SCHEDULE 14A INFORMATION
Proxy Statment Pursuant to Section 14(a) of the Securities Exchange Act of
1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Delta Natural Gas Company, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2)
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
DELTA NATURAL GAS COMPANY, INC.
Holders of Common Stock
Appointment of Proxy
For the Annual Meeting of Shareholders
To Be Held November 16, 1995 at 10:00 a.m.
at the Principal Office of the Company at
3617 Lexington Road, Winchester, Kentucky
PROXY:
The undersigned hereby appoints Harrison D. Peet and Glenn R. Jennings, and
either of them with power of substitution, as proxies to vote the shares of
Common Stock of the undersigned in Delta Natural Gas Company, Inc. at the
Annual Meeting of its Shareholders to be held November 16, 1995 and at any
adjournments thereof, upon all matters that may properly come before the
meeting, including the matters identified (and in the manner indicated) on
the reverse side of this proxy and described in the proxy statement furnished
herewith.
(Continued and to be signed and dated on reverse side)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
NOTE: This proxy is solicited on behalf of the Board of Directors, which
recommends votes FOR all items. It will be voted as specified. If not
specified, the shares represented by this proxy will be voted FOR all items.
Please sign and date this proxy on the reverse side, and return it promptly
in the enclosed envelope.
Indicate your vote by an (X) in the appropriate boxes:
ITEM:
1. Election of Directors
Nominees for three year term expiring 1998:
FOR
FOR WITHHELD all Nominees
all all EXCEPT those
NOMINEES NOMINEES listed below
___ ___ ___
Donald R. Crowe
Billy Joe Hall
_______________________________
_______________________________
FOR AGAINST ABSTAIN
___ ___ ____
2. Appointment of Arthur Ander-
sen LLP as auditors for Delta
for 1996.
SIGN EXACTLY AS NAME(S) APPEARS HEREON:
X_________________________________________________________
X______________________________Date ________________, 1995
If joint account, each joint owner must sign. If signing for a corporation
or partnership or as agent, attorney or fiduciary, indicate the capacity in
which you are signing.
Delta Natural Gas Company, Inc.
3617 Lexington Road
Winchester, Kentucky 40391
Notice To Common Shareholders Of Annual Meeting
To Be Held November 16, 1995
Please take notice that the Annual Meeting of Shareholders of Delta Natural
Gas Company, Inc. will be held at the principal office of the Company, 3617
Lexington Road, Winchester, Kentucky, on Thursday, November 16, 1995 at 10:00
a.m. for the purposes of:
1. Electing two Directors for three year terms expiring in 1998;
2. Approving the appointment of Arthur Andersen LLP as auditors of the
Company for 1996 and
3. Acting on such other business as may properly come before the meeting.
Holders of Common Stock of record at the close of business on October 2, 1995
will be entitled to vote at the meeting.
By Order of the Board of Directors
John F. Hall
Vice President - Finance,
Secretary and Treasurer
Winchester, Kentucky
October 10, 1995
To insure proper representation at the meeting at a minimum of expense, it
will be very helpful if you fill out, sign and return the
enclosed proxy promptly.
Proxy Statement
Delta Natural Gas Company, Inc.
3617 Lexington Road
Winchester, Kentucky 40391
Information Concerning Proxy
This solicitation of proxies is made by the Board of Directors of Delta
Natural Gas Company, Inc. (Delta or the Company), and the costs associated
with this solicitation will be borne by Delta. Management intends to use the
mails to solicit all Shareholders and intends first to send this proxy
statement and the accompanying form of proxy to Shareholders on or about
October 10, 1995. Delta will provide copies of this proxy statement, the
accompanying proxy and the Annual Report to brokers, dealers, banks and
voting trustees, and their nominees for mailing to beneficial owners and upon
request therefor will reimburse such record holders for their reasonable
expenses in forwarding solicitation materials. In addition to using the
mails, proxies may be solicited by directors, officers and regular employees
of Delta in person or by telephone, but without extra compensation.
You may revoke your proxy at any time before it is exercised by giving notice
to Mr. John F. Hall, Vice President - Finance, Secretary and Treasurer of
Delta.
Election of Directors
Delta's Board of Directors is classified into three classes, with terms
expiring in either 1995, 1996 or 1997.
The terms of three Directors, Donald R. Crowe, Billy Joe Hall and Robert M.
Watt III are scheduled to end in 1995. Donald R. Crowe and Billy Joe Hall,
who are members of the present Board of Directors, are nominated as Directors
for election at the Annual Meeting of Shareholders. Robert M. Watt has
decided to not seek re-election. Donald R. Crowe and Billy Joe Hall will
hold office until the Annual Meeting in 1998 and until their successors have
been elected and qualified.
If the enclosed proxy is duly executed and received in time for the meeting,
and if no contrary specification is made as provided therein, the shares
represented by this proxy will be voted for Donald R. Crowe and Billy Joe
Hall as Directors of Delta. If one of them should refuse or be unable to
serve, the proxy will be voted for such person as shall be designated by the
Board of Directors to replace them as a Nominee. Management presently has no
knowledge that either of the Nominees will refuse or be unable to serve.
The names of Directors and Nominees and certain information about them are
set forth below:
Additional Business
Name, Age and Position Experience During Period of Service
Held With Delta Last Five Years As Director
Donald R. Crowe (1) -61 Senior Analyst, 1966 to present
Director Department of Insurance,
Commonwealth of Kentucky,
Lexington, Kentucky
Billy Joe Hall(1) - 58 Investment Broker, 1978 to present
Director LPL Financial Services
(general brokerage
services); Mount Sterling,
Kentucky
Jane W. Hylton (3) - 65
Retired Vice President - 1976 to present
Director Human Resources and
Secretary, Delta Natural
Gas Company, Inc., and
Delta's subsidiaries,
Delta Resources,
Inc. (Resources),
Delgasco, Inc. (Delgasco),
Deltran, Inc. (Deltran)
and Enpro, Inc. (Enpro)
Glenn R. Jennings(2)-46 President and Chief Execu- 1984 to present
President and Chief tive Officer and Director,
Executive Officer; Director
Resources, Delgasco, Deltran
and Enpro
Additional Business
Name, Age and Position Experience During Period of Service
Held With Delta Last Five Years As Director
Harrison D. Peet(3)-75 Chairman of the Board, 1950 to present
Chairman of the Board Resources, Delgasco,
Deltran and Enpro;
Retired President and
Chief Executive Officer,
Delta
Virgil E. Scott(2)-74 Retired Vice President 1950 to present
Director Administration, Delta and
Resources; Director,
Resources, Delgasco,
Deltran and Enpro
Henry C. Thompson(3)-73 President, Triple Land 1967 to present
Director Company, Inc. (land
development and real
estate rental); Retired
President, Henry Thompson
Construction Company, Inc.
(land development and
commercial real estate
rental), both of Nicholasville,
Kentucky
Arthur E. Walker, Jr.(2)(4) - 50
Director President, The Walker 1981 to present
Company (general and
highway construction)
Mount Sterling,
Kentucky
Robert M. Watt III (1)(5) -48
Director Attorney, Stoll, Keenon & 1983 to present
Park (law firm), Lexington,
Kentucky
(1) Term expires November 16, 1995.
