set forth herein, the Dividend Reinvestment and Stock
Purchase Plan (the "Plan") of Delta Natural Gas Company, Inc. ("Delta" or the
"Company") provides participants with a simple and convenient method of
purchasing shares of the Company's Common Stock $1 par value ("Common Stock")
without payment of any brokerage commission. Any non-shareholder of the
Company who is a resident of the state of Kentucky and who has a Kentuckcy
mailing address ("Non-Shareholder) or any holder of record of the Company's
Common Stock ("Shareholder") may join the Plan.
Shareholders may join the Plan by completing necessary documentation
("Authorization Form"). Non-Shareholders may join the plan by making an
initial investment ("Initial Investment") of at least $100 in the Plan and
completing an Authorization Form.
Participants in the Plan may:
(i) elect to reinvest all cash dividends declared on their Common
Stock,
(ii) elect to reinvest a percentage of each cash dividend declared
on their Common Stock or
(iii) elect to reinvest up to a specified dollar amount of the cash
dividend declared on their Common Stock.
Participants may also make optional cash payments ("Optional
Investments") of not less than $25 per payment nor more than $50,000 per
calendar year.
Participants may withdraw from the Plan at any time.
The price of shares purchased by participants will be the average final
transaction price as reported on the National Association of Securities
Dealers Automated Quotation ("NASDAQ") National Market System for the period
of five consecutive trading days ending on the "Pricing Date". For shares
purchased as Initial Investments or Optional Investments, the monthly Pricing
Date is the day in the month on which dividends are paid, and if no dividends
are paid in the month the Pricing Date is the 15th day of the month. For
reinvested dividends, the Pricing Date is the day dividends are paid.
This prospectus relates to 200,000 authorized and unissued shares of
Common Stock of the Company available for purchase under the Plan. It is
suggested that this Prospectus be retained for future reference.
The Company will deliver with this Prospectus to each person to whom the
Prospectus is given or sent the Company's latest Annual Report to
Shareholders and latest Quarterly Report on Form 10-Q.
_______________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
_______________
The date of this Prospectus is December ___, 1994.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Reports, proxy statements and other
information filed by the Company can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549; and at the Commission's Regional
Offices located at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661; and 75 Park Place, 14th Floor, New York, New
York 10007. Copies of such materials also can be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, upon payment of the prescribed fees.
The Company has filed with the Commission in Washington, D.C., a
registration statement on Form S-2 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
the securities offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits thereto,
as permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the securities offered hereby,
reference is made to the Registration Statement and the exhibits filed
therewith, copies of which may be obtained from the Commission as specified
above. Statements contained in this Prospectus as to the contents of the
Plan or any other document are not necessarily complete, and in each
instance, reference is made to the copy of the Plan or such document filed as
an exhibit to the Registration Statement, each such statement being qualified
in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under
the Exchange Act are hereby incorporated by reference in this Prospectus:
(i) the Company's Annual Report on Form 10-K for the year ended June 30,
1994, (ii) the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994 (iii) the Company's 1994 Annual Report to shareholders,
and (iv) all documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the Common Stock.
Any statement contained in a document incorporated herein by reference
shall be deemed superseded by an inconsistent statement contained herein or
in any other document incorporated herein by reference that bears a later
date, to the extent of such inconsistency.
The Company will provide, without charge, to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of any such person, a copy of any or all documents
incorporated by reference herein (without exhibits other than exhibits
specifically incorporated by reference into such documents). Requests should
be directed to: John F. Hall, Vice President - Regulatory Matters and
Treasurer, Delta Natural Gas Company, Inc., 3617 Lexington Road, Winchester,
Kentucky 40391, telephone number (606) 744-6171.
THE COMPANY
Delta is engaged primarily in the distribution and transmission of
natural gas and serves approximately 32,000 customers in central and
southeastern Kentucky. Additionally, Delta transports gas to interconnected
pipelines and industrial customers. The Company also owns and operates
certain oil and gas production properties.
Delta was incorporated under Kentucky law in 1949. Its principal
executive offices are located at 3617 Lexington Road, Winchester, Kentucky
40391, its telephone number is (606) 744-6171 and its FAX number is (606) 744-
6552.
Unless the context requires otherwise, references to Delta include
Delta's 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 and
undeveloped acreage. Delta and its subsidiaries are managed by the same
officers.
DESCRIPTION OF THE PLAN
The Plan was adopted by the Board of Directors of the Company on
November 17, 1994, as an amendment to and complete restatement of the former
Delta Natural Gas Company, Inc. Dividend Reinvestment and Stock Purchase
Plan. The amended and restated Plan will be effective on January 1, 1995.
An order of the Kentucky Public Service Commission authorizing the issuance
by the Company of up to 200,000 shares of Common Stock pursuant to the Plan
was entered on November 11, 1994.
The Company is offering to Shareholders and Non-Shareholders the
opportunity to purchase shares of its Common Stock pursuant to the Plan. The
Plan is described in the following 28 numbered questions and answers.
Purpose
1. What is the purpose of the Plan?
The purpose of the Plan is to provide Shareholders and Non-Shareholders
with a simple, convenient and economical means of purchasing shares of the
Company's Common Stock and reinvesting cash dividends in additional shares of
Common Stock without any associated brokerage commissions or service charges.
Advantages
2. What are the advantages of participation in the Plan?
Part or all of cash dividends paid on all shares of Common Stock
registered in the participant's name can be automatically reinvested in
shares of Common Stock.
For those residing in Kentucky and having a Kentucky mailing address
that are not already Shareholders of the Company, they may become
participants in the Plan by making an Initial Investment of as little as
$100.
Participants may make Optional Investments as cash payments (including
their Initial Investment) of up to $50,000 per calendar year.
Investors do not pay any brokerage commissions or service charges in
connection with purchases under the Plan.
Funds will be fully invested because the Plan permits fractions of
shares to be credited to participants' accounts.
Regular statements of account will provide to participants a record of
each transaction to simplify their recordkeeping.
Administration
3. Who administers the Plan, and what are the administrator's
responsibilities?
The Plan is administered by the Dividend Reinvestment Plan Committee
(the "Committee"), which is appointed by the Board of Directors of the
Company. The Committee determines the rights of participants in accordance
with the Plan. It may adopt such rules and regulations as it deems
appropriate to promote the objectives of the Plan.
The designated agent under the Plan is Liberty National Bank and Trust
Company of Kentucky, Louisville, Kentucky (the "Agent"). The Agent is
responsible for investing participants' funds and keeping continuous records
of participants' accounts. At least quarterly, the Agent will send
participants statements of accounts that show the shares credited to the
participants' accounts. The Agent also will perform other duties for Plan
participants as needed.
The Agent will act as custodian of shares purchased under the Plan and
will hold certificates representing such shares. This will relieve
shareholders of the responsibility for the safekeeping of multiple
certificates for shares purchased and protect against loss, theft or
destruction of stock certificates. Certificates for any number of whole
shares credited to each account under the Plan will, however, be issued to
participants upon written request to the Agent. Any remaining whole and
fractional shares will continue to be credited to each participant's account.
Certificates for fractional shares will not be issued.
When pursuant to the written request of a participant, certificates
representing shares held by the Plan are issued to the participant, the
participant will become the record holder of such shares, but the subsequent
dividends paid on such issued shares will continue to be subject to the
dividend reinvestment option chosen by the participant.
4. How are administrative costs of the Plan to be paid?
All costs of administration of the Plan are paid by the Company.
Participation
5. Who is eligible to participate in the Plan?
Shareholders or Non-Shareholders may become participants in the Plan.
6. How does one become a participant?
Any Shareholder may join the Plan by completing an Authorization Form
and returning it to the Agent, (Liberty National Bank and Trust Company of
Kentucky, 416 West Jefferson Street, Louisville, Kentucky 40202 Attention:
Corporate Trust Operations). Authorization Forms will be furnished to
Shareholders at any time upon request to the Agent or the Company. If,
however, a Shareholder's shares are held in a registered name other than
their own, such as in the name of a broker, bank nominee or trustee, the
participation in the Plan by such Shareholder ("beneficial owner") requires
that such Shareholder either (i) take steps to become a record owner of the
shares or (ii) join the Plan through an Initial Investment (as described in
the following paragraph).
A Non-Shareholder may join the Plan by making an Initial Investment and
similarly completing and returning an Authorization
Form to the Agent. The minimum Initial Investment is $100, and the maximum
Initial Investment is $50,000.
7. When may one join the Plan?
Any Shareholder may join the Plan at any time, subject to the following.
If the Agent receives the Authorization Form from any Shareholder on or
before the record date for payment of a cash dividend (dividend record dates
normally have been approximately the last day of February, May, August and
November), that dividend will be used by the Agent to buy shares of Common
Stock for that Shareholder's account under the Plan to the extent requested
by the Shareholder. If the Authorization Form is received by the Agent after
any record date, such participation in the Plan will begin with the cash
dividend payment following the next record date.
Non-Shareholders may also join the Plan at any time, subject to the
following. Any Initial Investment received by the Agent five days or more
prior to the next "Pricing Date" shall be invested by the Agent on the next
Pricing Date. Any Initial Investment received by the Agent less than five
days prior to the next Pricing Date shall not be invested by the Agent until
the Pricing Date in the next month. In any month in which the Company pays
dividends, the Pricing Date for that month shall be the day such dividends
are paid. In all other months, the Pricing Date shall be the fifteenth
(15th) day of the month, or if that day is not a business day, the following
business day shall be the Pricing Date.
Purchases
8. What investments are available under the Plan?
For Initial Investments, the Authorization Form authorizes the Agent to
purchase Common Stock for the participant's account in the amount of the
payment received by the Agent for such Initial Investment. The minimum
Initial Investment is $100, and the maximum Initial Investment is $50,000.
The total Initial Investment and Optional Investment that a participant may
make in any calendar year is $50,000.
For dividend reinvestments, the Authorization Form provides for the
purchase of additional shares of the Company's Common Stock through any of
the following options offered under the Plan for dividend reinvestment:
i. Full Dividend Reinvestment - Participants may reinvest all cash
dividends on all shares of Common Stock then or subsequently registered in
the participant's name.
ii. Percentage Dividend Reinvestment - Participants may reinvest in
accordance with the Plan a percentage specified by the participant of all
cash dividends on all shares of the Company's Common Stock then or
subsequently registered in the participant's name. The remainder of all such
cash dividends, after the percentage specified by the participant to be
reinvested is deducted, will be sent directly to the participant; or
iii. Fixed Amount Dividend Reinvestment - Participants may reinvest a precise
dollar amount in each dividend period for any cash dividend on all shares of
the Company's Common Stock then or subsequently registered in the
participant's name. In each dividend period cash dividends on all shares of
the Company's Common Stock which are registered to the participant, up to the
dollar amount specified by the participant for that dividend period, will be
reinvested according to the terms and conditions of this Plan. Any excess of
the cash dividend over the amount which the participant has directed to be
reinvested will be sent directly to the participant. If the cash dividend on
all shares of the Company's Common Stock which are registered to a
participant when a cash dividend is declared is less than the dollar amount
which the participant has directed be reinvested in that dividend period, the
entire cash dividend on all shares of the Company's Common Stock which are
then registered to a participant will be reinvested.
All cash dividends on shares (including fractional shares) credited
to a participant's account under the Plan will automatically be
reinvested in additional shares of Common Stock pursuant to the
investment option selected in the participant's Authorization Form.
