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 December 31, 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
1,850,448 Shares Outstanding as of December 31, 1994.
<TABLE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DELTA NATURAL GAS COMPANY, INC. AND
SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
December 31 December 31 December 31
1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES $7,131,698 $7,814,638 $10,765,960 $11,400,137 $34,212,764 $31,442,579
OPERATING EXPENSES
Purchased gas $3,440,503 $3,659,395 $ 4,840,736 $ 4,981,808 $17,109,484 $14,732,075
Operation and maintenance 1,990,854 2,006,737 3,894,266 3,879,326 8,397,707 7,968,649
Depreciation and depletion 547,405 496,677 1,091,379 992,233 2,077,014 1,912,596
Taxes other than income taxes 210,295 200,058 417,679 405,943 887,213 795,433
Income taxes 120,400 333,900 (255,200) 11,900 1,242,500 1,428,800
Total operating expenses $6,309,457 $6,696,767 $ 9,988,860 $10,271,210 $29,713,918 $26,837,553
OPERATING INCOME $ 822,241 $1,117,871 $ 777,100 $ 1,128,927 $ 4,498,846 $ 4,605,026
OTHER INCOME AND DEDUCTIONS, NET 23,615 9,455 _ 30,174 15,467 49,694 31,859
INCOME BEFORE INTEREST CHARGES $ 845,856 $1,127,326 $ 807,274 $ 1,144,394 $ 4,548,540 $ 4,636,885
INTEREST CHARGES 617,737 548,878 1,212,213 1,108,231 2,318,641 2,220,089
NET INCOME (LOSS) $ 228,119 $ 578,448 $ (404,939) $ 36,163 $ 2,229,899 $ 2,416,796
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,847,354 1,781,086 1,844,837 1,724,527 1,838,806 1,685,992
NET INCOME (LOSS) PER COMMON SHARE $ .12 $ .32 $ (.22) $ .02 $ 1.21 $ 1.43
DIVIDENDS DECLARED PER COMMON SHARE $ .28 $ .275 $ .56 $ .55 $ 1.115 $ 1.095
</TABLE>
DELTA NATURAL GAS COMPANY, INC. AND
SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS December 31, June 30, December 31,
1994 1994 1993
UTILITY PLANT $81,985,956 $77,882,135 $74,722,335
Less-Accumulated provision
for depreciation (23,770,812) (22,862,469) (22,049,573)
Net utility plant $58,215,144 $55,019,666 $52,672,762
CURRENT ASSETS
Cash and cash equivalents $ 490,513 $ 156,547 $ 355,560
Accounts receivable - net 1,467,632 1,117,962 2,078,807
Deferred gas cost 2,167,331 1,471,342 2,683,177
Gas in storage 497,740 352,572 2,483,612
Materials and supplies 442,311 700,761 622,590
Prepayments 114,813 317,343 76,430
Total current assets $ 5,180,340 $ 4,116,527 $ 8,300,176
OTHER ASSETS
Cash surrender value of
officer's life insurance $ 277,603 $ 269,029 $ 252,887
Note receivable from officer 73,000 83,000 89,000
Unamortized debt expense and other 2,399,858 2,444,258 2,497,982
Total other assets $ 2,750,461 $ 2,796,287 $ 2,839,869
Total assets $66,145,945 $61,932,480 $63,812,807
LIABILITIES
CAPITALIZATION
Common shareholders' equity $20,915,700 $22,164,791 $20,280,977
Long-term debt 24,307,000 24,500,000 24,500,000
Total capitalization $45,222,700 $46,664,791 $44,780,977
CURRENT LIABILITIES
Current portion of long-term debt $ 500,000 $ 500,000 $ 500,000
Notes payable 8,030,000 2,705,000 4,595,000
Accounts payable 2,431,053 2,133,840 4,996,087
Refunds due customers 333,808 396,065 89,628
Customers' deposits 415,437 342,979 441,429
Accrued taxes (14,463) 436,158 296,575
Accrued interest on debt 524,745 427,338 412,738
Accrued vacation 449,757 454,362 420,675
Other current and accrued
liabilities 299,126 314,888 313,466
Total current liabilities $12,969,463 $ 7,710,630 $12,065,598
DEFERRED CREDITS AND OTHER
Deferred income taxes $ 5,563,700 $ 5,116,400 $ 4,469,800
Investment tax credits 886,100 921,800 957,500
Regulatory liability 1,289,200 1,312,500 1,335,800
Customer advances for
construction and other 214,782 206,359 203,132
Total deferred credits
and other $ 7,953,782 $ 7,557,059 $ 6,966,232
Total liabilities $66,145,945 $61,932,480 $63,812,807
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND
SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended Twelve Months Ended
December 31 December 31
1994 1993 1994 1993
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C> <C> <C>
Net income (loss) $ (404,939) $ 36,163 $ 2,229,899 $ 2,416,796
Adjustments to reconcile net
income to net cash from
operating activities:
Depreciation, depletion
and amortization 1,135,779 1,029,912 2,175,138 1,994,612
Deferred income taxes