(2) Term expires on date of Annual Meeting of Shareholders in 1996.
(3) Term expires on date of Annual Meeting of Shareholders in 1997.
(4) On November 8, 1993, Arthur E. Walker, Jr., entered a guilty plea in
Montgomery County, Kentucky, District Court to the charge of making
a political contribution in the name of another, a misdemeanor under
Kentucky Law. The Court fined Mr. Walker $1,000 plus court costs.
(5) This law firm is Delta's primary legal counsel.
Committees and Board Meetings
Delta has an Audit Committee comprised of Messrs. Crowe, Hall and Walker.
The Committee, which met one time during fiscal 1995, is empowered to
recommend independent auditors to the Board, review audit results and
financial statements, review the system of internal control and make reports
and recommendations to the Board.
Delta has a Compensation Committee comprised of Messrs. Crowe, Scott and
Watt. The Committee, which met three times during fiscal 1995, is empowered
to make recommendations to the Board as to the compensation of the Board and
Officers and any other personnel matters.
Delta has a Nominating Committee comprised of Messrs. Hall, Thompson and
Walker. The Committee, which met two times during fiscal 1995, is empowered
to present to the Board names of individuals who would make suitable
Directors and to counsel with appropriate Officers of the Company on matters
relating to the organization of the Board. The Nominating Committee will
consider Nominees recommended by Shareholders, if such nominations are
submitted in writing to the attention of Mr. John F. Hall at Delta's
corporate office in Winchester, Kentucky.
Delta has an Executive committee comprised of Messrs. Jennings, Peet and
Watt. The Committee, which met two times during fiscal 1995, is empowered to
act for and on behalf of the Board of Directors, during the interval between
the meetings of the Board of Directors, in the management and direction of
the business of the Company.
During fiscal 1995, Delta's Board of Directors held four meetings. All
Directors attended 75% or more of the aggregate number of meetings of the
Board of Directors and applicable committee meetings.
Non-Officer Directors other than the Chairman of the Board are provided a
monthly fee of $300. Mr. Peet is provided a monthly fee of $2,500 for his
services as Chairman of the Board. Non-Officer Directors other than Mr. Peet
receive a fee of $500 for attending board or committee meetings. During
fiscal 1995, each Director was provided with additional compensation of 100
shares of Common Stock.
Officers of Delta
Date Began
in this
Name Position(1) Age Position(2)
Johnny L. Caudill(3) Vice President - 46 3/1/95
Administration and
Customer Service
John F. Hall Vice President - 52 3/1/95
Finance, Secretary
and Treasurer
Robert C. Hazelrigg Vice President- 48 5/20/93
Public and Consumer
Affairs
Alan L. Heath Vice President - 48 5/21/84
Operations and
Engineering
Glenn R. Jennings President and Chief 46 11/17/88
Executive Officer
(1) Each Officer is normally elected to serve a one year term. Each
Officer's current term is scheduled to end on November 16, 1995, the date
of the Board of Directors' meeting following the Annual Shareholders'
Meeting.
(2) All current Officers except Mr. Caudill have functioned as Officers of
Delta for at least five years.
(3) Mr. Caudill was elected an Officer on March 1, 1995. Prior to that, Mr.
Caudill held the position of Manager - Customer Service for 2 years and
Manager - Distribution for 3 years. Mr. Caudill has been employed by
Delta since 1972.
Board Compensation Committee Report on
Executive Compensation
The Compensation Committee of the Board of Directors (Committee) is composed
of three independent, non-employee directors. The Committee is responsible
for developing and making recommendations to the Board with respect to
Delta's executive compensation. All decisions by the Committee relating to
the compensation of Delta's executive officers, including the Chief Executive
Officer, are reviewed and given final approval by the full Board of
Directors. During 1995, no decisions of the Committee were modified in any
material way or rejected by the full Board.
The goal of the Committee in establishing the compensation for the Company's
executive officers is to provide fair and appropriate levels of compensation
that will insure the Company's ability to attract and retain a competent and
energetic management team.
Salaries for Delta's officers, including all executive officers and the Chief
Executive Officer, are determined in a manner similar to that for all
employees, using a pay grade system established with the assistance of a
consulting firm. Salary grades were developed for all positions in the
Company through the use of external comparisons with other companies, and are
periodically adjusted for inflation. The salary grades have a minimum and
maximum compensation level for each grade. Salary increases for executive
officers are established by the Compensation Committee, considering factors
which include the overall raises budgeted for the Company, individual
performance of the executive officers and their position in their individual
pay grades. There is no specific, quantified relationship between corporate
performance and individual compensation.
There is no formal bonus plan for executive officers or the Chief Executive
Officer. Bonuses have been paid in the past from time to time, at the
discretion of the Company, based on the Company's overall performance and the
contributions and performances of the individual officers and other
employees. There has been no specific, quantified relationship between
corporate performance and individual bonuses.
A summary of the compensation awarded to Glenn R. Jennings, President and
Chief Executive Officer of the Company, is set forth in the "Summary
Compensation Table". The compensation paid to Mr. Jennings for fiscal 1995
reflects an increase in base salary which is described above, an increase in
other compensation in the form of additional loan forgiveness described in
"Certain Relationships and Related Transactions" and the compensatory portion
of a heating and cooling system installed for Mr. Jennings. No bonus was
paid for fiscal 1995, and the other components of Mr. Jennings' 1995 salary
package are generally consistent with prior years.
The Committee believes Mr. Jennings has positioned the Company well to
address a changing business climate, to provide for total shareholder return
and to continue the Company's growth.
Donald R. Crowe
Virgil E. Scott
Robert M. Watt III
Compensation Committee Interlocks and Insider Participation
The Compensation Committee during fiscal year 1995 consisted of Donald R.
Crowe, Virgil E. Scott and Robert M. Watt III.
Virgil E. Scott is a Director of Delta and serves on the Compensation
Committee. Mr. Scott retired in 1986 as the Vice President - Administration
of Delta.
Robert M. Watt III, a partner in the law firm of Stoll, Keenon & Park in
Lexington, Kentucky, is a Director of Delta and serves on the Compensation
Committee. Stoll, Keenon & Park represents Delta as general counsel in
various legal and regulatory matters. During fiscal 1995, Delta paid Stoll,
Keenon & Park $97,105 for legal services, and it is anticipated that this
firm will continue to perform legal services for the Company during fiscal
1996. In the opinion of Management, transactions with Stoll, Keenon & Park
were on terms as fair as might be expected in transactions with unaffiliated
parties. Mr. Watt's term on Delta's Board expires in November, 1995, and Mr.
Watt has decided not to stand for re-election.
Summary Compensation Table
The following table sets forth information concerning the compensation of the
Company's Chief Executive Officer for the last three fiscal years. No other
executive officer of the Company earned compensation in excess of $100,000
for the periods.