Under the terms of the Plan, each participant may make Optional
Investments in the Common Stock of the Company, and the Authorization Form so
provides. Optional Investments must be made in cash and must be at least
$25 per payment. The total Optional Investments and Initial Investments in
any calendar year shall not exceed $50,000. Optional Investment payments
will be invested by the Agent in the Common Stock of the Company at a price
determined as described in Question 10.
9. When will funds be invested under the Plan?
Cash dividends, Initial Investments and Optional Investments are
invested by the Agent on the respective Pricing Dates for such investments.
For cash dividends, the Pricing Date shall be the date the Company
pays its cash dividends, and all cash dividends for which dividend
reinvestment is authorized are automatically reinvested as of that date.
Pricing Dates for Initial Investments and Optional Investments
shall be monthly. In any month in which the Company pays dividends, the
Pricing Date for Initial Investments and Optional Investments for that month
shall be the date the Company pays its dividends. In each other month, the
Pricing Date for Initial Investments and Optional Investments shall be the
fifteenth (15th) day of the month or, if that day is not a business day, the
next business day. Any Initial Investment or Optional Investment received by
the Agent less than five (5) days prior to the Pricing Date shall not be
invested until the Pricing Date of the next month.
NO INTEREST IS PAID ON INITIAL INVESTMENTS OR OPTIONAL INVESTMENTS
RECEIVED AND HELD BY THE AGENT PENDING INVESTMENT.
10. What is the purchase price of the shares?
The price of Common Stock purchased under this Plan will be the
average of the final transaction price of the Company's Common Stock as
reported on the NASDAQ National Market System during the period of the five
(5) trading days most immediately preceding and ending on the Pricing Date
(or the five (5) trading days most immediately preceding the Pricing Date, if
the market is closed on the Pricing Date), except that shares will not be
issued for less than their par value of one dollar ($1.00) per share.
11. How many shares will be purchased for the participant?
Payments made as an Initial Investment or as Optional Investments,
as well as cash dividends on shares of Common Stock registered in a
participant's name, as such participant may direct, and on shares (including
fractional shares) credited to the participant's account under the Plan, will
be used to purchase shares of Common Stock for the participant's account.
The number of shares, including fractional shares, so purchased will depend
on the amounts of Initial Investment, Optional Investments and dividends
available to the Agent for investment on behalf of the participant and will
depend on the price of the shares as described in Question 10. The amount of
Optional Investments made by participants may vary from month to month, and
participants have no obligation to make Optional Investments each month.
12. Can a participant order the purchase of a specific number of shares
when submitting an Optional Investment?
No. All Optional Investments received at least five business days
prior to the Pricing Date are used to purchase full and fractional shares on
the Pricing Date. Because the Optional Investment must be received before
the purchase price is known, the amount of cash necessary to purchase a
specific number of shares cannot be determined.
Reinvestment of Dividends
13. Will cash dividends on shares purchased as Optional Investments, Initial
Investments or dividend reinvestments be sent to the participant?
Shares purchased with Optional Investments, Initial Investments or
dividend reinvestments will be held in the participant's account under the
Plan, unless the participant in writing requests the Agent to issue
certificates for such shares of Common Stock. All cash dividends on such
shares of Common Stock held in a participant's account under the Plan are
reinvested automatically in additional shares of Common Stock pursuant to the
reinvestment option selected by the participant on the Authorization Form.
Source of Shares Purchased
14. What is the source of shares purchased under the Plan?
Shares purchased under the Plan will come from the authorized but
unissued shares of Common Stock of the Company.
Reports
15. What reports will be sent to participants?
All participants will receive a statement of their account as soon
as practicable after each calendar quarter. These statements are the
participants' continuing record of the cost of the participants' purchases
and should be retained for income tax purposes. Participants will continue to
receive the same communications as every other shareholder, including the
Quarterly Reports to Shareholders, the Annual Report to Shareholders and the
Notice of Annual Meeting and Proxy Statement.
Changing Participation
16. How can a participant terminate participation or change investment
options in the Plan?
A participant can terminate participation in the Plan at any time
by written notice to:
LIBERTY NATIONAL BANK AND TRUST COMPANY OF KENTUCKY
416 West Jefferson Street
Louisville, Kentucky 40202
Attention: Corporate Trust Operations
Such notice is effective on the date it is received by the Agent,
provided the notice is received by the Agent at least 15 days prior to the
next dividend record date. If notice to terminate is received by the Agent
less than 15 days prior to the next dividend record date, that dividend is
reinvested according to the terms of the Plan, and the termination notice
takes effect immediately after the payment date of that dividend. All
subsequent dividends are paid directly to the shareholder unless the
shareholder re-enrolls in the Plan.
A participant may change investment options by completing a new
Authorization Form and returning it to the Agent.
17. When participants withdraw from the Plan, can the participants
receive cash for all or any portion of the shares credited to their account?
A cash payment will be made to participants only for any fraction
of a share credited to their account. Certificates for whole shares credited
to the participant's account will be sent to the participant, and no cash
payment will be made with respect to such whole shares.
18. When may an investor rejoin the Plan?
Generally, an investor may again become a participant at any time.
However, the Agent reserves the right to reject any Authorization Form from a
previous participant on grounds of excessive joining and termination. Such
reservation is intended to minimize administrative expenses and to encourage
use of the Plan as a long-term shareholder investment service.
Rights Offerings, Stock Dividends and Splits
19. What happens if the Company makes a rights offerings, issues a stock
dividend or declares a stock split?
In the event the Company makes a rights offering of any of its
securities to shareholders of common stock, the Agent will promptly sell on
the open market the rights attributable to all of the shares held in
participants' Plan accounts. The Agent will then credit each participant's
Plan account with his or her proportionate share of the proceeds of that
sale, and those proceeds will be invested as Optional Investments on the next
Pricing Date. All participants will be notified by the Company of any such
rights offering. Therefore, any participant who wishes to exercise his or
her rights will be required to instruct the Agent to withdraw the
participant's Plan shares from the Plan prior to the record date for the
rights distribution.
Any shares distributed by the Company as a stock dividend or a
stock split on shares (including fractional shares) credited to a
participant's account under the Plan, or upon any split of such shares, will
be credited to the participant's account. Stock dividends or splits
distributed on all shares held by a participant and registered in the
participant's name individually will be mailed directly to the participant.
Participants' Sales of Shares
20. What happens when participants sell or transfer all of the shares
registered in their names other than shares credited to their accounts under
the Plan?
If participants dispose of all the shares registered in their
names, exclusive of shares credited to their accounts under the Plan, the
Agent will continue to reinvest the cash dividends on the shares held in
their accounts under the Plan until otherwise notified in writing.
21. May shares held in a participant's Plan account be transferred
directly to the Plan accounts of others?
Yes. A participant may transfer shares held in their Plan account directly
to an existing or newly established Plan account of any other person. Prior
to such transfer, the Agent will require appropriate documentation for such
transfer and, if applicable, the establishment of the new Plan account for
the transferee.
Taxes
22. What are the Federal income tax consequences of participation in the
Plan?
The Company believes that the Federal income tax consequences of
participating in the Plan will be as follows:
(1) Participants will be treated for Federal income tax purposes as
having received, on the dividend payment date, a dividend in an amount equal
to the fair market value of the shares acquired from the Company with
reinvested dividends. Fair market value for such purpose will be the average
of the high and low sale prices for the Common Stock on the dividend payment
date (the Pricing Date), and not the five-day average used to calculate the
purchase price under the Plan. Participants who purchase shares with Initial
Investments or Optional Investments will be treated as having received a
taxable dividend on the date of purchase equal to the difference between the
fair market value of such shares, determined under the rule set forth in the
preceding sentence, and the amount paid for them.
(2) The fair market value determined as set forth in paragraph (1) will
be the tax basis for determining gain or loss upon any subsequent sale of
shares.
(3) A participant's holding period for shares acquired pursuant to the
Plan will begin on the day following the credit of such shares to such
participant's account.
In the case of participants who elect to have their dividends reinvested
and whose dividends are subject to United States income tax withholding, the
Agent will reinvest an amount equal to the dividends of such participants,
less the amount of tax required to be withheld. The statements confirming
purchases made for such participants will indicate the net dividend payment
reinvested.
23. What information will be provided to participants for income tax
purposes?
As previously indicated under Question 15, each participant will receive
statements as to the transactions in their Plan account. These statements
should be retained for income tax purposes.
24. Should participants consult with their own tax advisors?
Yes. Participants should consult with their own tax advisors for more
information regarding the Federal, state and local tax consequences of
participation in the Plan.
Voting
25. How will a participant's shares held under the Plan be voted at meetings
of shareholders?
All shares owned by a participant may be voted by the participant
in the same manner as shareholders not participating in the Plan.
Other Matters
26. What is the responsibility of the Company under the Plan?
In administering the Plan, the Company is not liable for any act
done in good faith, or for any omission to act in good faith, including,
without limitation, any claim of liability arising out of failure to
terminate a participant's account upon such participant's death prior to the
receipt of notice in writing of such death.
Participants should recognize that the Company cannot assure them
of a profit or protect them against a loss on shares purchased by them under
the Plan.
27. Who interprets and regulates the Plan?
The Dividend Reinvestment Plan Committee, which is appointed by the
Board of Directors of the Company, interprets and regulates the Plan.
28. May the Plan be modified or discontinued?
The Dividend Reinvestment Plan Committee may adopt such rules and
regulations as it deems appropriate to promote the objectives of the Plan.
The Company also has the unqualified right to suspend or terminate the Plan
at any time. Notice of any suspension, amendment or termination of the Plan
will be provided to all participants by the Company 30 days prior to
effectiveness.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
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. There were 2,235 record holders of Delta's common
stock as of October 3, 1994.
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 1995
First 20 17 1/2 .28
Second * 18 15 3/4 .28
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
* through November 28, 1994
INFORMATION PROVIDED WITH PROSPECTUS
The Company will deliver or cause to be delivered with this
Prospectus, to each person to whom the Prospectus is sent or given, the
Company's latest Annual Report to Shareholders and the latest Quarterly
Report on Form 10-Q.
USE OF PROCEEDS
The Company does not know the number of shares that actually will
be sold under the Plan or the prices thereof, but the Company intends to add
the proceeds it receives from sales to its general funds. Such proceeds will
be used for capital expenditures and for other general corporate purposes of
the Company. The Company is unable to estimate the amount of proceeds which
will be devoted to any specific purpose.
DESCRIPTION OF COMMON STOCK
Delta's Articles of Incorporation presently authorize the issuance
of 6,000,000 shares of Common Stock, par value $1 per share of which
1,846,349 were outstanding on November 1, 1994. Common shareholders are
entitled to such dividends as may be declared from time to time by the Board
of Directors.
All voting power resides in the Common Stock except (a) as
otherwise required by law and (b) subject to the power of the Board of
Directors to grant voting rights to any series of Preferred Stock, of which
312,500 shares are authorized but none is issued and outstanding. Cumulative
voting applies to the election of the Board of Directors. The Board of
Directors of the Company is divided into three classes, with the classes
serving staggered terms that normally are three-years and with one class
being elected at each annual meeting of the Company's shareholders. Except
with regard to the right to vote cumulatively for Directors, the holders of
Common Stock are entitled to cast one vote per share on each matter presented
to shareholders for vote.