and investment tax
credits 388,300 287,200 975,900 842,200
Other, net 282,769 204,378 525,099 483,832
Decrease (increase) in assets (32,432) (2,639,700) 2,730,227 (2,258,057)
Increase (decrease) in other
liabilities (753,733) 762,300 (2,003,639) 489,870
Net cash provided by (used
in) operating activities $ 615,744 $ (319,747) $ 6,632,624 $ 3,969,253
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures $(4,569,626) $(3,799,878) $(8,144,495) $(6,628,866)
Net cash used in
investing activities $(4,569,626) $(3,799,878) $(8,144,495) $(6,628,866)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends on common stock $(1,033,072) $ (955,072) $(2,050,367) $(1,850,486)
Issuance of common stock 188,920 3,698,842 455,191 3,962,667
Issuance of debentures - net - 14,246,937 - 14,246,937
Repayment of long-term debt (193,000) (10,855,401) (193,000) (11,427,786)
Increase (decrease) in
short-term debt 5,325,000 (1,875,000) 3,435,000 (2,180,000)
Net cash provided by
financing activities $ 4,287,848 $ 4,260,306 $1,646,824 $ 2,751,332
NET INCREASE IN CASH AND
CASH EQUIVALENTS $ 333,966 $ 140,681 $ 134,953 $ 91,719
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 156,547 214,879 355,560 263,841
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 490,513 $ 355,560 $ 490,513 $ 355,560
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the
period for:
Interest $ 1,070,406 $ 1,103,601 $ 2,108,510 $ 2,197,758
Income taxes $ 233,046 $ - $ 948,046 $ 697,000
</TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(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 inactive. Enpro, Inc.
(Enpro) owns and operates production properties. All
subsidiaries of Delta 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 $4.6 million
was expended during the six months ended December 31, 1994. Delta
generates internally only a portion of the cash necessary for its
capital expenditure requirements and finances 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 $8 million was
borrowed at December 31, 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 $8 million at December 31, 1994.
The primary sources and uses of cash for the six and twelve
month periods ending December 31, 1994 and 1993 are summarized
below:
Six Months Ended December 31
Sources (Uses) 1994 1993
Provided (used) by
operating activities $ 615,744 $ (319,747)
Capital expenditures $ (4,569,626) $ (3,799,878)
Issuance of common stock $ 188,920 $ 3,698,842
Issuance of debentures, net $ - $ 14,246,937
Repayment of long-term
debt $ (193,000) $(10,855,401)
Dividends on common stock $ (1,033,072) $ (955,072)
Increase (decrease) in
short-term debt $ 5,325,000 $ (1,875,000)
Twelve Months Ended December 31
1994 1993
Sources (Uses)
Provided by operating
activities $ 6,632,624 $ 3,969,253
Capital expenditures $ (8,144,495) $ (6,628,866)
Issuance of common stock $ 455,191 $ 3,962,667
Issuance of debentures, net $ - $ 14,246,937
Repayment of long-term
debt $ (193,000) $(11,427,786)
Dividends on common stock $ (2,050,367) $ (1,850,486)
Increase (decrease) in short-
term debt $ 3,435,000 $ (2,180,000)
RESULTS OF OPERATIONS
Operating Revenues
The decreases in operating revenues for the three and six
months ended December 31, 1994 of approximately $683,000 and
$634,000, respectively, were due primarily to decreases in retail
sales volumes of approximately 231,000 Mcf and 236,000 Mcf for the
three and six months ended December 31, 1994, respectively, as a
result of the warmer winter weather in 1994 as compared with the
same periods in 1993. Billed degree days were approximately 52% of
the thirty-year average degree days for the six months ended
December 31, 1994 as compared with approximately 70% for the
similar period of 1993. These decreases were partially offset by
increased volumes transported for on-system customers for the three
and six months ended December 31, 1994 of approximately 85,000 Mcf
and 92,000 Mcf, respectively, as compared with the similar periods
of 1993.
The increase in operating revenues of approximately $2,770,000
for the twelve months ended December 31, 1994 was primarily due to
increases in the cost of gas purchased that were reflected in rates
billed to customers through Delta's gas cost recovery clause.