Annual
Name and Compensation All Other
Principal Position Year Salary Bonus Compensation(1)
Glenn R. Jennings 1995 $136,000 $ -- $24,500
President and Chief 1994 $130,000 $34,101 $12,000
Executive Officer 1993 $124,000 $23,118 $12,000
(1) During each of the preceding three fiscal years, Delta forgave a portion
of the principal amount of a loan made by Delta to Mr. Jennings (see "Certain
Relationships and Related Transactions" for a discussion of this loan).
Comparison of Five Year Cumulative Total Return
Among the Company, S & P 500, and
Natural Gas Distribution Industry Index
The following graph sets forth a comparison of five year cumulative total
return among the common shares of the Company, the S & P 500 Index and the
Edward D. Jones & Co. Natural Gas Distribution Industry Index ("Industry
Index") for the fiscal years indicated. Information reflected on the graph
assumes an investment of $100 on June 30, 1990 in each of the common shares
of the Company, the S & P 500 Index and the Industry Index. Cumulative total
return assumes reinvestment of dividends. The Industry Index consists of
thirty natural gas distribution companies chosen by Edward D. Jones & Co.
The Company is among the thirty companies included in the Industry Index.
1990 1991 1992 1993 1994 1995
Delta 100 116.9 148.5 195.9 220.3 197.3
S & P 500 Index 100 107.4 121.8 138.4 140.3 176.8
Industry Index 100 112.6 136.5 182.9 174.3 180.6
Estimated Annual Benefits Upon Retirement
Delta has a trusteed, non-contributory, defined benefit retirement plan. The
following table illustrates the approximate pension benefits payable under
the terms of the plan to employees retiring at the normal retirement age of
65 assuming five years' average annual compensation and years of service as
indicated:
Average Annual Estimated Annual Benefits For
Compensation Years of Service Indicated
(Five Year
Average) 15 20 25 30 35
$100,000 $ 24,000 $ 32,000 $ 40,000 $ 48,000 $ 56,000
125,000 30,000 40,000 50,000 60,000 70,000
150,000 36,000 48,000 60,000 72,000 84,000
175,000 42,000 46,000 70,000 84,000 98,000
200,000 48,000 64,000 80,000 96,000 112,000
The plan is available to all employees as they become eligible. The basic
retirement benefit is payable for 120 months certain and life thereafter,
based upon a formula of 1.6% of the highest five years average monthly salary
for each year of service. The compensation used to determine the average
monthly salary under the plan includes only base salary of employees (see
"Salary" in the Summary Compensation Table). An employee may also elect from
various joint, survivor, lump sum and annuitant provisions that would change
the above amounts. Social Security benefits would be in addition to the
amounts received under Delta's pension plan.
Mr. Jennings has sixteen years of credited service in the plan.
Employment Contract and Termination of
Employment and Change in Control Agreement
Delta entered into an agreement with Mr. Jennings on May 31, 1995. The
agreement provides for Mr. Jennings' employment in his present capacity
through November 30, 2000, and such agreement continues on a year-to-year
basis thereafter. This agreement provides for the termination of Mr.
Jennings' employment in the event of his death or incapacity or for cause.
In addition, Mr. Jennings may terminate his employment following a change in
control if he determines in good faith that, due to the change in control,
his continued employment is not in Delta's best interests or he is unable to
carry out his duties effectively. A change in control is defined as a change
in control that would be required to be reported under Regulation 14A of the
Securities and Exchange Act of 1934 or an acquisition by any person or entity
of twenty percent or more of Delta's issued and outstanding voting Common
Stock.
Under the agreement, if Delta terminates Mr. Jennings without cause, or if
Mr. Jennings terminates the agreement following a change in control because
he determines in good faith that his continued employment is not in Delta's
best interests or that he is unable to carry out his duties effectively, then
in any such instance Delta is required to continue to pay Mr. Jennings as
severance pay an amount equal to his salary for the number of years remaining
under the agreement, but in no event less than three years. Mr. Jennings'
current yearly salary is $136,000. In addition, in all such cases the
agreement provides for the continuance, at not less than present levels, of
Mr. Jennings' employee benefit plans and practices, including the retirement
plan, 401-K Plan, stock purchase plan, life and accidental death and
dismemberment insurance, company furnished automobile and office, vacation
plan, and medical, dental, health, and long term disability plans, and the
agreement obligates Delta to forgive any unpaid principal outstanding on a
loan made to him (see "Certain Relationships and Related Transactions" for a
description of this loan).
If, as described above, Mr. Jennings elects under the terms of the agreement
to terminate his employment following a change in control, he has, in
addition to the rights described in the immediately preceding paragraph, the
right to a lump sum payment for all such amounts due to him under the
agreement as salary.
Delta also has agreed to indemnify Mr. Jennings for actions taken by him in
good faith while performing services for Delta and has agreed to provide
liability insurance for lawsuits and to pay legal expenses arising from any
such proceedings.
Security Ownership Of Certain
Beneficial Owners and Management (1)
Amount and Nature
Of Beneficial Percent Of
Name Of Owner Ownership(2)(3)(4) Stock
Donald R. Crowe 3,326 *
(925 shares jointly owned)
Billy Joe Hall 3,087 *
Jane W. Hylton 6,225 *
(588 shares jointly owned)
Glenn R. Jennings 4,900 *
Harrison D. Peet (5) 18,356 *
Virgil E. Scott 12,342 *
Henry C. Thompson 4,169 *
Arthur E. Walker, Jr. (6) 18,719 *
(5,954 shares jointly owned)
Robert M. Watt III (7) 2,960 *
(451 shares jointly owned)
All Directors and 74,084 3.9%
Officers as a (7,918 shares jointly owned)
Group (13 persons)
* Less than 1%.
(1) The only class of stock issued and outstanding is Common Stock.
(2) Under the terms of Delta's Employee Stock Purchase Plan, all Officers
and employees (with certain limited exceptions) have the right to contribute
1% of their July 1, 1995 annual salary level on a monthly basis. At the end
of fiscal 1996, Delta will issue its Common Stock, based upon 1996
contributions, using an average of the last sale price of Delta's stock as
quoted in the National Association of Securities Dealers Automated Quotation
National Market System at the close of business for the last five business
days in June, 1996, and will match those share so purchased. If employees
cease to participate in the plan prior to year end, their contribution will
be returned with no matching Company portion. The continuation and terms of
the plan are subject to approval by Delta's Board of Directors on an annual
basis. Accordingly, all the persons listed who are Officers (Directors,
however, have no rights under this plan, unless they are also Officers) have
the right to participate in the Plan in 1996. Stock acquired pursuant to the
Plan during fiscal 1996 will not be issued until July, 1996. Accordingly,
ownership figures in the above table do not include shares to be issued
under the Plan for fiscal 1996.
(3) The persons listed, unless otherwise indicated in this column, are the
sole owners of the reported securities and accordingly exercise both sole
voting and sole investment power over the securities.
(4) The figures, which are as of August 1, 1995, are based on information
supplied to Delta by its Officers and Directors.
(5) The listed shares include 15,000 shares held by Mr. Peet's wife in a
voting trust, which is administered and voted by Mr. Peet.
(6) The listed shares include 3,358 shares held by Mr. Walker as guardian
for his children and 616 shares held by his wife.