The Company's Articles of Incorporation require an affirmative
shareholder vote of at least 80% of the outstanding shares entitled to vote
to effect certain mergers, consolidations, sales of assets, liquidations or
issuances of voting stock involving a holder of 10% or more of the Company's
voting stock, unless such transaction is approved by the Board of Directors
before the other party to the transaction becomes a 10% holder. Also, the
Articles of Incorporation provide that the number of Directors as fixed by
the By-laws can only be changed by at least such an 80% affirmative
shareholder vote or an affirmative vote of a majority of the Board of
Directors. Additionally, a Director can be removed without cause only with
an affirmative shareholder vote of 80% of the outstanding shares entitled to
vote.
In the event of liquidation, the owners of the Common Stock are
entitled to share pro-rata in any distribution, after payment of all debts
and obligations of the Company. There are no pre-emptive rights, conversion
rights, redemption provisions or sinking fund provisions applicable to the
Common Stock. The issued and outstanding shares of Common Stock, including
those offered hereby, are and will be fully paid and nonassessable.
The Registrar and Transfer Agent for Delta's Common Stock is
Liberty National Bank and Trust Company of Kentucky, 416 West Jefferson
Street, Louisville, Kentucky 40202.
EXPERTS
The consolidated financial statements and schedules of the Company
incorporated by reference in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants as indicated in their reports with respect thereto, and
are included herein in reliance upon the authority of said firm as experts in
giving said reports. Reference is made to said reports, which include an
explanatory paragraph with respect to the change in the method of accounting
for income taxes in fiscal 1994 as discussed in Note 1 to the consolidated
financial statements.
LEGAL OPINION
The validity of the Common Stock will be passed upon for the
Company by its special counsel, Stoll, Keenon & Park, 201 E. Main Street,
Suite 1000, Lexington, Kentucky 40507. Robert M. Watt III, a partner in
Stoll, Keenon & Park, is a Director of Delta. The partnership of Stoll,
Keenon & Park owns no stock in Delta. Attorneys in the firm of Stoll, Keenon
& Park who have participated in the firm's representation of Delta in
connection with the registration and offering of these securities and members
of such attorneys' immediate families own collectively approximately 4,658
shares of Delta's Common Stock.
No person is authorized to give any information or to make any representation
not contained in this Prospectus, and, if given or made, such information or
representation should not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any of the securities offered hereby in any
jurisdiction in which such offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do so,
or to any person to whom it is unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of the Company since the date hereof.
___________________
TABLE OF CONTENTS
Available Information . . .
Incorporation of Certain
Documents by Reference. .
The Company . . . . . . . .
Description of the Plan . .
Purpose . . . . . . . . .
Advantages. . . . . . . .
Administration. . . . . .
Participation . . . . . .
Purchases . . . . . . . .
Reinvestment of
Dividends . . . . . . .
Sources of Shares
Purchased . . . . . . .
Reports . . . . . . . . .
Changing Participation. .
Rights Offerings and Stock
Dividends and Splits . .
Participants' Sales of
Shares. . . . . . . . .
Taxes . . . . . . . . . .
Voting. . . . . . . . . .
Other Matters . . . . . .
Price Range of Common
Stock and Dividends . . .
Information Provided with
Prospectus. . . . . . . .
Use of Proceeds . . . . . .
Description of Common
Stock . . . . . . . . . .
Experts . . . . . . . . . .
Legal Opinion . . . . . . .
_______________________
DELTA NATURAL GAS COMPANY, INC.
Dividend Reinvestment and
Stock Purchase Plan
____________________
PROSPECTUS
____________________
December, 1994
_________________________________
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses in connection with the
issuance and distribution of the securities being registered. Except for the
registration fee, all the amounts shown are estimates.
Registration Fee . . . . . . . . . . . . . $ 1,156
Blue Sky Fees and Expenses . . . . . . . . 5,000
Accounting Fees. . . . . . . . . . . . . . 3,500
Legal Fees . . . . . . . . . . . . . . . . 10,000
Printing . . . . . . . . . . . . . . . . . 3,000
Miscellaneous Expenses . . . . . . . . . . 1,344
Total . . . . . . . . . . . . . . . . $24,000
Item 15. Indemnification of Directors and Officers.
Kentucky law permits a corporation to provide insurance for
directors and officers against claims arising out of their services in those
capacities and permits a corporation to provide indemnification in certain
instances for claims arising out of actions undertaken by directors and
officers. Under agreements with its Officers, Delta has agreed to indemnify
the Officers against liability for actions taken by them in good faith while
performing services for Delta and has agreed to pay legal expenses arising
from any such proceedings. Delta's By-Laws provide for such indemnification
by Delta for all Directors and Officers. Delta also provides Directors and
Officers with indemnification insurance coverage with limits up to
$10,000,000.
Item 16. Exhibits.
Exhibit
4(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.
4(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(c) Amended and Restated Dividend Reinvestment and Stock
Purchase Agency Agreement.
4(d) Amended and Restated Dividend Reinvestment and Stock
Purchase Plan Authorization Form.
4(e) Amended and Restated Dividend Reinvestment and Stock
Purchase Plan.
5 Opinion of Stoll, Keenon & Park concerning legality.
10(a) Certain of Delta's material natural gas supply con-
tracts 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(f) 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, is incorporated herein by reference
to Exhibit 10(j) to Delta's Form 10-K for
the period ended June 30, 1993.
10(k) Contract between Tennessee Gas Marketing and
Delta for the sale of gas by Tennessee Gas
Marketing to Delta is incorporated herein by
reference to Exhibit 10(c) to Delta's Form
10-Q for the period ended September 30, 1994.
10(l) Contract between Natural Gas Clearinghouse and
Delta for the sale of gas by Natural Gas
Clearinghouse to Delta is incorporated herein
by reference to Exhibit 10(d) to Delta's Form
10-Q for the period ended September 30, 1994.
10(m) 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(n) 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(o) 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.
10(p) Amendment dated September 1, 1994 to employment
agreement between Delta and Glenn R. Jennings is
incorporated herein by reference to Exhibit 10(e)
to Delta's Form 10-Q for the period ended
September 30, 1994.
13(a) 1994 Annual Report to Shareholders.
13(b) Quarterly Report on Form 10-Q for the quarter ended
September 30, 1994.
23(a) Consent of Arthur Andersen LLP.
23(b) Consent of Stoll, Keenon & Park is contained in its
opinion letter filed as Exhibit 5.
24 Power of Attorney is included with the signature
page in Part II of this filing.
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to section 13 or section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) If the registrant is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any financial
statements required by Section 210.3-19 of Regulation S-X at the start of any
delayed offering or throughout a continuous offering. Financial statements
and information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided that the registrant includes in the prospectus, by means
of a post-effective amendment, financial statements required pursuant to
(a)(4) and other information necessary to ensure that all other information
in the prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, with respect to registration
statements on Form F-3, a post effective amendment need not be filed to
include financial statements and information required by Section 210.3-19 of
Regulation S-X if such financial statements and information are contained in
periodic reports filed with or furnished to the Commission by the registrant
pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the Form F-3.
_________________________
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to section 13(a) or section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
_________________________
The undersigned registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Securities
Exchange Act of 1934; and, where interim financial information required to be
presented by Article 3 of Regulation S-X are not set forth in the prospectus,
to deliver or cause to be delivered to each person to whom the prospectus is
sent or given, the latest quarterly report that is specifically incorporated
by reference in the prospectus to provide such interim financial information.
_________________________
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment of the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
__________________________
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained
in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Winchester, State of Kentucky, on
the 17th day of November, 1994.
DELTA NATURAL GAS COMPANY, INC.
By: /s/Glenn R. Jennings________
Glenn R. Jennings, President
and Chief Executive Officer
_________________________
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Glenn R. Jennings, John F. Hall, and
each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, and to make any and all state
securities law or blue sky filings, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/H. D. Peet______________ Chairman of the November 17, 1994
H. D. Peet Board
/s/Glenn R. Jennings_____ President, Chief November 17, 1994
Glenn R. Jennings Executive Officer
and Director
/s/John F. Hall____________ Vice President - November 17, 1994
John F. Hall Regulatory Matters
and Treasurer
(Principal Financial
Officer)
/s/Thomas A. Kohnle________ Vice President - November 17, 1994
Thomas A. Kohnle Controller
(Principal Accounting
Officer)
/s/Donald R. Crowe_________ Director November 17, 1994
Donald R. Crowe
/s/Billy Joe Hall__________ Director November 17, 1994
Billy Joe Hall
/s/Jane W. Hylton__________ Vice President - November 17, 1994
Jane W. Hylton Human Resources,
Secretary and
Director
/s/Virgil E. Scott_________ Director November 17, 1994
Virgil E. Scott
/s/Henry C. Thompson_______ Director November 17, 1994
Henry C. Thompson
/s/Arthur E. Walker, Jr.___ Director November 17, 1994
Arthur E. Walker, Jr.
/s/Robert M. Watt III______ Director November 17, 1994
Robert M. Watt III
EXHIBIT INDEX
EXHIBIT 4.C AMENDED AND RESTATED DIVIDEND REINVESTMENT AND
STOCK PURCHASE AGENCY AGREEMENT
EXHIBIT 4.D AUTHORIZATION FORM
EXHIBIT 4.E AMENDED AND RESTATED DIVIDEND REINVESTMENT AND
STOCK PURCHASE PLAN
EXHIBIT 5 OPINION RE LEGALITY
EXHIBIT 13.A 1994 ANNUAL REPORT TO SHAREHOLDERS
EXHIBIT 13.B FORM 10-Q FOR PERIOD ENDED 9/30/94
EXHIBIT 23.A CONSENT OF ARTHUR ANDERSEN LLP
EXHIBIT 23.B CONSENT OF STOLL, KEENON & PARK IS CONTAINED
IN ITS OPINION LETTER FILED AS EXHIBIT 5.
AMENDED AND RESTATED DIVIDEND REINVESTMENT
AND STOCK PURCHASE AGENCY AGREEMENT
This is an Amended and Restated Dividend Reinvestment and Stock Purchase
Agency Agreement (the "Agreement") dated as of January 1, 1995, between Delta
Natural Gas Company, Inc., a Kentucky corporation, hereinafter referred to as
"Company", and Liberty National Bank and Trust Company of Kentucky, a
national banking association, hereinafter referred to as "Liberty". This
Agreement amends and restates the DIVIDEND REINVESTMENT AND STOCK PURCHASE
AGENCY AGREEMENT of September 28, 1989 between the Company and Liberty.
Recitals
A. Company has an Amended and Restated Dividend Reinvestment and Stock
Purchase Plan in effect for the benefit of its stockholders (hereinafter
referred to as the "Plan", a copy of which is attached hereto as Exhibit A
and incorporated herein by reference), which provides that such stockholders
may utilize the dividends paid on their shares of Company common stock (with
such contributions which they may desire to make to the extent permitted by
the Plan) for the purchase of common stock of the Company and that
stockholders may make additional purchases of stock through the Plan in an
amount up to $50,000.00 per year. The Plan further provides that non-
stockholders who are residents of Kentucky and have a Kentucky mailing
address may also join the Plan.
B. Liberty currently acts as Registrar and Transfer Agent for Company,
and Company desires Liberty to act as Dividend Reinvestment and Stock
Purchase Agent (the "Agent") for the purchase of shares of Company common
stock for the benefit of all participants who shall be from time to time
enrolled in the Plan.
