SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
X__ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
____ 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
1,881,752 Shares Outstanding as of September 30, 1995.
<TABLE>
PART 1 -FINANCIAL INFORMATION
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
Three Months Ended Twelve Months Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
OPERATING REVENUES $3,774,849 $3,634,262 $31,984,926 $34,895,704
OPERATING EXPENSES
Purchased gas $1,518,930 $1,400,233 $15,615,853 $17,328,376
Operation and maintenance 2,019,029 1,903,412 8,118,414 8,413,590
Depreciation and depletion 603,649 543,974 2,243,233 2,026,286
Taxes other than income taxes 231,563 207,384 887,519 876,976
Income taxes (450,800) (375,600) 967,200 1,456,000
Total operating expenses $3,922,371 $3,679,403 $27,832,219 $30,101,228
OPERATING INCOME (LOSS) $ (147,522) $ (45,141) $ 4,152,707 $ 4,794,476
OTHER INCOME AND DEDUCTIONS, NET 7,206 6,559 51,229 35,534
INCOME (LOSS) BEFORE INTEREST CHARGES $ (140,316) $ (38,582) $ 4,203,936 $ 4,830,010
INTEREST CHARGES 620,346 594,476 2,413,805 2,249,782
NET INCOME (LOSS) $ (760,662) $ (633,058) $ 1,790,131 $ 2,580,228
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,875,427 1,842,535 1,859,334 1,819,949
NET INCOME (LOSS) PER COMMON SHARE $ (.41) $ (.34) $ .96 $ 1.42
DIVIDENDS DECLARED PER COMMON SHARE $ .28 $ .28 $ 1.12 $ 1.11
</TABLE>
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND
SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
ASSETS September 30,1995 June 30, 1995 September 30,1994
<S> <C> <C> <C>
UTILITY PLANT $ 87,538,629 $ 84,944,969 $ 80,006,773
Less-Accumulated provision
for depreciation (25,026,445) (24,588,203) (23,301,444)
Net utility plant $ 62,512,184 $ 60,356,766 $ 56,705,329
CURRENT ASSETS
Cash and cash equivalents $ 155,517 $ 135,779 $ 237,460
Accounts receivable - net 708,882 1,236,199 631,008
Gas in storage 497,492 490,710 514,827
Deferred gas costs - - 1,744,786
Materials and supplies 503,713 527,442 477,077
Prepayments 305,039 423,246 243,400
Total current assets $ 2,170,643 $ 2,813,376 $ 3,848,558
OTHER ASSETS
Cash surrender value of
officer's life insurance $ 293,457 $ 293,116 $ 277,603
Note receivable from officer 124,000 130,000 79,000
Unamortized debt expense and other 2,333,258 2,355,458 2,422,058
Total other assets $ 2,750,715 $ 2,778,574 $ 2,778,661
Total assets $ 67,433,542 $ 65,948,716 $ 63,332,548
LIABILITIES AND SHAREHOLDERS' EQUITY
CAPITALIZATION
Common shareholders' equity $ 21,441,250 $ 22,511,513 $ 21,134,936
Long-term debt 23,621,009 23,702,200 24,500,000
Total capitalization $ 45,062,259 $ 46,213,713 $ 45,634,936
CURRENT LIABILITIES
Notes payable $ 9,565,000 $ 5,675,000 $ 6,425,000
Current portion of long-term debt 1,057,700 1,057,700 500,000
Accounts payable 1,556,149 1,955,231 1,398,809
Accrued taxes (76,996) 363,948 (158,314)
Refunds due customers 445,549 479,637 406,882
Advance recovery of gas cost 843,772 1,111,786 -
Customers' deposits 327,588 331,708 346,625
Accrued interest on debt 385,416 473,001 446,364
Accrued vacation 454,728 454,728 449,757
Other current and accrued
liabilities 326,723 349,872 312,849
Total current liabilities $ 14,885,629 $ 12,252,611 $ 10,127,972
DEFERRED CREDITS AND OTHER
Deferred income taxes $ 5,510,400 $ 5,510,400 $ 5,116,400
Investment tax credits 850,400 850,400 921,800
Regulatory liability 912,900 912,900 1,312,500
Advances for construction
and other 211,954 208,692 218,940