(7) The listed shares include 549 shares held by Mr. Watt as guardian for
his children.
Certain Relationships and Related Transactions
Robert M. Watt III, a partner in the law firm of Stoll, Keenon & Park in
Lexington, Kentucky, is a Director of Delta. Stoll, Keenon & Park represents
Delta as general counsel in various legal and regulatory matters. During
fiscal 1995, Delta paid Stoll, Keenon & Park $97,105 for legal services, and
it is anticipated that this firm will continue to perform legal services for
the Company during fiscal 1996. In the opinion of Management, transactions
with Stoll, Keenon & Park were on terms as fair as might be expected in
transactions with unaffiliated parties. Mr. Watt's term on Delta's Board
expires in November, 1995, and Mr. Watt has decided not to stand for re-
election.
Delta has an agreement with Glenn R. Jennings, President and Chief Executive
Officer and a Director of Delta, under the terms of which Mr. Jennings
received a secured loan of $132,000. The agreement provides that interest is
to be paid by Mr. Jennings at the annual rate of 8%, payable monthly, with
Delta forgiving $2,000 of the principal amount for each month of service Mr.
Jennings completes (forgiveness $1,000 each month until September 1, 1994).
The outstanding balance on this loan was $126,000 as of August 31, 1995. The
maximum amount outstanding during fiscal 1995 was $132,000.
Appointment of Auditors
(Delta's Board of Directors recommends voting FOR this Proposal, which is
designated in the Proxy as Item 2.)
Subject to approval of Delta's Common Shareholders, the Board of Directors of
Delta has appointed Arthur Andersen LLP as independent public accountants and
auditors in connection with Delta's accounting matters and to make an annual
audit of the accounts of Delta and its subsidiary companies for the fiscal
year ending June 30, 1996. Arthur Andersen LLP have been auditors for Delta
since 1962 and, both by virtue of their long familiarity with Delta's affairs
and their ability, are considered to be well qualified to perform this
important function. Representatives of Arthur Andersen LLP are expected to
be present at the Annual Meeting of Shareholders, and they will have an
opportunity to make a statement, if they so desire, and will be available to
respond to questions.
Shareholders' Proposals
Proposals of security holders intended to be presented at Delta's 1996 annual
meeting must be received by Delta no later than June 13, 1996, in order to be
included in Delta's proxy statement and form of proxy related to that
meeting.
Financial Statements
Delta's 1995 Annual Report to Shareholders containing financial statements
will precede or accompany the mailing of this proxy to Common Shareholders.
Other Matters
Management is not aware of any other matters to be presented at the meeting
of Shareholders to be held on November 16, 1995. However, if any other
matters come before the meeting, it is intended that the Holders of proxies
solicited hereby will vote such shares thereon in their discretion.
As of the close of business on October 2, 1995, the record date fixed for
determination of voting rights, Delta had outstanding 1,881,752 shares
of Common Stock, each share having one vote. A majority of the shares
entitled to be cast on a matter constitutes a quorum for action on that
matter. Once a share is represented for any purpose at the meeting, it will
be deemed present for quorum purposes for the remainder of the meeting and
any adjournment of the meeting (unless a new record date is set). If a
quorum exists, action on a matter (other than the election of Directors) will
be approved if the votes cast favoring the action exceed the votes cast
opposing the action unless a higher vote is required by law.
Under applicable Kentucky law, each Common Shareholder of Delta is entitled
to vote cumulatively for the election of Directors. This means that each
Common Shareholder has the right to give one Nominee votes equal to the
number of Directors to be elected multiplied by the number of shares of
Common Stock the Shareholder possesses or to distribute such votes among two
or more Nominees as the Shareholder desires. The two nominees for Director
receiving the highest number of votes will be elected.
There are no conditions precedent to the exercise of cumulative voting
rights.
Shares represented by a limited proxy, such as where a broker may not vote on
a particular matter without instructions from the beneficial owner and no
instructions have been received (i.e., "broker non-vote"), will be counted to
determine the presence of a quorum but will not be deemed present for other
purposes and will not be the equivalent of a "no" vote on a proposition.
Shares represented by a proxy with instructions to abstain on a matter will
be counted in determining whether a quorum is in attendance. An abstention
is not the equivalent of a "no" vote on a proposition.
Under Kentucky law, there are no appraisal or similar rights of dissenters
with respect to any matter to be acted upon at the Shareholders' meeting.
Any stockholder may obtain without charge a copy of Delta's Annual Report on
Form 10-K, as filed with the Securities and Exchange Commission for the year
1995, by submitting a request in writing to: John F. Hall, Vice President -
Finance, Secretary and Treasurer, Delta Natural Gas Company, Inc., 3617
Lexington Road, Winchester, KY 40391.
The above Notice and Proxy Statement are sent by order of the Board of
Directors.
John F. Hall
Vice President - Finance,
Secretary and Treasurer
October 10, 1995
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 34,000
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 and storage projects under consideration. Enpro
owns and operates existing production properties. Delta and its subsidiaries
are managed by the same officers.
Letter to Shareholders
This has been a good year for Delta in many respects. We have increased
our customer base by 3.5% and capital expenditures exceeded $8 million, a
large portion of which to provided services to new customers as well as
enhanced our system for the future. We have continued to streamline our
operations and improve efficiency. This helped to control our operations and
maintenance expenses.
Unfortunately, despite all our positive efforts, we experienced a very
mild winter. Degree days were only 89% of normal 30 year averages, as
compared with 106% in 1994. As a result, our sales volumes decreased by over
600,000 Mcf in 1995 as compared with 1994, and net income per common share
decreased from $1.50 in 1994 to $1.04 in 1995.
We are optimistic about Delta's future. Our service area continues to
grow and develop. Opportunities continue for us to convert customers from
other fuel sources. We have an outstanding team of employees that is well
trained and equipped to provide excellent service in our increasingly
changing and competitive industry.
We actively promote natural gas' quality advantages and its availability
as a safe, efficient, convenient fuel for our customers. Natural gas is used
for many needs, including space heating, cooking, clothes drying, air
cooling, water heating and lighting. Customers utilize natural gas for pool
heaters, grills and lighting. New technology such as the York Triathlon
heating and cooling system is making natural gas available for cooling in
summer and heating in winter from one outside unit. Natural gas is used for
commercial and industrial cooling, and is utilized by industry for a variety
of manufacturing heat processes. Also, compressed natural gas is being used
as a vehicle fuel. We presently have a natural gas fill station in Laurel
County and 25 of our company vehicles are already converted to operate on
natural gas. We are considering expansion in this area.
Our plans for the next year and beyond include a continuance of our
efforts to provide for Delta's growth. We plan to purchase and convert to
underground storage certain natural gas production wells and leases in
southeastern Kentucky. We will continue our efforts to extend natural gas
service to new customers and to provide service to those who wish to convert
from other fuels.
Thank you for your continued support of the Company.