Therefore, in consideration of the mutual covenants, promises and
conditions hereinafter set forth, Company and Liberty agree as follows:
1. Designation of Agency.
Company hereby designates Liberty as its Agent for the purchase of
the common stock of Company pursuant to the terms and conditions of the Plan,
effective as of the date of this Agreement.
2. Responsibilities of Agent.
Liberty agrees to act as Agent and in that capacity, pursuant to
the terms and conditions of the Plan, to (a) purchase authorized but unissued
Company common stock on behalf of participants in the Plan; (b) maintain
records of the Plan participants accounts; and (c) perform other duties for
Plan participants as outlined by the Plan.
3. Responsibilities of Company.
(a) Company agrees to abide by the terms and conditions of the
Plan and to provide Liberty a copy of the resolution of the Board of
Directors of Company authorizing each dividend payment, certified by the
Secretary of the Company. Company further agrees to furnish all information,
authorizations and assistance reasonably necessary for Liberty's compliance
with the terms of this Agreement, and to notify Liberty in writing of any
suspension, termination or modification of the Plan thirty days prior to the
effective date of such action taken.
(b) From time to time as required, Company shall duly authorize
sufficient shares of common stock of Company to permit the purchase by
Liberty, on behalf of the Plan participants, of the shares of unissued
authorized shares of common stock required to be purchased in accordance with
the Plan.
(c) Company shall furnish Liberty a sufficient supply of blank
certificates for Company common stock, and from time to time shall renew such
supply upon request. Such blank certificates shall be signed manually or by
facsimile signatures of officers of the Company authorized to sign
certificates, and if required by law, shall bear the corporate seal or
facsimile thereof.
(d) Company shall furnish Liberty an opinion of counsel for the
Corporation addressed to Liberty as to (i) the validity of the issuance of
all shares currently outstanding and all unissued shares provided to be
issued, and (ii) compliance, in so far as required, with the provisions of
the Securities Act of 1933, as amended, and all other regulatory statutes.
4. Agency Fees.
Liberty shall be entitled to compensation for all services rendered in
performance of its duties, which compensation Company agrees to promptly pay
upon receipt of a statement therefor, in accordance with a Fee Schedule, a
copy of which is attached hereto and incorporated by reference herein as
Exhibit B. The Fee Schedule may be amended by Liberty from time to time upon
giving 30 days prior written notice thereof to Company.
5. Representations and Warranties of Company.
Company represents and warrants to Liberty as follows:
(a) Company is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Kentucky.
(b) Company has complied with all governmental laws, regulations,
orders, decrees and rules in adopting and implementing the Plan.
(c) All action required by Company's organizational documents in
order to enable Liberty to enter into this Agreement and perform its
obligations hereunder have been taken by Company. The individual executing
this Agreement on behalf of Company is President and Chief Executive Officer
of Company and is authorized to execute this Agreement on Company's behalf.
Upon execution and delivery by Glenn R. Jennings, President and Chief
Executive Officer of Company, this Agreement shall constitute a binding
obligation of Company, enforceable against Company in accordance with its
terms.
6. Limitation of Liability.
(a) Liberty may rely conclusively and act without further
investigation upon any list, instruction, certification, authorization, stock
certificate or other instrument or paper believed by it in good faith to be
genuine and to have been signed, countersigned or executed by any duly
authorized person or persons, or upon the instruction of any member or
members of the Dividend Reinvestment Plan Committee of the Company, as
designated from time to time by the Company, or upon advice of the Company's
counsel. Liberty may record any distribution, purchase or transfer of
certificates for shares of Company common stock which is believed by it in
good faith to have been duly authorized, or Liberty may refuse to record any
distribution, purchase or transfer of certificates for shares of Company
common stock, if in good faith Liberty deems such refusal necessary in order
to avoid any liability on the part of either the Company or itself. Company
shall indemnify and hold harmless Liberty from and against any losses, costs
(including attorneys' fees), claims and liability which Liberty may suffer or
incur by reason of its reliance, recordation or refusal of recordation as
permitted in this Paragraph 6(a).
(b) In the event of any disagreement between the parties hereto or
between any such party and any other person or entity claiming by, under or
through the parties hereto resulting in claims and/or demands being made by
the disputing parties, which in the reasonable judgment of Liberty are
conflicting, Liberty shall be entitled reasonably to refuse to comply with
any such claims and/or demands so long as such disagreement shall continue.
Liberty may reasonably refuse to make delivery of any assets in its
possession to any or all of the claimants, and Liberty shall not be or become
liable to any claimant by reason of any reasonable failure or refusal to
comply with such conflicting claims or demands or to delivery of any assets
as demanded. Provided such conduct is reasonable, Liberty may continue to
refuse or take any action, irrespective of the time which elapses during
which such dispute continues, until either the rights of the disputing
claimants have been duly adjudicated and Liberty shall have received a
certified copy of a final judgment of a Court of apparent competent
jurisdiction, or until the claimants shall have reached agreement on their
differences, and shall have furnished to Liberty joint instructions. All
actions taken by Liberty pursuant to any court order shall be conclusively
presumed to be taken in good faith. Liberty shall be held harmless for any
action taken pursuant to a court order, even if such order is appealable or,
without the actual knowledge of Liberty, is or has been reversed, withdrawn
or modified or is not effective for any other reason. In no event shall
Liberty be required to file an interpleader or similar type of action, or to
defend any action or legal proceeding filed against it, but it may do so in
its sole discretion.
(c) In the event that Liberty or Company shall be unable to
perform its obligations under the terms of this Agreement due to any
modification, amendment or change in any statute, law, decree, regulation,
ordinance or governmental order not in existence or effect on the date of the
execution of this Agreement, or any strike, work stoppage, equipment failure,
Act of God or other cause beyond the party's control, the failure of the
non-performing party to fulfill its obligations hereunder shall not
constitute a default by the non-performing party, and there shall be no
claims or rights of action against the non-performing party as a result
thereof.
7. Term.
(a) Unless terminated earlier in accordance with this Section,
this Agreement shall remain in effect for a period of one year from the date
of this Agreement. The term of this Agreement shall be automatically
extended for an additional one-year period at the expiration of each
successive year term unless either party gives written notice to the other at
least 30 days prior to the expiration of the then current one-year term.
(b) Either party may terminate this Agreement at any time without
cause by providing the other party with written notice of its intent to
terminate 30 days prior to such termination.
(c) Immediately upon the occurrence of any of the following
events, either party may terminate this Agreement by written notice to the
other party, and such termination shall be effective upon that party's
receipt of notice:
(i) Material breach by the other party of any of its
obligations set forth in this Agreement; or
(ii) The occurrence of changes in either Kentucky or federal
rules, regulations or laws which have a material adverse impact on the
benefits to either party of this contractual arrangement.
(d) Upon termination of this Agreement by either party, and with
or without cause, Liberty shall deliver to its successor or to Company its
records as such Agent, and said delivery shall not constitute a waiver of any
rights of Liberty in reference to indemnification for acts or with respect to
services performed hereunder or the right of Liberty to fees or out-of-pocket
expenses incurred, including attorneys' fees, prior to termination of this
Agreement, which rights shall survive the termination of this Agreement by
either party.
8. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the benefit
of the parties with respect to the subject matter hereto and their successors
and assigns.
(b) This Agreement sets forth the full and complete understanding
of the parties with respect to the subject matter hereof, and any other
agreement with respect to the subject matter hereof, oral or written, is
superseded by this Agreement. Any modification or waiver of any of the
provisions of this Agreement shall be effective only if made in writing and
executed by the party against whom enforcement is sought.
(c) In the event any term or provision of this Agreement is found
to be unenforceable or void, in whole or in part, as drafted, then the
offending term or provision shall be construed as valid and enforceable to
the maximum extend permitted by law, and the balance of the Agreement shall
remain in full force and effect.
(d) This Agreement is executed and delivered in the Commonwealth
of Kentucky, and it shall be governed by, construed and administered in
accordance with the laws of the Commonwealth of Kentucky.
(e) Any notice required or permitted by this Agreement shall be in
writing and shall be deemed given at the time it is hand-delivered or
deposited in the United States mail, postage prepaid, certified or registered
mail, return receipt requested, addressed to the party to whom it is to be
given as follows:
Company: Delta Natural Gas Company, Inc.
Dividend Reinvestment Plan Committee
3617 Lexington Road
Winchester, KY 40391
Liberty: Liberty National Bank and Trust
Company of Kentucky
416 West Jefferson Street
Louisville, KY 40202
Attention: Corporate Trust Operations
IN WITNESS WHEREOF, the parties have executed two originals of this
agreement as of the date set forth in the preamble, but actually on the dates
set forth below.
DELTA NATURAL GAS COMPANY, INC.
By:____________________________________
Glenn R. Jennings, President and
Chief Executive Officer
Date:__________________________________
LIBERTY NATIONAL BANK AND TRUST
COMPANY OF KENTUCKY
By:____________________________________
Jaci L. Kitch, Vice President and
Division Manager Corporate Trust
Date:__________________________________
EXHIBIT A
AMENDED AND RESTATED DIVIDEND
REINVESTMENT AND STOCK PURCHASE PLAN
Purpose
The Plan offers participants a convenient method of investing all or
part of their dividends in additional shares of the common stock of Delta
Natural Gas Company, Inc., (the "Company") and for making voluntary
additional cash payments ("Optional Investment") of up to $50,000.00 in any
calendar year to purchase additional shares of the Company's common stock,
without payment of service charge or brokerage commission.
Eligibility
Any holder of record of the Company's common stock ("Shareholder") is
eligible to participate in the Plan.
Persons not already shareholders of the Company who are residents of
Kentucky and have a Kentucky mailing address ("Non-Shareholders") may
participate in the Plan by making an initial investment ("Initial
Investment") of at least $100.00.
Beneficial owners of common stock whose shares are acquired or held for
them in registered names other than their own, such as in the names of
brokers, bank nominees or trustees, must take appropriate steps to become a
holder of record to qualify for Plan participation or, alternatively, if a
Non-Shareholder, may join the Plan in their own name by making an Initial
Investment.
Administration
The Plan is administered by the Dividend Reinvestment Plan Committee
(the "Committee") which is appointed by the Board of Directors of the
Company. The Committee determines the rights of participants in accordance
with the Plan. It may adopt such rules and regulations as it deems
appropriate to promote the objectives of the Plan.
ALL REQUESTS FOR INFORMATION REGARDING THE PLAN SHOULD
BE ADDRESSED TO:
DELTA NATURAL GAS COMPANY, INC.
Dividend Reinvestment Plan Committee
3617 Lexington Road
Winchester, KY 40391
The Dividend Reinvestment and Stock Purchase Agent under the Plan is
Liberty National Bank and Trust Company of Kentucky, Louisville, Kentucky
(the "Agent"). The Agent is responsible for investing participants' funds
and keeping continuous records of participants' accounts. The Agent will
send the participants statements of accounts at least quarterly and perform
other duties for Plan participants as needed.
All written notices concerning the Plan should be mailed to the Agent at
the following address:
LIBERTY NATIONAL BANK AND TRUST COMPANY OF KENTUCKY
416 West Jefferson Street
Louisville, KY 40202
Attention: Corporate Trust Operations
Participation
In order to participate, a Shareholder must complete an Authorization
Form, provided by the Company, and deliver it to:
LIBERTY NATIONAL BANK AND TRUST COMPANY OF KENTUCKY
416 West Jefferson Street
Louisville, KY 40202
Attention: Corporate Trust Operations
Any Non-Shareholder may participate in the Plan by similarly completing
and delivering the Authorization Form together with a minimum Initial
Investment of $100.00. The maximum Initial Investment shall be $50,000.00.