Total deferred credits and other $ 7,485,654 $ 7,482,392 $ 7,569,640
Total liabilities $ 67,433,542 $ 65,948,716 $ 63,332,548
</TABLE>
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND
SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS
(UNAUDITED)
<CAPTION>
Three Months Twelve Months Ended
Ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ (760,662) $ (633,058) $ 1,790,131 $ 2,580,228
Adjustments to reconcile net
income to net cash from
operating activities:
Depreciation, depletion
and amortization 625,849 566,174 2,332,033 2,121,049
Deferred income taxes
and investment tax
credits - - (77,000) 874,800
Other, net 96,180 158,475 539,689 576,221
Increase(decrease) in other 668,130 617,752 (209,668) 2,146,897
assets
Increase (decrease) in other
liabilities (1,253,720) (1,563,521) 2,797,757 (2,975,920)
Net cash provided by (used in)
operating activities $ (624,223) $ (854,178) $ 7,172,942 $ 5,323,275
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures $ (2,855,247) $(2,388,112) $ (8,589,777) $ (7,881,942)
Net cash used in
investing activities $ (2,855,247) $(2,388,112) $ (8,589,777) $ (7,881,942)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends on common stock $ (525,467) $ (515,933) $ (2,082,908) $ (2,034,666)
Issuance of common stock, net 215,866 119,136 599,091 4,003,463
Issuance of debentures - - - 14,246,937
Repayment of long-term debt (81,191) - (321,291) (11,322,221)
Increase (decrease) in
notes payable 3,890,000 3,720,000 3,140,000 (2,210,000)
Net cash provided by
financing activities $ 3,499,208 $ 3,323,203 $ 1,334,892 $ 2,683,513
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS $ 19,738 $ 80,913 $ (81,943) $ 124,846
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 135,779 156,547 237,460 112,614
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 155,517 $ 237,460 $ 155,517 $ 237,460
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 685,731 $ 553,250 $ 2,385,953 $ 2,170,906
Income taxes $ (34,588) $ 229,443 $ 1,000,911 $ 944,443
</TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Delta Natural Gas Company, Inc. (Delta or the Company) has four wholly-
owned subsidiaries. Delta Resources, Inc. (Resources) buys gas and
resells it to industrial customers on Delta's system and to Delta for
system supply. Delgasco, Inc. buys gas and resells it to Resources and
to customers not on Delta's system. Deltran, Inc. was formed to engage
in potential pipeline and storage projects. Enpro, Inc. owns and
operates existing production properties. All subsidiaries are included
in the consolidated financial statements. Intercompany balances and
transactions have been eliminated.
(2) The accompanying information reflects, in the opinion of management, all
normal recurring adjustments necessary to present fairly the results for
the interim periods. Reference should be made to Delta's Form 10-K for
the year ending June 30, 1995 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 1996 are expected to be
approximately $12.4 million, of which approximately $2.9 million was
expended during the three months ended September 30, 1995. 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 $9.6 million was borrowed at September 30, 1995. 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 repay short-term debt and to
refinance certain long-term debt.
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 $5.7 million
at June 30, 1995 to $9.6 million at September 30, 1995.