Sincerely,
/s/H.D. Peet /s/Glenn R. Jennings
H. D. Peet Glenn R. Jennings
Chairman of the Board President and Chief
Executive Officer
August 14, 1995
<TABLE>
Selected Consolidated Financial Information
<CAPTION>
For the Years
Ended June 30, 1995 1994(a) 1993 1992 1991(b)
<S> <C> <C> <C> <C> <C>
Summary of Operations ($)
Operating
revenues ........ 31,844,339 34,846,941 31,221,410 29,200,834 26,778,255
Operating
income .......... 4,255,088 4,850,673 4,791,816 4,586,323 3,039,045
Net income ...... 1,917,735 2,671,001 2,620,664 2,453,813 1,162,582
Earnings per
common share .... 1.04 1.50 1.60 1.52 0.73
Dividends
declared per
common share .... 1.12 1.105 1.085 1.08 1.08
Average Number of
Common Shares
Outstanding ........ 1,850,986 1,775,068 1,635,945 1,612,437 1,586,235
Total Assets ($).... 65,948,716 61,932,480 55,129,912 50,478,014 47,816,330
Capitalization ($)..
Common share-
holders' equity . 22,511,513 22,164,791 17,501,045 16,227,158 15,147,551
Long-term debt .. 23,702,200 24,500,000 19,596,401 20,187,826 21,473,431
Total
capitalization .. 46,213,713 46,664,791 37,097,446 36,414,984 36,620,982
Short-Term
Debt ($) (c) ....... 6,732,700 3,205,000 7,729,000 4,029,000 2,616,000
Other Items ($)
Capital
expenditures .... 8,122,838 7,374,747 6,289,508 5,074,483 5,213,319
Total plant ..... 84,944,969 77,882,135 71,187,860 66,032,217 61,757,666
(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.
</TABLE>
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 its employees; enhance the quality of
its shareholders' investments; and maintain positive relationships with
governmental officials, regulatory agencies and the general public.
NATURAL GAS HAS MANY USES
Space heating - warm, comfortable, efficient, safe, reliable
Cooking - precise temperature control
Clothes drying - efficient, economical, easy on clothes
Water heating - adequate hot water, quick recovery, low cost
Pool heaters - maintain water temperatures desired
Natural gas logs and fireplaces - warmth, beauty without the mess of
wood fires
Lighting - charming, soft warmth, ambiance
Gas grills - provide controlled heat, without the charcoal mess, with
reliable, available fuel
Process loads - heat uses for large commercial and industrial
businesses, including furnaces and ovens
Cooling - commercial and industrial cooling equipment to meet a variety
of cooling needs.
Vehicle fuel - clean, efficient compressed natural gas fuel for a
variety of vehicles
SUMMARY OF OPERATIONS
Gas Operations and Supply
Delta provides retail gas distribution and transportation service to
approximately 34,000 customers in its service area in 17 predominantly rural
counties in Kentucky. The economy of Delta's service area in central and
southeastern Kentucky is based principally on coal mining, farming and light
industry. The four largest service areas are Corbin, Nicholasville,
Middlesboro and Berea, where Delta serves approximately 6,000, 5,700, 3,700
and 3,500 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 gas cost recovery
clause, may affect Delta's competitive position or may cause customers to
conserve, or in the case of industrial customers, to use alternative energy
sources. Also, the potential bypass of Delta's system by industrial
customers and others is a competitive concern that Delta has and will
continue to address. In recent years, regulatory changes at the federal
level and changes in the participants in the natural gas industry have led to
a national spot market for natural gas. The Company's marketing subsidiaries
purchase gas and resell it to various industrial customers and others in
competition with producers and marketers.
Delta's retail sales are seasonal and temperature-sensitive as the majority
of the gas sold by Delta is used for heating. This seasonality impacts
Delta's liquidity position and its management of its working capital
requirements (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 6% of the total volume of gas sold by Delta at retail
during 1995.
Retail gas sales in 1995 were approximately 3,724,000 thousand cubic feet
(Mcf), as compared to approximately 4,334,000 Mcf in 1994. Heating degree
days for 1995 were approximately 89.6% of the 30 year average as compared
with 106.2% in 1994. As a result of this warmer weather, sales volumes
decreased by 609,000 Mcf, or 14.1%, in 1995. The number of customers served
increased by approximately 1,100, or 3.5%, during 1995 as Delta continued to
extend its system to new customers and to convert customers to natural gas
from other fuels. 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 $3,049,000 of transportation revenues was earned during 1995 as
compared with $2,933,000 during 1994. Total volumes transported were
3,842,000 Mcf in 1995 as compared to 4,183,000 Mcf in 1994. As of June 30,
1995, Delta had 43 on-system transportation customers (customers who purchase
their gas from others) and 5 off-system transportation customers (deliveries
made by Delta to other pipelines).
Transportation revenues include $2,588,000 earned during 1995 and $2,310,000
earned during 1994 for transportation of 2,390,000 Mcf and 2,186,000 Mcf,
respectively, on behalf of on-system customers. Delta's off-system
transportation includes deliveries for interconnected interstate pipeline
systems. During 1995 and 1994, 1,452,000 Mcf and 1,997,000 Mcf,
respectively, were transported for off-system deliveries. The decline in off-
system transportation in 1995 was primarily due to reduced deliveries from
some local production.
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
anticipates an adequate gas supply for service to existing customers and to
provide for growth.
During the past few years, the Federal Energy Regulatory Commission (FERC)
has restructured interstate natural gas pipeline operations, services and
rates as a part of its Order 636 proceedings. This restructuring resulted in
Delta's involvement in proceedings with its interstate pipeline suppliers,
Tennessee Gas Pipeline Company (Tennessee), Columbia Gas Transmission
Corporation (Columbia) and Columbia Gulf Transmission Company (Columbia
Gulf). Delta contracted for transportation and storage services with these
three pipelines, with gas supplies purchased from gas marketers. The FERC
approved Tennessee's new rates and services effective September 1, 1993, and
Columbia's and Columbia Gulf's new rates and services effective November 1,
1993.
Enpro produces oil and gas from leases it owns in southeastern Kentucky.
Enpro natural gas production is purchased by the Company for system supply
and its remaining proved, developed natural gas reserves are estimated at
approximately 4.7 million Mcf. During 1995, Delta purchased approximately
222,000 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 franchises
in four of the ten cities in which it maintains a branch office and in six
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 attempts to
acquire or reacquire franchises whenever the communities desire or require
them.
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 1995 were approximately $8.1 million and
for fiscal 1996 are estimated to be approximately $12.4 million. These
include planned expenditures for development of underground gas storage,
system extensions, computer system upgrades, and the replacement and
improvement of existing transmission, distribution, gathering and general
office 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 available line of credit at June 30, 1995 was $15 million of
which approximately $5.7 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 1995 the requirements of the Employee Stock Purchase Plan were met
through the issuance of 2,492 shares of common stock resulting in an increase
of $48,444 in Delta's common shareholders' equity. The Dividend Reinvestment
and Stock Purchase Plan (see Note 3 of the Notes to Consolidated Financial
Statements) resulted in the issuance of 25,802 shares of common stock,
providing an increase of $434,392 in Delta's common shareholders' equity.