Authorization Forms may be obtained from the Company on request.
The Authorization Form provides for the reinvestment of dividends
through the following investment options:
(1) Full Dividend Reinvestment - directs the Company to
reinvest in accordance with the Plan all cash dividends on all
shares of the Company's common stock then or subsequently
registered in the participant's name;
(2) Percentage Dividend Reinvestment - directs the Company to
reinvest in accordance with the Plan a percentage, specified
by the participant, of all cash dividends on all shares of the
Company's common stock then or subsequently registered in the
participant's name. The remainder of all such cash dividends,
after the percentage specified by the participant to be
reinvested is deducted, will be sent directly to the
participant; or
(3) Fixed Amount Dividend Reinvestment - directs the Company
to reinvest a precise dollar amount in each dividend period
for any cash dividend on all shares of the Company's common
stock then or subsequently registered in the participant's
name. In each dividend period cash dividends on all shares of
the Company's common stock which are registered to the
participant, up to the dollar amount specified by the
participant for that dividend period, will be reinvested
according to the terms and conditions of this Plan. Any
excess of the cash dividend over the amount which the
participant has directed to be reinvested will be sent
directly to the participant. If the cash dividend on all
shares of the Company's common stock which are registered to a
participant when a cash dividend is declared is less than the
dollar amount which the participant has directed be reinvested
in that dividend period, the entire cash dividend on all
shares of the Company's common stock which are then registered
to a participant will be reinvested.
A participant in the Plan may change investment options by completing a
new Authorization Form and returning it to the Agent.
At any time a participant may make Optional Investments to their Plan
account in a minimum amount of $25.00 per payment, or in whole dollar
increments up to a maximum of $50,000.00 in any calendar year. In computing
the maximum amount of Optional Investments, the Initial Investment by any
participant shall be considered part of the participant's Optional
Investments for the calendar year in which such Initial Investment is made.
The amount of Optional Investment payments need not be the same, and there is
no obligation to make Optional Investment payments.
Shareholders may join the Plan at any time, subject to the following.
If the Authorization Form is received by the Agent on or before the record
date for the payment of the next dividend (approximately 15 days in advance
of the payment date), that dividend will be invested in additional shares of
common stock for the applicant's Plan account. If the Authorization Form is
received in the period between any dividend record date and payment date,
that dividend will be paid in cash, and the Shareholder's initial dividend
reinvestment will be delayed until the following dividend.
Non-Shareholders may also join the Plan at any time, subject to the
following. Any Initial Investment received by the Agent less than five days
prior to the "Pricing Date" in any month shall not be invested by the Agent
until the Pricing Date in the next month. In any month in which the Company
pays dividends, the Pricing Date for that month shall be the day such
dividends are paid. In all other months, the Pricing Date shall be the
fifteenth (15th) day of the month, or if that day is not a business day, the
following business day shall be the Pricing Date.
Payments of Initial Investments and Optional Investments may be made by
completing an Authorization Form, and forwarding it to the Agent together
with a check or money order made payable to Liberty National Bank and Trust
Company of Kentucky. The entire amount of such payments will be invested by
the Agent in accordance with the Plan in full and fractional shares to four
decimal places. Such shares will be placed in the participant's Plan account
and administered in accordance with the terms and conditions of this Plan.
Any payment received which is less than the required minimum payment
($100.00 in the case of an Initial Investment and $25.00 in the case of an
Optional Investment) or results in a total of Initial Investments and
Optional Investments in excess of $50,000.00 per calendar year will be
promptly returned to the participant.
On written request, a participant may receive the return of any Initial
Investment or Optional Investment cash payment if the request is received by
the Agent no less than forty-eight (48) hours before such payment is to be
invested.
Purchasing Shares
There are no brokerage fees charged on any Initial Investment, dividend
reinvestment or Optional Investment, because shares are purchased from the
Company. All costs of administration of the Plan are paid by the Company.
Shares purchased under the Plan will come from the authorized but
unissued shares of Company common stock. Shares will not be purchased in the
open market.
Cash dividends for which dividend reinvestment is authorized are
automatically invested by the Agent in common stock of the Company on the
dividend payment date. That date is the "Pricing Date" for shares purchased
with reinvestment dividends.
Initial Investment and Optional Investment cash payments are invested
monthly to purchase shares of the Company's common stock. In each month in
which a cash dividend is paid in the Company's common stock, Initial
Investment and Optional Investment cash payments are invested as of the
dividend payment date. In each other month, Initial Investment and Optional
Investment cash payments are invested as of the fifteenth (15th) day of the
month or, if that day is not a business day, on the following business day.
Such date of investment is the "Pricing Date" for shares purchased with
Initial Investment and Optional Investment cash payments. Notwithstanding
the foregoing, any cash payments received in any month by the Agent as
Initial Investments or Optional Investments less than five business days
prior to or after the Pricing Date of that month shall be invested on the
Pricing Date in the next following month.
NO INTEREST IS PAID ON INITIAL INVESTMENT AND OPTIONAL INVESTMENT CASH
PAYMENTS RECEIVED AND HELD PENDING INVESTMENT. ACCORDINGLY, IT IS IN THE
BEST INTEREST OF PARTICIPANTS TO DEFER INITIAL INVESTMENT AND OPTIONAL
INVESTMENT CASH PAYMENTS UNTIL SHORTLY BEFORE THE INVESTMENT DATE.
Notwithstanding this investment schedule, shares purchased under the
Plan may, for administrative purposes, be issued on or as of a date up to one
week after the related Pricing Date.
The price of common stock purchased under this Plan will be the average
of the final transaction price of the Company's common stock as reported on
the National Association of Securities Dealers Automated Quotation System
(NASDAQ) National Market System during the period of five (5) trading days
ending on the Pricing Date (or the five [5] days immediately preceding the
Pricing Date, if the market is closed on the Pricing Date), except that
shares will not be issued for less than their par value of one dollar ($1.00)
per share.
The number of shares of the Company's common stock purchased by
participants depends on the amount of cash dividends and Initial Investment
and Optional Investment cash payments available for investment and the price
of the shares. Each participant's account is credited with that number of
shares, including fractions computed to four decimal places, equal to the
total amount invested by the participant divided by the purchase price.
All shares purchased through the Plan on behalf of a participant,
whether purchased pursuant to Initial Investment, dividend reinvestment or
Optional Investment, will be held by the Agent in a participant's Plan
account until certificates are issued. The number of shares credited to a
participant's account under the Plan is shown on the participant's statement
of account.
Upon written request by a participant, certificates for shares of
Company's common stock purchased under the Plan and held by the Agent in the
participant's account will be issued to the participant. Certificates for
fractional shares will not be issued, however, and any fractional shares held
in Plan accounts will remain in the Plan account unless a participant
requests in writing that he or she receive the cash value of any such
fractional share. The issuance of certificates does not affect the
participant's continuation in the Plan in any way.
Shares credited to the account of a participant under the Plan may not
be assigned or pledged as collateral. A participant who wishes to pledge
these shares must request that certificates for the shares be issued in the
participant's name.
Each account in the Plan will be maintained in the same manner as the
Company's shareholder account at the time the participant entered the Plan.
Consequently, certificates for full shares will be similarly registered when
issued.
Upon written request by a participant to the Company or Agent, all or
any portion of the shares held in the participant's Plan account will be
transferred, as directed, to the Plan account of any other person. Prior to
completing such transfer, the Agent may request reasonable accompanying
documentation necessary to satisfy all state and federal laws and facilitate
the orderly and efficient transfer of such shares.
Upon written request and submission of appropriate documents, including,
where applicable, stock powers, certificates issued with respect to shares
held in the Plan can also be registered in names other than that of the
participant subject to compliance with any applicable laws and the payment by
the participant of any applicable taxes.
Statements
As soon as practicable after each calendar quarter, a statement will be
mailed to the participants advising them of their investment. These
statements are the participants' continuing record of cost information and
should be retained for tax purposes.
The fair market value of such shares may differ from the price at which
the participant purchased the shares pursuant to the Plan.
Each new participant will receive any amendments or supplements to the
Plan, quarterly and annual reports, proxy statements and tax notices covering
both directly held and Plan shares. However, participants will not receive
duplicate mailings where the same materials are furnished as a result of
their direct ownership of shares.
Dividends, Stock Splits and Rights Offerings
The Company pays dividends, as declared, to the record holders of all of
its common stock. Shares purchased under the Plan will participate equally
with other shares of common stock in all cash dividends, stock dividends, and
stock splits declared after the date of purchase.
Cash dividends declared on shares held in Plan accounts are added to all
other cash dividends declared on all common stock registered in a
participant's name and are administered in accordance with the directions
contained in the participant's Authorization Form.
Any stock dividends or splits on shares purchased under the Plan for
which certificates have not been issued to the participant will be credited
to the participant's Plan account and administered in accordance with the
directions contained in the participant's Authorization Form.
Participants receive cash and stock dividends on fractions of shares, as
well as whole shares, purchased under the Plan.
Stock dividends and splits declared on shares held in participants'
names individually will be issued directly to the participants individually
on the payment date.
In the event the Company makes a rights offering of any of its
securities to shareholders of common stock, the Agent will promptly sell on
the open market the rights attributable to all of the shares held in
participants' Plan accounts. The Agent will then credit each participant's
Plan account with his or her proportionate share of the proceeds of that
sale, and those proceeds will be invested as Optional Investments on the next
Pricing Date. All participants will be notified by the Company of any such
rights offering. Therefore, any participant who wishes to exercise his or
her rights will be required to instruct the Agent to withdraw that
participant's Plan shares from the Plan prior to the record date for the
rights distribution.
Voting
All shares owned by a participant may be voted by the participant in the
same manner as shareholders not participating in the Plan.
Termination of the Plan or Participation in the Plan
A participant can terminate participation in the Plan at any time by
written notice to:
LIBERTY NATIONAL BANK AND TRUST COMPANY OF KENTUCKY
416 West Jefferson Street
Louisville, KY 40202
Attention: Corporate Trust Operations
Such notice is effective on the date it is received by the Agent. Such
notice, however, must be received by the Agent at least 15 days prior to a
dividend record date in order to make the termination effective on that
dividend record date. If notice to terminate is received by the Agent less
than 15 days prior to a dividend record date, that dividend is reinvested
according to the terms of the Plan and the termination notice takes effect
immediately after the payment date of that dividend. All subsequent
dividends are paid directly to the shareholder unless the shareholder re-
enrolls in the Plan.
Upon such termination, the participant will receive (a) cash equal to
the value of any fractional share held in the participant's Plan account; and
(b) a certificate for all full shares held in the participant's account.
When participants own no common stock of the Company other than
fractional shares in their Plan accounts, the Company is authorized to
terminate such participation in the Plan and send cash equal to the value of
fractional shares, as outlined above.
Generally, one may again become a participant in the Plan at any time.
However, the Company reserves the right to reject any Authorization Form from
a previous participant on the grounds of excessive joining and termination.
Such reservation is intended to minimize unnecessary administrative expenses
and to encourage use of the Plan as a long-term shareholder investment
service.