The primary sources and uses of cash for the three and twelve month
periods ending September 30, 1995 and 1994 are summarized below:
Three Months Ended September 30,
1995 1994
Sources (Uses)
Used in operating activities $ (624,223) $ (854,178)
Capital expenditures $ (2,855,247) $ (2,388,112)
Dividends on common stock $ (525,467) $ (515,933)
Issuance of common stock, net $ 215,866 $ 119,136
Repayment of long-term debt $ (81,191) $ -
Increase(decrease)in notes payable $ 3,890,000 $ 3,720,000
Twelve Months Ended September 30,
Sources (Uses) 1995 1994
Provided by operating activities $ 7,172,942 $ 5,323,275
Capital expenditures $ (8,589,777) $ (7,881,942)
Dividends on common stock $ (2,082,908) $ (2,034,666)
Issuance of common stock, net $ 599,091 $ 4,003,463
Issuance of debentures, net $ - $ 14,246,937
Repayment of long-term debt $ (321,291) $(11,322,221)
Increase(decrease)in notes payable $ 3,140,000 $ (2,210,000)
RESULTS OF OPERATIONS
Operating Revenues
The decrease in operating revenues for the twelve months ended
September 30, 1995 of approximately $2,911,000 was due primarily to a
decrease in retail sales volumes of approximately 601,000 Mcf as a result of
the warmer winter weather in 1995 (90.2% of 30 year average weather compared
to 105.2% for 1994) and a decrease in off-system transportation of
approximately 528,000 Mcf due to reduced deliveries from some local
production. The decrease was partially offset by an increase in customers
served of approximately 2.9% and by an increase in on-system transportation
volumes of approximately 238,000 Mcf.
Operating Expenses
The decrease in purchased gas expense of approximately $1,713,000 for
the twelve months ended September 30, 1995 was due primarily to the decreased
retail sales volumes.
The increases in depreciation and depletion expense for the three and
twelve months ended September 30, 1995 of approximately $60,000 and $217,000,
respectively, were primarily due to additional depreciable plant.
Changes in income taxes for the three and twelve months ended September
30, 1995 of approximately $75,000 and $489,000, respectively were primarily
due to changes in net income.
Interest Charges
The increase in interest charges for the twelve months ended
September 30, 1995 of approximately $164,000 was due primarily to increased
average short-term borrowings and increased average interest rates for the
period.
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 1995 periods. As a result, the average common shares
outstanding increased for the 1995 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, 1995.
ITEM 5. SUBSEQUENT EVENT.
On November 10, 1995, Delta acquired interests, primarily
consisting of leases and depleted gas wells, in certain property located in
Bell County, Kentucky to be developed for the underground storage
of natural gas. This acquisition continues Delta's effort to provide for
enhanced supply security and system flexibility. When operational, the
storage field will include approximately 8,000 acres and is expected to
have an estimated working capacity of approximately 4 million Mcf of gas,
which will be utilized to provide supply to the Company's customers during
the winter heating months. The purchase price of $2,800,000 consists of
$1,000,000 cash and a $1,800,000 promissory note payable in three
installments through 2001. Delta secured the promissory note by escrow of
102,858 shares of Delta's common stock, which would be issued to the holder
of the note in the event of default in payment by Delta.
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)
________________________________
DATE: November 13, 1995 Glenn R. Jennings
President & Chief Executive Officer
(Duly Authorized Officer)
________________________________
John F. Hall
Vice President - Finance,
Secretary and Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> OPUR1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 62,512,184
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 2,170,643
<TOTAL-DEFERRED-CHARGES> 2,333,258
<OTHER-ASSETS> 417,457
<TOTAL-ASSETS> 67,433,542
<COMMON> 1,881,752
<CAPITAL-SURPLUS-PAID-IN> 18,620,699
<RETAINED-EARNINGS> 938,799
<TOTAL-COMMON-STOCKHOLDERS-EQ> 21,441,250
0
0
<LONG-TERM-DEBT-NET> 23,621,009
<SHORT-TERM-NOTES> 9,565,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,057,700
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 11,748,583
<TOT-CAPITALIZATION-AND-LIAB> 67,433,542
<GROSS-OPERATING-REVENUE> 3,774,849
<INCOME-TAX-EXPENSE> (450,800)
<OTHER-OPERATING-EXPENSES> 4,373,171
<TOTAL-OPERATING-EXPENSES> 3,922,371
<OPERATING-INCOME-LOSS> (147,522)
<OTHER-INCOME-NET> 7,206
<INCOME-BEFORE-INTEREST-EXPEN> (140,316)
<TOTAL-INTEREST-EXPENSE> 620,346
<NET-INCOME> (760,662)
0
<EARNINGS-AVAILABLE-FOR-COMM> (760,662)
<COMMON-STOCK-DIVIDENDS> 525,467
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> (624,223)
<EPS-PRIMARY> (.41)
<EPS-DILUTED> (.41)
</TABLE>