Common Stock Dividends and Prices
Delta has paid cash dividends on its common stock each year since 1964.
While it is the intention of the Board of Directors to continue to declare
dividends on a quarterly basis, the frequency and amount of future dividends
will depend upon the Company's earnings, financial requirements and other
relevant factors.
The Company's common stock trades on the Nasdaq Stock Market under the symbol
DGAS. The accompanying table reflects the high and low sales prices during
each quarter as reported by Nasdaq and the quarterly dividends declared per
share.
Range of Stock Prices ($) Dividends
Quarter High Low Per Share
Fiscal 1995
First 20 17 1/2 .28
Second 18 15 3/4 .28
Third 18 3/4 16 .28
Fourth 18 1/2 16 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
There were 2,091 record holders of Delta's common stock as of August 1, 1995.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources
Capital expenditures for Delta for 1996 are expected to be approximately
$12.4 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
available line of credit is $15 million of which approximately $5.7 million
had been borrowed at June 30, 1995, at an interest rate of 6.9%. The maximum
amount borrowed during 1995 was $8,430,000. Delta had an average interest
rate of 6.5% for 1995. The current line of credit extends until November,
1995. 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.
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.
The primary sources and uses of cash during the last three years are
summarized below:
Sources(Uses) 1995 1994 1993
Provided by operat-
ing activities $ 6,943,183 $ 6,172,019 $ 4,567,023
Capital expenditures $(8,122,838) $ (7,374,747) $(6,289,508)
Dividends on common
stock $(2,073,374) $ (1,972,368) $(1,775,411)
Issuance of common
stock, net $ 502,361 $ 3,965,113 $ 428,634
Issuance of deben-
tures, net $ -- $ 14,246,937 $ --
Repayment of long-
term debt $ (240,100) $(11,330,286) $ (591,425)
Increase (decrease)
in notes payable $ 2,970,000 $ (3,765,000) $ 3,700,000
Results of Operations
Operating Revenues
The decrease in operating revenues for 1995 of approximately $3,003,000 was
due primarily to a decrease in retail sales volumes of approximately 609,000
Mcf as a result of the warmer winter weather in 1995 (89.6% of thirty year
average weather compared to 106.2% for 1994) and an approximate $162,000
(545,000 Mcf) decrease in off-system transportation due to reduced deliveries
from some local production. The decrease was partially offset by an increase
in on-system transportation of $278,000 due to a 204,000 Mcf increase in
volumes transported and by an increase in customers served of approximately
1,100, or 3.5%.
The increase in operating revenues for 1994 of approximately $3,626,000 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 (106.2% of thirty year
average weather compared to 99.6% for 1993), and an increase in customers
served of 796, or 2.5%. The increase in operating revenues was partially
offset by an approximate $213,000 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.
Operating Expenses
The decrease in purchased gas expense of approximately $1,753,000 for 1995
was due primarily to the decreased retail sales volumes.
The increase in purchased gas expense of approximately $3,016,000 for 1994
was due primarily to increases in the cost of gas purchased for retail sales
and to an increase in retail sales volumes.
The decrease in operation and maintenance expenses during 1995 of
approximately $380,000 was due primarily to decreases in payroll and related
benefit costs.
The increases in depreciation expense during 1995 and 1994 of approximately
$206,000 and $145,000, respectively, were due primarily to additional
depreciable plant.
The increase in taxes other than income taxes during 1994 of approximately
$78,000 was primarily due to increased property taxes that resulted from
increased plant, and to increased payroll taxes that resulted from increased
wages and payroll tax rates.
Changes in income taxes during the periods of approximately $467,000 and
$34,000 for 1995 and 1994, 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, 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.
Interest Charges
The increase in other interest charges for 1995 of approximately $176,000 was
due primarily to increased average short-term borrowings and increased
average interest rates for the period.
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Income
For the Years Ended June 30, 1995 1994 1993
Operating Revenues ............ $31,844,339 $34,846,941 $31,221,410
Operating Expenses
Purchased gas .............. 15,497,156 $17,250,556 $14,234,258
Operation and maintenance
(Note 1) ................. 8,002,797 8,382,767 8,020,622
Depreciation and depletion
(Note 1) ................. 2,183,558 1,977,868 1,833,072
Taxes other than income
taxes .................... 863,340 875,477 797,942
Income taxes (Note 1) ...... 1,042,400 1,509,600 1,543,700
Total operating expenses. $27,589,251 $29,996,268 $26,429,594
Operating Income .............. 4,255,088 $ 4,850,673 $ 4,791,816
Other Income and Deductions, Net 50,582 34,987 39,681
Income Before Interest Charges. $ 4,305,670 $ 4,885,660 $ 4,831,497
Interest Charges
Interest on long-term debt.. $ 1,879,442 $ 1,879,526 $ 1,875,901
Other interest ............. 419,693 243,729 258,405
Amortization of debt expense 88,800 91,404 76,527
Total interest charges .. $ 2,387,935 $ 2,214,659 $ 2,210,833
Net Income $ 1,917,735 $ 2,671,001 $ 2,620,664
Weighted Average Number of
Common Shares Outstanding ..... 1,850,986 1,775,068 1,635,945
Earnings Per Common Share ..... $ 1.04 $ 1.50 $ 1.60
Dividends Declared Per Common
Share ......................... $ 1.12 $ 1.105 $ 1.085
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, 1995 1994 1993
Cash Flows From Operating Activities:
Net income ...................... $ 1,917,735 $ 2,671,001 $ 2,620,664
Adjustments to reconcile net
income to net cash from
operating activities:
Depreciation, depletion and
amortization ............... 2,272,358 2,069,013 1,922,102
Deferred income taxes and
investment tax credits ..... (77,000) 874,800 839,100
Other - net .................. 602,180 446,969 493,848
(Increase) decrease in assets:
Accounts receivable .......... (118,237) 802,197 (707,605)
Materials and supplies ....... 173,319 (229,275) 155,358
Prepayments .................. (105,903) 25,701 8,096
Other assets ................. (209,225) (780) (95,564)
Increase (decrease) in
liabilities:
Accounts payable ............. (178,609) 513,265 438,897
Refunds due customers ........ 83,572 358,270 37,226
Accrued taxes ................ (72,210) (34,543) (162,982)
Other current liabilities .... 69,742 38,675 16,435
Advance (deferred) recovery
of gas cost ................ 2,583,128 (1,372,030) (993,136)
Advances for construction and
other ...................... 2,333 8,756 (5,416)
Net cash provided by
operating activities .... $ 6,943,183 $ 6,172,019 $ 4,567,023
Cash Flows From Investing Activities:
Capital expenditures ............ $(8,122,838) $(7,374,747) $(6,289,508)
Net cash used in investing
activities .............. $(8,122,838) $(7,374,747) $(6,289,508)
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Cash Flows
(continued)
For the Years Ended June 30, 1995 1994 1993
Cash Flows From Financing Activities:
Dividends on common stock ....... $(2,073,374) $(1,972,368) $(1,775,411)
Issuance of common stock, net.... 502,361 3,965,113 428,634
Issuance of debentures, net...... - 14,246,937 -
Repayment of long-term debt ..... (240,100) (11,330,286) (591,425)
Increase (decrease) in notes
payable ....................... 2,970,000 (3,765,000) 3,700,000
Net cash provided by
financing activities $ 1,158,887 $ 1,144,396 $ 1,761,798
Net Increase (Decrease) in Cash and
Cash Equivalents ................... $ (20,768) $ (58,332) $ 39,313
Cash and Cash Equivalents,
Beginning of Year .................. 156,547 214,879 175,566
Cash and Cash Equivalents,
End of Year ........................ $ 135,779 $ 156,547 $ 214,879
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 2,253,472 $ 2,141,705 $ 2,107,168
Income taxes $ 1,264,942 $ 715,000 $ 952,851
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, 1995 1994
Assets
Gas Utility Plant, at cost .............. $84,944,969 $77,882,135
Less - Accumulated provision for
depreciation .......................... (24,588,203) (22,862,469)
Net gas plant $60,356,766 $55,019,666
Current Assets
Cash and cash equivalents ............ $ 135,779 $ 156,547
Accounts receivable, less accumulated
provisions for doubtful accounts of
$81,608 and $131,324 in 1995 and
1994, respectively ................. 1,236,199 1,117,962
Gas in storage, at average cost ...... 490,710 352,572
Deferred gas costs (Note 1) .......... - 1,471,342
Materials and supplies, at first-in,
first-out cost ..................... 527,442 700,761
Prepayments .......................... 423,246 317,343
Total current assets $ 2,813,376 $ 4,116,527
Other Assets
Cash surrender value of officers' life
insurance (face amount of $1,044,355
and $1,031,000 in 1995 and 1994,
respectively) ...................... $ 293,116 $ 269,029
Note receivable from officer ......... 130,000 83,000
Unamortized debt expense and other
(Note 5) ........................... 2,355,458 2,444,258
Total other assets $ 2,778,574 $ 2,796,287
Total assets $65,948,716 $61,932,480
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Balance Sheets (continued)
As of June 30, 1995 1994
Liabilities and Shareholders' Equity
Capitalization (See Consolidated Statements
of Capitalization)
Common shareholders' equity .......... $22,511,513 $22,164,791
Long-term debt (Note 5) .............. 23,702,200 24,500,000
Total capitalization .............. $46,213,713 $46,664,791
Current Liabilities
Notes payable (Note 4) ............... $ 5,675,000 $ 2,705,000
Current portion of long-term debt
(Note 5) ........................... 1,057,700 500,000
Accounts payable ..................... 1,955,231 2,133,840
Accrued taxes ........................ 363,948 436,158
Refunds due customers ................ 479,637 396,065
Advance recovery of gas cost.......... 1,111,786 -
Customers' deposits .................. 331,708 342,979
Accrued interest on debt ............. 473,001 427,338
Accrued vacation ..................... 454,728 454,362
Other accrued liabilities ............ 349,872 314,888
Total current liabilities $12,252,611 $ 7,710,630
Deferred Credits and Other
Deferred income taxes ................ $ 5,510,400 $ 5,116,400
Investment tax credits ............... 850,400 921,800
Regulatory liability (Note 1) ........ 912,900 1,312,500
Advances for construction and other .. 208,692 206,359
Total deferred credits and other $7,482,392 $ 7,557,059
Commitments and Contingencies (Note 6) ..
Total liabilities and
shareholders' equity ............ $65,948,716 $61,932,480
The accompanying notes to consolidated financial statements are an
integral part of these statements.
<TABLE>
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Changes in
Shareholders' Equity
<CAPTION>
For the Years Ended June 30, 1995 1994 1993
<S> <C> <C> <C>
Common Shares
Balance, beginning of year ............ $ 1,839,340 $ 1,648,485 $ 1,624,878
$1.00 par value of 29,394, 190,855
and 23,607 shares issued in 1995,
1994 and 1993, respectively -
Public issuance of common shares .. - 170,000 -
Dividend reinvestment and stock
purchase plan ................... 25,802 15,355 16,265
Employee stock purchase plan and
other ........................... 3,592 5,500 7,342
Balance, end of year .................. $ 1,868,734 $ 1,839,340 $ 1,648,485
Premium on Common Shares
Balance, beginning of year ............ $19,532,909 $15,562,427 $15,157,400
Premium on issuance of common shares-
Public issuance of common shares .. - 3,570,000 -
Dividend reinvestment and stock
purchase plan ................... 425,357 293,782 281,074
Employee stock purchase plan and
other ........................... 64,377 106,700 123,953
Balance, end of year .................. $20,022,643 $19,532,909 $15,562,427
Capital Stock Expense
Balance, beginning of year ............
$(1,588,025) $(1,391,801) $(1,391,801)
Issuance of common shares (16,767) (196,224) --
Balance, end of year .................. $(1,604,792) $(1,588,025) $(1,391,801)
Retained Earnings
Balance, beginning of year ............ 2,380,567 $ 1,681,934 $ 836,681
Net income .......................... 1,917,735 2,671,001 2,620,664
Cash dividends declared on common
shares - (See Consolidated
Statements of Income for rates) ... (2,073,374) (1,972,368) (1,775,411)
Balance, end of year .................. $ 2,224,928 $ 2,380,567 $ 1,681,934
The accompanying notes to consolidated financial statements are an
integral part of these statements.
</TABLE>
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Capitalization
As of June 30, 1995 1994
Common Shareholders' Equity
Common shares, par value $1.00 per share
(Notes 2 and 3)
Authorized - 6,000,000 shares
Issued and outstanding -
1,868,734 and 1,839,340 shares in
1995 and 1994, respectively ......... $ 1,868,734 $ 1,839,340
Premium on common shares ................ 20,022,643 19,532,909
Capital stock expense ................... (1,604,792) (1,588,025)
Retained earnings (Note 5) .............. 2,224,928 2,380,567
Total common shareholders' equity .... $22,511,513 $22,164,791
Long-Term Debt (Note 5)
Debentures, 9%, due 2011 ................ $14,561,000 $15,000,000
Capital lease, due 1998 ................. 10,000,000 10,000,000
198,900 -
Total long-term debt ................. $24,759,900 $25,000,000
Less - Amounts due within one year,
included in current liabilities ....... (1,057,700) (500,000)
Net long-term debt ................... $23,702,200 $24,500,000
Total capitalization .............. $46,213,713 $46,664,791
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 and storage projects under consideration.
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 2.8%, 2.7%
and 2.7% of average depreciable plant for 1995, 1994 and 1993, respectively.