The Company in its absolute discretion may terminate the Plan at any
time upon 30 days notice to participants. Upon such termination,
participants will receive a certificate for all full shares held in their
Plan account and cash equal to the value of any fractional shares held in
their Plan account.
Tax Consequences and SEC Reporting
Neither the Company nor the Agent shall be responsible for the listing
of any securities purchased under this Plan or in their possession for the
purposes of ad valorem taxes or for compliance with the rules or regulations
of the Securities and Exchange Commission (the "SEC"). The preparation and
payment of all taxes and all SEC reporting requirements remain the sole
responsibility of the participant.
Since each participant's tax consequences may be different, the
participant is advised to consult with the participant's own tax advisors.
Other Information
The Company reserves the right to make modifications to the Plan. Any
modification will be announced to participating shareholders at least thirty
(30) days prior to its effective date.
The participant bears the risk of loss and the benefits of gain from
market price changes with respect to all shares. The Company cannot
guarantee that shares purchased under the Plan will, at any particular time,
be worth more or less than their purchase price.
In performing its duties under the Plan, the Company is not liable for
any act done in good faith, or for any good faith omission to act, including,
without limitation, any claim of liability arising out of failure to
terminate a participant's account upon the participant's death, the prices or
timing at which shares are purchased under the Plan or fluctuations in market
value of shares.
The Company reserves the right to interpret and regulate the Plan as
deemed desirable or necessary in connection with its operation.
EXHIBIT B
LIBERTY NATIONAL BANK AND TRUST COMPANY
STOCK TRANSFER AND DIVIDEND REINVESTMENT PLAN
SCHEDULE OF FEES
Common Stockholders (Maintenance)
1000 Shareholder Accounts @ $7.00 each
Above 1000 Shareholder Accounts @ $5.00 each
Reinvestment Services (Statements)
@ $5.00 each
Ordered Drip Statements @ Cost
Transfer Activity (Re-Registration
Certificates issued @ $1.00 each
Certificates cancelled/destroyed @ $1.00 each
Out-Of-Pocket Expenses
Dividend Checks Issued
Checks @ $100.00 per 1,000
Stock Certificates Issued @ $1.00 each
Cash-In-Lien @ $.10
Proxies
Proxies @ $1.50 each
Proxy Participant Listing @ $20.00
Customize Programming For Proxy Labels @ $115.00
Delta Natural Gas Company, Inc. Amended and
Restated Dividend Reinvestment and Stock
Purchase Plan ("the Plan") Authorization Form
TO: Liberty National Bank and Trust
Company of Kentucky
416 West Jefferson Street
Louisville, Kentucky 40202
Attention: Corporate Trust Operations
Agent for Delta Natural Gas Company, Inc.
I wish to participate in the Plan and hereby Please sign exactly as your
appoint you to act as my agent for this purpose names(s) appear(s) in the
subject to the Terms and Conditions of the Plan Company's shareholder
as set forth in Delta's current Prospectus, a records if you are a Share-
copy of which I have recived. I authorize you to holder (s), or as you
apply any Initial Investment or Optional Invest- wish your name(s) to
ment accompanying this Form and all future cash appear in the Company's
dividends payable to me and received by you on records, if you are a
shares of Delta's Common Stock registered in Non-Shareholder(s)
my name to the extent indicated on the reverse making an Initial
side of this form, to the purchase of full and Investment.
fractional shares of Delta's Common Stock for
my account.
_____________________________
SHAREHOLDER
_____________________________
(Continued on other side) SHAREHOLDER
THIS IS NOT A PROXY.
____________________________
DATE
I wish to participate in Delta's Dividend Reinvestment and Stock Purchase
Plan. I choose the following investment option:
AUTOMATIC DIVIDEND REINVESTMENT
Check only one box:
__ Full Dividend Reinvestment: to reinvest all cash dividends on all
shares of the Company's Common Stock now or subsequently registered in my
name;
__ Percent Dividend Reinvestment: to reinvest _____% of all cash dividends
on all shares of the Company's Common Stock now or subsequently registered
in my name. The remainder of all such cash dividends will be sent directly to
me;
__ Fixed Amount Dividend Reinvestment: to reinvest $________ in each
period of any cash dividends on all shares of the Company's Common Stock now
or subsequently registered in my name. Any excess of the cash dividend
over the dollar amount specified will be sent directly to me. If the cash
dividend is less than the dollar amount I have indicated then the entire cash
dividend will be invested.
OPTIONAL INVESTMENT
I wish to make an optional cash payment of $________ (at least $25 but not
more than $50,000 per year). My check made payable to Liberty National Bank
and Trust Company of Kentucky is enclosed.
INITIAL INVESTMENT
A Non-Shareholder may join the Plan by making an Initial Investment. The
minimum Initial Investment is $100, and the maximum Initial Investment is
$50,000. I wish to make an Initial Investment of $___________.
TERMINATION
I understand that I may terminate my participation at any time by appropriate
written notice to Liberty National Bank and Trust Company of Kentucky,
Corporate Trust Operations, 416 West Jefferson Street, Louisville, KY 40202.
AMENDED AND RESTATED DIVIDEND
REINVESTMENT AND STOCK PURCHASE PLAN
Purpose
The Plan offers participants a convenient method of investing all or
part of their dividends in additional shares of the common stock of Delta
Natural Gas Company, Inc., (the "Company") and for making voluntary
additional cash payments ("Optional Investment") of up to $50,000.00 in any
calendar year to purchase additional shares of the Company's common stock,
without payment of service charge or brokerage commission.
Eligibility
Any holder of record of the Company's common stock ("Shareholder") is
eligible to participate in the Plan.
Persons not already shareholders of the Company who are residents of
Kentucky and have a Kentucky mailing address ("Non-Shareholders") may
participate in the Plan by making an initial investment ("Initial
Investment") of at least $100.00.
Beneficial owners of common stock whose shares are acquired or held for
them in registered names other than their own, such as in the names of
brokers, bank nominees or trustees, must take appropriate steps to become a
holder of record to qualify for Plan participation or, alternatively, if a
Non-Shareholder, may join the Plan in their own name by making an Initial
Investment.
Administration
The Plan is administered by the Dividend Reinvestment Plan Committee
(the "Committee") which is appointed by the Board of Directors of the
Company. The Committee determines the rights of participants in accordance
with the Plan. It may adopt such rules and regulations as it deems
appropriate to promote the objectives of the Plan.
ALL REQUESTS FOR INFORMATION REGARDING THE PLAN SHOULD
BE ADDRESSED TO:
DELTA NATURAL GAS COMPANY, INC.
Dividend Reinvestment Plan Committee
3617 Lexington Road
Winchester, KY 40391
The Dividend Reinvestment and Stock Purchase Agent under the Plan is
Liberty National Bank and Trust Company of Kentucky, Louisville, Kentucky
(the "Agent"). The Agent is responsible for investing participants' funds
and keeping continuous records of participants' accounts. The Agent will
send the participants statements of accounts at least quarterly and perform
other duties for Plan participants as needed.
All written notices concerning the Plan should be mailed to the Agent at
the following address:
LIBERTY NATIONAL BANK AND TRUST COMPANY OF KENTUCKY
416 West Jefferson Street
Louisville, KY 40202
Attention: Corporate Trust Operations
Participation
In order to participate, a Shareholder must complete an Authorization
Form, provided by the Company, and deliver it to:
LIBERTY NATIONAL BANK AND TRUST COMPANY OF KENTUCKY
416 West Jefferson Street
Louisville, KY 40202
Attention: Corporate Trust Operations
Any Non-Shareholder may participate in the Plan by similarly completing
and delivering the Authorization Form together with a minimum Initial
Investment of $100.00. The maximum Initial Investment shall be $50,000.00.
Authorization Forms may be obtained from the Company on request.
The Authorization Form provides for the reinvestment of dividends
through the following investment options:
(1) Full Dividend Reinvestment - directs the Company to
reinvest in accordance with the Plan all cash dividends on all
shares of the Company's common stock then or subsequently
registered in the participant's name;
(2) Percentage Dividend Reinvestment - directs the Company to
reinvest in accordance with the Plan a percentage, specified
by the participant, of all cash dividends on all shares of the
Company's common stock then or subsequently registered in the
participant's name. The remainder of all such cash dividends,
after the percentage specified by the participant to be
reinvested is deducted, will be sent directly to the
participant; or
(3) Fixed Amount Dividend Reinvestment - directs the Company
to reinvest a precise dollar amount in each dividend period
for any cash dividend on all shares of the Company's common
stock then or subsequently registered in the participant's
name. In each dividend period cash dividends on all shares of
the Company's common stock which are registered to the
participant, up to the dollar amount specified by the
participant for that dividend period, will be reinvested
according to the terms and conditions of this Plan. Any
excess of the cash dividend over the amount which the
participant has directed to be reinvested will be sent
directly to the participant. If the cash dividend on all
shares of the Company's common stock which are registered to a
participant when a cash dividend is declared is less than the
dollar amount which the participant has directed be reinvested
in that dividend period, the entire cash dividend on all
shares of the Company's common stock which are then registered
to a participant will be reinvested.
A participant in the Plan may change investment options by completing a
new Authorization Form and returning it to the Agent.
At any time a participant may make Optional Investments to their Plan
account in a minimum amount of $25.00 per payment, or in whole dollar
increments up to a maximum of $50,000.00 in any calendar year. In computing
the maximum amount of Optional Investments, the Initial Investment by any
participant shall be considered part of the participant's Optional
Investments for the calendar year in which such Initial Investment is made.
The amount of Optional Investment payments need not be the same, and there is
no obligation to make Optional Investment payments.
Shareholders may join the Plan at any time, subject to the following.
If the Authorization Form is received by the Agent on or before the record
date for the payment of the next dividend (approximately 15 days in advance
of the payment date), that dividend will be invested in additional shares of
common stock for the applicant's Plan account. If the Authorization Form is
received in the period between any dividend record date and payment date,
that dividend will be paid in cash, and the Shareholder's initial dividend
reinvestment will be delayed until the following dividend.
Non-Shareholders may also join the Plan at any time, subject to the
following. Any Initial Investment received by the Agent less than five days
prior to the "Pricing Date" in any month shall not be invested by the Agent
until the Pricing Date in the next month. In any month in which the Company
pays dividends, the Pricing Date for that month shall be the day such
dividends are paid. In all other months, the Pricing Date shall be the
fifteenth (15th) day of the month, or if that day is not a business day, the
following business day shall be the Pricing Date.
Payments of Initial Investments and Optional Investments may be made by
completing an Authorization Form, and forwarding it to the Agent together
with a check or money order made payable to Liberty National Bank and Trust
Company of Kentucky. The entire amount of such payments will be invested by
the Agent in accordance with the Plan in full and fractional shares to four
decimal places. Such shares will be placed in the participant's Plan account
and administered in accordance with the terms and conditions of this Plan.
Any payment received which is less than the required minimum payment
($100.00 in the case of an Initial Investment and $25.00 in the case of an
Optional Investment) or results in a total of Initial Investments and
Optional Investments in excess of $50,000.00 per calendar year will be
promptly returned to the participant.
On written request, a participant may receive the return of any Initial
Investment or Optional Investment cash payment if the request is received by
the Agent no less than forty-eight (48) hours before such payment is to be
invested.
Purchasing Shares
There are no brokerage fees charged on any Initial Investment, dividend
reinvestment or Optional Investment, because shares are purchased from the
Company. All costs of administration of the Plan are paid by the Company.