Contributing to the increase in operating revenues was an increase
in retail sales volumes of approximately 81,000 Mcf resulting from
colder winter weather in 1994 as compared with the same period in
1993 and an increase in customers served of 798, or 2.4%. Also
contributing to the increase in operating revenues were increased
volumes transported for on-system customers of approximately
109,000 Mcf.
Operating Expenses
The decreases in purchased gas expense for the three and six
months ended December 31, 1994 of approximately $219,000 and
$141,000, respectively, were due primarily to decreases in the cost
of gas for retail sales resulting from decreases in retail sales
volumes for the periods as the winter weather was warmer during the
1994 periods. The decreases were partially offset by increases in
the cost of gas purchased for retail sales.
The increase in purchased gas expense for the twelve months
ended December 31, 1994 of approximately $2,377,000 was due
primarily to increases in the cost of gas purchased for retail
sales.
The increase in operation and maintenance expense for the
twelve months ended December 31, 1994 of approximately $429,000 was
primarily due to wage and benefit cost increases and the general
effects of inflation.
The increases in depreciation expense for the three, six and
twelve months ended December 31, 1994 of approximately $51,000,
$99,000 and $164,000, respectively, were due primarily to
additional depreciable plant.
The increase in taxes other than income taxes for the three,
six and twelve months ended December 31, 1994 of approximately
$10,000, $12,000 and $92,000, 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.
The decreases in income taxes for the three, six and twelve
months ended December 31, 1994, of approximately $214,000, $267,000
and $186,000, respectively, were primarily due to changes in net
income.
Interest Charges
The increases in interest charges for the three, six and
twelve months ended December 31, 1994 of approximately $70,000,
$104,000 and $99,000, respectively, were due primarily to increased
average short-term borrowings and higher interest rates.
Net Income (Loss) Per Common Share
The net income (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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Registrant held its annual meeting of
shareholders on November 17, 1994.
(b) Jane W. Hylton, Harrison D. Peet and Henry C.
Thompson were elected to Delta's Board of Directors for
three-year terms expiring in 1997 and Arthur E. Walker,
Jr. was elected to Delta's Board of Directors for a two-
year term expiring in 1996. Donald R. Crowe, Billy Joe
Hall and Robert M. Watt III will continue to serve on
Delta's Board of Directors until the election in 1995 and
Glenn R. Jennings and Virgil E. Scott will continue to
serve on Delta's Board of Directors until the election in
1996.
(c) The total shares voted in the election of Directors
were 1,482,450. There were no broker non-votes. The
shares voted for each Nominee were:
Jane W. Hylton For 1,471,334 Withheld 11,116
Harrison D. Peet For 1,468,476 Withheld 13,974
Henry C. Thompson For 1,468,615 Withheld 13,835
Arthur E. Walker, Jr. For 1,467,164 Withheld 15,286
The shares voted for the appointment of Arthur
Andersen LLP as auditors of the Company for 1995 were as
follows (there were no broker non-votes):
For 1,461,009
Against 10,354
Abstain 11,085
(d) Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. No exhibits are required to be filed with
this report.
(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)
/s/Glenn R. Jennings
DATE: February 8, 1995 Glenn R. Jennings
President and Chief Executive Officer
(Duly Authorized Officer)
/s/John F. Hall
John F. Hall
Vice President - Regulatory Matters
and Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> OPUR1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 58,215,144
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 3,013,009
<TOTAL-DEFERRED-CHARGES> 2,167,331
<OTHER-ASSETS> 2,750,461
<TOTAL-ASSETS> 66,145,945
<COMMON> 1,850,448
<CAPITAL-SURPLUS-PAID-IN> 18,122,696
<RETAINED-EARNINGS> 942,556
<TOTAL-COMMON-STOCKHOLDERS-EQ> 20,915,700
0
0
<LONG-TERM-DEBT-NET> 24,307,000
<SHORT-TERM-NOTES> 8,030,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 500,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 12,393,245
<TOT-CAPITALIZATION-AND-LIAB> 66,145,945
<GROSS-OPERATING-REVENUE> 10,765,960
<INCOME-TAX-EXPENSE> (255,200)
<OTHER-OPERATING-EXPENSES> 10,244,060
<TOTAL-OPERATING-EXPENSES> 9,988,860
<OPERATING-INCOME-LOSS> 777,100
<OTHER-INCOME-NET> 30,174
<INCOME-BEFORE-INTEREST-EXPEN> 807,274
<TOTAL-INTEREST-EXPENSE> 1,212,213
<NET-INCOME> (404,939)
0
<EARNINGS-AVAILABLE-FOR-COMM> (404,939)
<COMMON-STOCK-DIVIDENDS> (1,033,072)
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 615,744
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