(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 34,000 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 temporary
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 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 net accumulated
deferred income tax liability at June 30, 1995 are as follows:
1995 1994
Deferred Tax Liabilities
Accelerated depreciation $7,186,700 $6,257,200
Deferred gas cost - 580,400
Debt expense 413,500 29,400
Other 178,900 200,000
$7,779,100 $7,067,000
Deferred Tax Assets
Unamortized investment tax
credit $ 335,400 $ 363,600
Regulataory liabilities 360,100 517,700
Alternative minimum tax credits 724,300 667,200
Deferred gas cost 438,500 -
Other 410,400 402,100
$2,268,700 $1,950,600
Net accumulated deferred
income tax liability $5,510,400 $5,116,400
The components of the income tax provision are comprised of the following for
the years ended June 30:
1995 1994 1993
Components of income tax expense:
Payable currently:
Federal $ 453,900 $ 306,300 $ 432,300
State 194,500 100,800 121,900
Total $ 648,400 $ 407,100 $ 554,200
Deferred to future years from:
Use of accelerated depreciation $ 929,500 $ 675,000 $ 660,300
Deferred (advance) recovery of (1,018,900) 541,200 418,000
gas cost
Other deferred tax effects, net 483,400 (113,700) (88,800)
Income tax expense $1,042,400 $1,509,600 $1,543,700
Reconciliation of the statutory federal income tax rate to the effective
income tax rate is shown in the table below:
1995 1994 1993
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 (2.4) (1.3) (1.7)
Other differences - net (.9) (.9) -
Effective income tax rate 35.9% 36.5% 37.5%
(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:
1995 1994 1993
Plan assets at fair value $5,358,108 $5,251,296 $ 4,931,658
Actuarial present value of benefit
obligation:
Vested benefits $3,605,363 $4,114,517 $ 4,042,029
Non-vested benefits 21,742 30,562 37,777
Accumulated benefit obligation $3,627,105 $4,145,079 $ 4,079,806
Additional amounts related
to projected salary increases 1,638,014 1,734,413 1,881,303
Total projected benefit obligation $5,265,119 $5,879,492 $ 5,961,109
Plan assets in excess of (less than)
projected benefit obligation $ 92,989 $(628,196) $(1,029,451)
Unrecognized net assets at date of
initial application being
amortized over 15 years (296,759) (339,153) (381,547)
Unrecognized net loss 286,557 950,735 1,407,072
Accrued pension asset (liability) $ 82,787 $ (16,614) $ (3,926)
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:
1995 1994 1993
Benefits earned during the year -
service cost $ 432,546 $ 455,097 $ 401,054
Interest cost on projected benefit
obligation 382,167 357,372 317,897
Actual return on plan assets (623,972) (45,100) (356,971)
Net amortization and deferral 185,660 (353,530) (24,856)
Net periodic pension cost $ 376,401 $ 413,839 $ 337,124
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, 1995, 1994 and 1993 were
7.0%, 6.5% and 6.0%, 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, 1995, 1994 and 1993, Delta's Savings Plan expense was
$112,379, $106,863 and $93,749, respectively.
(c) Employee Stock Purchase Plan - The Company has an Employee Stock
Purchase Plan (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. The Company
issues 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 matches those shares so purchased. Therefore, stock
equivalent to approximately $99,400 was issued in July, 1995. 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 $50,000 per year 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 25,802
shares were issued in 1995. Delta reserved 200,000 shares under the
Reinvestment Plan in December, 1994, and, as of June 30, 1995 there were
182,815 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, 1995 and
1994, the available line of credit was $15,000,000, of which $5,675,000 and
$2,705,000 had been borrowed at an interest rate of 6.935% and 5.5%,
respectively. The maximum amount borrowed during 1995 was $8,430,000. 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, 1995.
(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 60 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, 1995, 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 60
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 is being amortized over the term of the related debt consistent with
regulatory treatment.
A capital lease of computer equipment, entered into during June, 1995,
requires principal payments of approximately $57,700 in 1996, $66,000 in 1997
and $75,200 in 1998.
(6) Commitments and Contingencies:
The Company has entered into individual employment agreements with its five
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 1995
September 30 $ 3,634,262 $ (45,141) $ (633,058) $ (.34)
December 31 7,131,698 822,241 228,119 .12
March 31 14,903,281 2,842,418 2,255,994 1.22
June 30 6,175,098 635,570 66,680 .04
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)
______________________________________________________________
(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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the results
of their operations and their cash flows for each of the three years in the
period ended June 30, 1995, 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 LLP
Louisville, Kentucky
August 11, 1995
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 LLP, the independent auditors, who have full and free
access to the Audit Committee, with or without management present, to discuss
internal accounting control, auditing and financial reporting matters.
Consolidated Statistics
For the Years Ended June 30, 1995 1994 1993 1992 1991
Retail Customers Served,
End of Period
Residential .............. 29,029 27,939 27,293 26,488 25,698
Commercial ............... 4,287 4,242 4,093 4,035 4,168
Industrial ............... 72 76 75 66 71
Total ................. 33,388 32,257 31,461 30,589 29,937
Operating Revenues ($000)
Residential sales ........ 14,772 16,597 14,578 13,945 12,453
Commercial sales ......... 8,673 9,663 8,269 7,651 6,294
Industrial sales ......... 1,248 1,671 1,383 1,188 1,299
On-system transportation . 2,588 2,310 2,451 2,348 2,351
Off-system transportation. 461 623 836 1,342 1,377
Subsidiary sales ......... 3,959 3,755 3,532 2,580 2,873
Other .................... __143 228 172 147 131
Total ................. 31,844 34,847 31,221 29,201 26,778
System Throughput
(Million Cu. Ft.)
Residential sales ........ 2,173 2,511 2,341 2,202 2,049
Commercial sales ......... 1,328 1,506 1,368 1,235 1,115
Industrial sales ......... 223 316 281 229 248
Total retail sales .... 3,724 4,333 3,990 3,666 3,412
On-system transportation.. 2,390 2,186 2,248 2,061 1,993
Off-system transportation. 1,452 1,997 2,668 4,580 4,903
Total ................. 7,566 8,516 8,906 10,307 10,308
Average Annual Consumption Per
End of Period Residential
Customer (Thousand Cu. Ft.). 75 90 86 83 80
Lexington, Kentucky Degree Days
Actual .................... 4,217 4,999 4,688 4,370 4,025
Percent of 30 year average
(4,706) ................. 89.6 106.2 99.6 92.9 85.5
Average Revenue Per Mcf Sold
at Retail ($) ............. 6.63 6.44 6.07 6.21 5.88
Average Gas Cost Per Mcf Sold
at Retail ($) ............. 3.37 3.34 2.90 3.01 3.42
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
Johnny L. Caudill
Vice President - Administration & Customer Service
John F. Hall
Vice President - Finance, Secretary and Treasurer
Robert C. Hazelrigg
Vice President - Public and Consumer Affairs
Alan L. Heath
Vice President - Operations and Engineering
Glenn R. Jennings
President and Chief Executive Officer
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 LLP
2300 Meidinger Tower
The Louisville Galleria
Louisville, Kentucky 40202
Disbursement Agent, Transfer Agent and Registrar for Common Shares
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, OH 45202
Trustee and Interest Paying Agents for Debentures
6 5/8% due 2023; 9% due 2011
Bank One - Corporate Trust
235 W. Schrock Rd.
Westerville, OH 43081
Dividend Reinvestment and Stock Purchase Plan Administrator and Agent
Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, OH 45202
1995 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.
1995 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 16, 1995, 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 10, 1995.
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 -
Finance, Secretary 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. Fifth Third Bank 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.