Shares purchased under the Plan will come from the authorized but
unissued shares of Company common stock. Shares will not be purchased in the
open market.
Cash dividends for which dividend reinvestment is authorized are
automatically invested by the Agent in common stock of the Company on the
dividend payment date. That date is the "Pricing Date" for shares purchased
with reinvestment dividends.
Initial Investment and Optional Investment cash payments are invested
monthly to purchase shares of the Company's common stock. In each month in
which a cash dividend is paid in the Company's common stock, Initial
Investment and Optional Investment cash payments are invested as of the
dividend payment date. In each other month, Initial Investment and Optional
Investment cash payments are invested as of the fifteenth (15th) day of the
month or, if that day is not a business day, on the following business day.
Such date of investment is the "Pricing Date" for shares purchased with
Initial Investment and Optional Investment cash payments. Notwithstanding
the foregoing, any cash payments received in any month by the Agent as
Initial Investments or Optional Investments less than five business days
prior to or after the Pricing Date of that month shall be invested on the
Pricing Date in the next following month.
NO INTEREST IS PAID ON INITIAL INVESTMENT AND OPTIONAL INVESTMENT CASH
PAYMENTS RECEIVED AND HELD PENDING INVESTMENT. ACCORDINGLY, IT IS IN THE
BEST INTEREST OF PARTICIPANTS TO DEFER INITIAL INVESTMENT AND OPTIONAL
INVESTMENT CASH PAYMENTS UNTIL SHORTLY BEFORE THE INVESTMENT DATE.
Notwithstanding this investment schedule, shares purchased under the
Plan may, for administrative purposes, be issued on or as of a date up to one
week after the related Pricing Date.
The price of common stock purchased under this Plan will be the average
of the final transaction price of the Company's common stock as reported on
the National Association of Securities Dealers Automated Quotation System
(NASDAQ) National Market System during the period of five (5) trading days
ending on the Pricing Date (or the five [5] days immediately preceding the
Pricing Date, if the market is closed on the Pricing Date), except that
shares will not be issued for less than their par value of one dollar ($1.00)
per share.
The number of shares of the Company's common stock purchased by
participants depends on the amount of cash dividends and Initial Investment
and Optional Investment cash payments available for investment and the price
of the shares. Each participant's account is credited with that number of
shares, including fractions computed to four decimal places, equal to the
total amount invested by the participant divided by the purchase price.
All shares purchased through the Plan on behalf of a participant,
whether purchased pursuant to Initial Investment, dividend reinvestment or
Optional Investment, will be held by the Agent in a participant's Plan
account until certificates are issued. The number of shares credited to a
participant's account under the Plan is shown on the participant's statement
of account.
Upon written request by a participant, certificates for shares of
Company's common stock purchased under the Plan and held by the Agent in the
participant's account will be issued to the participant. Certificates for
fractional shares will not be issued, however, and any fractional shares held
in Plan accounts will remain in the Plan account unless a participant
requests in writing that he or she receive the cash value of any such
fractional share. The issuance of certificates does not affect the
participant's continuation in the Plan in any way.
Shares credited to the account of a participant under the Plan may not
be assigned or pledged as collateral. A participant who wishes to pledge
these shares must request that certificates for the shares be issued in the
participant's name.
Each account in the Plan will be maintained in the same manner as the
Company's shareholder account at the time the participant entered the Plan.
Consequently, certificates for full shares will be similarly registered when
issued.
Upon written request by a participant to the Company or Agent, all or
any portion of the shares held in the participant's Plan account will be
transferred, as directed, to the Plan account of any other person. Prior to
completing such transfer, the Agent may request reasonable accompanying
documentation necessary to satisfy all state and federal laws and facilitate
the orderly and efficient transfer of such shares.
Upon written request and submission of appropriate documents, including,
where applicable, stock powers, certificates issued with respect to shares
held in the Plan can also be registered in names other than that of the
participant subject to compliance with any applicable laws and the payment by
the participant of any applicable taxes.
Statements
As soon as practicable after each calendar quarter, a statement will be
mailed to the participants advising them of their investment. These
statements are the participants' continuing record of cost information and
should be retained for tax purposes.
The fair market value of such shares may differ from the price at which
the participant purchased the shares pursuant to the Plan.
Each new participant will receive any amendments or supplements to the
Plan, quarterly and annual reports, proxy statements and tax notices covering
both directly held and Plan shares. However, participants will not receive
duplicate mailings where the same materials are furnished as a result of
their direct ownership of shares.
Dividends, Stock Splits and Rights Offerings
The Company pays dividends, as declared, to the record holders of all of
its common stock. Shares purchased under the Plan will participate equally
with other shares of common stock in all cash dividends, stock dividends, and
stock splits declared after the date of purchase.
Cash dividends declared on shares held in Plan accounts are added to all
other cash dividends declared on all common stock registered in a
participant's name and are administered in accordance with the directions
contained in the participant's Authorization Form.
Any stock dividends or splits on shares purchased under the Plan for
which certificates have not been issued to the participant will be credited
to the participant's Plan account and administered in accordance with the
directions contained in the participant's Authorization Form.
Participants receive cash and stock dividends on fractions of shares, as
well as whole shares, purchased under the Plan.
Stock dividends and splits declared on shares held in participants'
names individually will be issued directly to the participants individually
on the payment date.
In the event the Company makes a rights offering of any of its
securities to shareholders of common stock, the Agent will promptly sell on
the open market the rights attributable to all of the shares held in
participants' Plan accounts. The Agent will then credit each participant's
Plan account with his or her proportionate share of the proceeds of that
sale, and those proceeds will be invested as Optional Investments on the next
Pricing Date. All participants will be notified by the Company of any such
rights offering. Therefore, any participant who wishes to exercise his or
her rights will be required to instruct the Agent to withdraw that
participant's Plan shares from the Plan prior to the record date for the
rights distribution.
Voting
All shares owned by a participant may be voted by the participant in the
same manner as shareholders not participating in the Plan.
Termination of the Plan or Participation in the Plan
A participant can terminate participation in the Plan at any time by
written notice to:
LIBERTY NATIONAL BANK AND TRUST COMPANY OF KENTUCKY
416 West Jefferson Street
Louisville, KY 40202
Attention: Corporate Trust Operations
Such notice is effective on the date it is received by the Agent. Such
notice, however, must be received by the Agent at least 15 days prior to a
dividend record date in order to make the termination effective on that
dividend record date. If notice to terminate is received by the Agent less
than 15 days prior to a dividend record date, that dividend is reinvested
according to the terms of the Plan and the termination notice takes effect
immediately after the payment date of that dividend. All subsequent
dividends are paid directly to the shareholder unless the shareholder re-
enrolls in the Plan.
Upon such termination, the participant will receive (a) cash equal to
the value of any fractional share held in the participant's Plan account; and
(b) a certificate for all full shares held in the participant's account.
When participants own no common stock of the Company other than
fractional shares in their Plan accounts, the Company is authorized to
terminate such participation in the Plan and send cash equal to the value of
fractional shares, as outlined above.
Generally, one may again become a participant in the Plan at any time.
However, the Company reserves the right to reject any Authorization Form from
a previous participant on the grounds of excessive joining and termination.
Such reservation is intended to minimize unnecessary administrative expenses
and to encourage use of the Plan as a long-term shareholder investment
service.
The Company in its absolute discretion may terminate the Plan at any
time upon 30 days notice to participants. Upon such termination,
participants will receive a certificate for all full shares held in their
Plan account and cash equal to the value of any fractional shares held in
their Plan account.
Tax Consequences and SEC Reporting
Neither the Company nor the Agent shall be responsible for the listing
of any securities purchased under this Plan or in their possession for the
purposes of ad valorem taxes or for compliance with the rules or regulations
of the Securities and Exchange Commission (the "SEC"). The preparation and
payment of all taxes and all SEC reporting requirements remain the sole
responsibility of the participant.
Since each participant's tax consequences may be different, the
participant is advised to consult with the participant's own tax advisors.
Other Information
The Company reserves the right to make modifications to the Plan. Any
modification will be announced to participating shareholders at least thirty
(30) days prior to its effective date.
The participant bears the risk of loss and the benefits of gain from
market price changes with respect to all shares. The Company cannot
guarantee that shares purchased under the Plan will, at any particular time,
be worth more or less than their purchase price.
In performing its duties under the Plan, the Company is not liable for
any act done in good faith, or for any good faith omission to act, including,
without limitation, any claim of liability arising out of failure to
terminate a participant's account upon the participant's death, the prices or
timing at which shares are purchased under the Plan or fluctuations in market
value of shares.
The Company reserves the right to interpret and regulate the Plan as
deemed desirable or necessary in connection with its operation.
November 30, 1994
Securities and Exchange Commission
450 Fifth Street
Washington, DC 20549
RE: Delta National Gas Company, Inc.
Registration Statement
Dear Sir or Madam:
We are acting as counsel to Delta Natural Gas Company, Inc. ("Delta"), a
Kentucky corporation, in connection with the issuance and sale by Delta of
200,000 shares of common stock, $1 par value (the "Common Stock"). A
Registration Statement on Form S-2 with respect to the Common Stock has been
filed by Delta with the Securities and Exchange Commission.
In our capacity as such counsel to Delta, we have familiarized ourselves
with the corporate affairs of the company and are familiar with the actions
taken by Delta in connection with the aforementioned issuance and sale. We
have examined the original and certified copies of all such records of Delta
and all such agreements, certificates of public officials, certificates of
officers or representatives of Delta and others and such other documents as
we deem relevant and necessary as a basis for the opinions hereinafter
expressed. In such examination we have assumed the genuineness of all
signatures on original documents and the conformity to original documents of
all copies submitted to us as conformed or photostatic copies. As to various
questions of fact material to such opinions, we have relied upon statements
or certificates of officials and representatives of Delta and others.
Based on the foregoing, it is our opinion that:
1. Delta is a corporation duly organized and validly
existing under the laws of the state of Kentucky.
2. The Common Stock has been legally authorized by Delta and
will, when sold, be legally issued, fully paid and non-
assessable.
We hereby consent to the filing of this opinion as an Exhibit to the
Registration Statement. We also hereby consent to the use of our name under
"Legal Opinion" in the Prospectus constituting part of the Registration
Statement.
Very truly yours,
STOLL, KEENON & PARK
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, 34,987 39,681 34,087
Net
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.
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-8788
DELTA NATURAL GAS COMPANY, INC.
(Exact Name of Registrant as Specified in its Charter)
Incorporated in the State 61-0458329
of Kentucky (I.R.S. Employer Identification No.)
3617 LEXINGTON ROAD, WINCHESTER, KENTUCKY 40391
(Address of Principal Executive Offices) (Zip Code)
606-744-6171
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months and (2) has been
subject to such filing requirements for the past 90 days.
YES____X_____. NO__________.
Common Shares, Par Value $1.00 Per Share
1,845,692 Shares Outstanding as of September 30, 1994.
PART 1 -FINANCIAL INFORMATION
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME(UNAUDITED)
Three Months Ended Twelve Months Ended
September 30 September 30
<CAPTION>
1994 1993 1994 1993
<S> <C> <C> <C> <C>
OPERATING REVENUES $3,634,262 $3,585,499 $34,895,704 $31,340,531
OPERATING EXPENSES
Purchased gas $1,400,233 $1,322,413 $17,328,376 $14,510,675
Operation and maintenance 1,903,412 1,872,589 8,413,590 7,885,217
Depreciation and depletion 543,974 495,556 2,026,286 1,873,396
Taxes other than income taxes 207,384 205,885 876,976 804,779
Income taxes (375,600) (322,000) 1,456,000 1,509,800
Total operating expenses $3,679,403 $3,574,443 $30,101,228 $26,583,867
OPERATING INCOME (LOSS) $ (45,141) $ 11,056 $ 4,794,476 $ 4,756,664
OTHER INCOME AND DEDUCTIONS, NET 6,559 6,012 35,534 31,374
INCOME (LOSS) BEFORE INTEREST CHARGES $ (38,582) $ 17,068 $ 4,830,010 $ 4,788,038
INTEREST CHARGES 594,476 559,353 2,249,782 2,233,680
NET INCOME (LOSS) $ (633,058) $ 542,285 $ 2,580,228 $ 2,554,358
AVERAGE NUMBER OF COMMON
SHARES OUSTANDING 1,842,535 1,649,926 1,819,949 1,641,445
NET INCOME (LOSS) PER COMMON SHARE $ (.34) $ (.33) $ 1.42 $ 1.56
DIVIDENDS DECLARED PER COMMON SHARE $ .28 $ .275 $ 1.11 $ 1.09
</TABLE>
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND
SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
ASSETS September 30,1994 June 30, 1994 September 30, 1993
<S> <C> <C> <C>
UTILITY PLANT $ 80,006,773 $ 77,882,135 $ 72,965,898
Less-Accumulated provision
for depreciation (23,301,444) (22,862,469) (21,540,004)
Net utility plant $ 56,705,329 $ 55,019,666 $ 51,425,894
CURRENT ASSETS
Cash and cash equivalents $ 237,460 $ 156,547 $ 112,614
Accounts receivable - net 631,008 1,117,962 720,373
Gas in storage 514,827 352,572 2,543,599
Deferred gas cost 1,744,786 1,471,342 246,435
Materials and supplies 477,077 700,761 504,879
Prepayments 243,400 317,343 228,738
Total current assets $ 3,848,558 $ 4,116,527 $ 4,356,638
OTHER ASSETS
Cash surrender value of
officer's life insurance $ 277,603 $ 269,029 $ 252,887
Note receivable from officer 79,000 83,000 92,000
Unamortized debt expense and other 2,422,058 2,444,258 1,316,209
Total other assets 2,778,661 2,796,287 1,661,096
Total assets $ 63,332,548 $ 61,932,480 $ 57,443,628
LIABILITIES AND SHAREHOLDERS' EQUITY
CAPITALIZATION
Common shareholders' equity $ 21,134,936 $ 22,164,791 $ 16,585,911
Long-term debt 24,500,000 24,500,000 19,588,336
Total capitalization $ 45,634,936 $ 46,664,791 $ 36,174,247
CURRENT LIABILITIES
Notes payable $ 6,425,000 $ 2,705,000 $ 8,635,000
Current portion of long-term debt 500,000 500,000 1,259,000
Accounts payable 1,398,809 2,133,840 2,874,161
Accrued taxes (158,314) 436,158 217,677
Refunds due customers 406,882 396,065 36,251
Customers' deposits 346,625 342,979 372,742
Accrued interest on debt 446,364 427,338 462,252
Accrued vacation 449,757 454,362 420,675
Other current and accrued
liabilities 312,849 314,888 313,801
Total current liabilities $ 10,127,972 $ 7,710,630 $ 14,591,559
DEFERRED CREDITS AND OTHER
Deferred income taxes $ 5,116,400 $ 5,116,400 $ 4,123,500
Investment tax credits 921,800 921,800 993,300
Regulatory liability 1,312,500 1,312,500 1,359,100
Advances for construction
and other 218,940 206,359 201,922
Total deferred credits and other $ 7,569,640 $ 7,557,059 $ 6,677,822
Total liabilities $ 63,332,548 $ 61,932,480 $ 57,443,628
</TABLE>
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND
SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Twelve Months
Ended Ended
September 30 September 30
<CAPTION>
1994 1993 1994 1993
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ (633,058) $ (542,285) $ 2,580,228 $ 2,554,358
Adjustments to reconcile net
income to net cash from
operating activities:
Depreciation, depletion
and amortization 566,174 514,396 2,121,049 1,955,796
Deferred income taxes
and investment tax
credits - - 874,800 839,100
Other, net 158,475 28,963 576,221 326,754
Increase(decrease) in other assets 617,752 (931,301) 918,949 (1,979,236)
Increase (decrease) in other
liabilities (1,563,521) 924,792 (2,975,920) 1,085,735
Net cash provided by
operating activities $ (854,178) $ (5,435) $ 4,095,327 $4,782,507
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures $(2,388,112) $(1,880,917) $(7,881,942) $(6,138,815)
Net cash used in
investing activities $(2,388,112) $(1,880,917) $(7,881,942) $(6,138,815)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends on common stock $ (515,933) $ (453,634) $(2,034,666) $(1,789,544)
Issuance of common stock 119,136 80,786 4,003,463 415,955
Issuance of debentures - - 15,000,000 -
Repayment of long-term debt - (8,065) (10,847,336) (590,076)
Increase (decrease) in
short-term debt 3,720,000 2,165,000 (2,210,000) 3,230,000
Net cash provided by
financing activities $ 3,323,203 $ 1,784,087 $ 3,911,461 $ 1,266,335
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 80,913 $ (102,265) $ 124,846 $ (89,973)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 156,547 214,879 112,614 202,587
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 237,460 $ 112,614 $ 237,460 $ 112,614
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 553,250 $ 524,049 $ 2,170,906 $ 2,124,154
Income taxes $ 229,443 $ - $ 944,443 $ 752,851
</TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) 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 and is currently inactive. Enpro, Inc. owns and operates production
properties. All subsidiaries are included in the consolidated financial
statements. Intercompany balances and transactions have been eliminated.
(2) The accompanying information reflects, in the opinion of management, all
normal recurring adjustments necessary to present fairly the results for the
interim periods. Reference should be made to Delta's Form 10-K for the year
ending June 30, 1994 for additional footnote disclosures, including a summary
of significant accounting policies.
(3) On October 18, 1993, Delta completed the issuance and sale of $15,000,000
of 6 5/8% Debentures due October 1, 2023 and 170,000 shares of common stock.
The net proceeds of approximately $17,800,000 were used to repay certain long-
term debt (approximately $11.3 million, including call premium of $475,000) and
to repay a portion of Delta's short-term notes payable.
(4) Reference is made to Part II - Item 1 relative to the status of legal
proceedings.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures for Delta for fiscal 1995 are expected to be
approximately $8.4 million, of which approximately $2.4 million was expended
during the three months ended September 30, 1994. 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 $6.4
million was borrowed at September 30, 1994. These short-term borrowings are
periodically repaid with long-term debt and equity securities as was done on
October 18, 1993, when the net proceeds of approximately $17.8 million from the
sale of $15,000,000 of debentures and 170,000 shares of common stock were used
to repay certain long-term debt and to repay short-term notes payable.
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. As a
result, short-term borrowings increased from approximately $2.7 million at June
30, 1994 to $6.4 million at September 30, 1994.
The primary sources and uses of cash for the three and twelve month
periods ending September 30, 1994 and 1993 are summarized below:
Three Months Ended September 30,
1994 1993
Sources (uses)
Used in operating activities $ (854,178) $ (5,435)
Capital expenditures $ (2,388,112) $ (1,880,917)
Net short-term borrowings $ 3,720,000 $ 2,165,000
Common stock dividends $ (515,933) $ (453,634)
Issuance of common stock $ 119,136 $ 80,786
Repayment of long-term debt $ - $ (8,065)
Twelve Months Ended September 30,
Sources (Uses) 1994 1993
Provided by operating activities $ 4,095,327 $ 4,782,507
Capital expenditures $ (7,881,942) $ (6,138,815)
Net short-term borrowings $ (2,210,000) $ (3,230,000)
Common stock dividends $ (2,034,666) $ (1,789,544)
Issuance of common stock $ 4,003,463 $ 415,955
Issuance of debentures $ 15,000,000 $ -
Repayment of long-term debt $(10,847,336) $ -
RESULTS OF OPERATIONS
Operating Revenues
The increase in operating revenues of approximately $3,555,000 for the
twelve months ended September 30, 1994 was primarily due to increased sales
volumes of 8.4% resulting from cooler weather in 1994 and from a 2.6% increase
in the number of customers served. Billed degree days were 106% of thirty-year
average degree days for the twelve months ended September 30, 1994 as compared
with 98.7% for the similar period of 1993. Also, contributing to this increase
was an increase in the cost of purchased gas for the period which was reflected
in rates billed to customers through Delta's gas cost recovery clause.
Operating Expenses
The increase in purchased gas expense for the twelve months ended
September 30, 1994 of approximately $2,818,000 was primarily due to an increase
in the cost of gas purchased and increased sales volumes of 8.4% as well as a
2.6% increase in the number of customers served.
The increases in depreciation and depletion expense for the three and
twelve months ended September 30, 1994 of approximately $48,000 and $153,000,
respectively, were primarily due to additional depreciable plant.
The increase in taxes other than income taxes for the twelve months ended
September 30, 1994 of approximately $72,000 was primarily due to increased
property taxes resulting from increased plant, and to increased payroll taxes
resulting from increased wages.
Changes in income taxes for the periods 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 Financial Accounting
Standards (FAS) No. 109 effective July 1, 1993, as required. The adoption of
FAS No. 109 did not have a material impact on the results of operations or
financial position of the Company.
FAS No. 106, "Employers' Accounting for Post-Retirement Benefits", and FAS
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.
Net Income (Loss) Per Common Share
The net increase (loss) per common share was impacted by the additional
170,000 shares of common stock issued in October, 1993, as well as the common
shares issued under Delta's dividend reinvestment plan and shares issued to
employees during the 1994 periods. As a result, the average common shares
outstanding increased for the 1994 periods, and per share earnings were
decreased.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The detailed information required by Item 1 has been disclosed in previous
reports filed with the Commission and is unchanged from the information as
presented in Item 3 of Form 10-K for the period ending June 30, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10(a) - Gas purchase contract between Tennessee
Gas Marketing and Delta dated September 1,
1993.
10(b) - Gas purchase contract between Natural Gas
Clearinghouse and Delta dated November 1,
1993.
10(c) - Amendment dated September 1, 1994 to an
employment agreement dated June 1, 1992
between Delta and Glenn R. Jennings, an
officer.
(b) Reports on Form 8-K. No reports on Form 8-K have been filed by the
Registrant during the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements 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.
DELTA NATURAL GAS COMPANY, INC.
(Registrant)
________________________________
DATE: November 7, 1994 Glenn R. Jennings
President & Chief Executive Officer
(Duly Authorized Officer)
________________________________
John F. Hall
Vice President - Regulatory Matters
and Treasurer
(Principal Financial Officer)
EXHIBIT 23(a)
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation by reference in this registration statement of
our reports dated August 12, 1994 included in Delta Natural
Gas Company, Inc.'s Form 10-K for the year ended June 30,
1994 and in Delta Natural Gas Company, Inc.'s 1994 Annual
Report to shareholders and to all references to our Firm
indicated in this registration statement.
Louisville, Kentucky
November 30, 1994 Arthur Andersen LLP
