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 March 31, 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
1,855,760 Shares Outstanding as of March 31, 1995.
PART 1 - FINANCIAL INFORMATION
<TABLE>
ITEM 1. FINANCIAL STATEMENTS.
DELTA NATURAL GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF
INCOME (UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended Twleve Months Ended
March 31 March 31 March 31
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES $14,903,281 $16,494,674 $25,669,241 $27,894,811 $32,621,371 $34,458,121
OPERATING EXPENSES
Purchased gas $ 7,903,996 $ 8,866,581 $12,744,732 $13,848,389 $16,146,899 $16,817,643
Operation and maintenance 2,059,921 2,042,525 5,954,187 5,921,851 8,415,103 8,065,992
Depreciation and depletion 547,463 496,411 1,638,842 1,488,644 2,128,066 1,947,613
Taxes other than income taxes 228,883 229,883 646,562 635,826 886,213 826,152
Income taxes 1,320,600 1,589,000 1,065,400 1,600,900 974,100 1,711,800
Total operating expenses $12,060,863 $13,224,400 $22,049,723 $23,495,610 $28,550,381 $29,369,200
OPERATING INCOME $ 2,842,418 $ 3,270,274 $ 3,619,518 $ 4,399,201 $ 4,070,990 $ 5,088,921
OTHER INCOME AND DEDUCTIONS, NET 7,684 7,595 37,858 23,062 49,783 33,894
INCOME BEFORE INTEREST CHARGES $ 2,850,102 $ 3,277,869 $ 3,657,376 $ 4,422,263 $ 4,120,773 $ 5,122,815
INTEREST CHARGES 594,108 564,306 1,806,321 1,672,537 2,348,443 2,221,365
NET INCOME $ 2,255,994 $ 2,713,563 $ 1,851,055 $ 2,749,726 $ 1,772,330 $ 2,901,450
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,852,445 1,830,233 1,847,319 1,756,686 1,844,359 1,730,649
NET INCOME PER COMMON SHARE $ 1.22 $ 1.48 $ 1.00 $ 1.57 $ 0.96 $ 1.68
DIVIDENDS DECLARED PER
COMMON SHARE $ 0.28 $ 0.275 $ 0.84 $ 0.825 $ 1.12 $ 1.095
</TABLE>
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND
SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
ASSETS March 31,1995 June 30, 1994 March 31, 1994
<S> <C> <C> <C>
UTILITY PLANT $82,915,276 $77,882,135 $ 75,494,184
Less-Accumulated provision
for depreciation (24,201,951) (22,862,469) (22,481,671)
Net utility plant $58,713,325 $55,019,666 $ 53,012,513
CURRENT ASSETS
Cash and cash equivalents $ 270,239 $ 156,547 $ 505,304
Accounts receivable - net 2,678,983 1,117,962 3,466,229
Deferred gas cost - 1,471,342 2,419,352
Gas in storage 428,194 352,572 365,845
Materials and supplies 415,689 700,761 606,931
Prepayments 562,106 317,343 436,819
Total current assets $ 4,355,211 $ 4,116,527 $ 7,800,480
OTHER ASSETS
Cash surrender value of
officers' life insurance $ 277,603 $ 269,029 $ 252,887
Note receivable from officer 67,000 83,000 86,001
Unamortized debt expense and other 2,377,658 2,444,258 2,450,234
Total other assets $ 2,722,261 $ 2,796,287 $ 2,789,122
Total assets $65,790,797 $61,932,480 $ 63,602,115
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common shareholders' equity $22,737,786 $22,164,791 $ 22,655,134
Long-term debt 24,091,000 24,500,000 24,500,000
Total capitalization $46,828,786 $46,664,791 $ 47,155,134
CURRENT LIABILITIES
Current portion of long-term debt $ 500,000 $ 500,000 $ 500,000
Notes payable 4,895,000 2,705,000 3,340,000
Accounts payable 1,642,764 2,133,840 2,242,270
Refunds due customers 529,225 396,065 66,400
Customers' deposits 416,628 342,979 435,324
Advance recovery of gas costs 436,105 - -
Accrued taxes 1,417,469 436,158 1,914,177
Accrued interest on debt 478,972 427,338 413,946
Accrued vacation 432,407 454,362 418,976
Other current and accrued
liabilities 265,108 314,888 146,316
Total current liabilities $11,013,678 $ 7,710,630 $ 9,477,409
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 209,333 206,359 206,472
Total deferred credits and $ 7,948,333 $ 7,557,059 $ 6,969,572
other
Total capitalization and
liabilities $65,790,797 $61,932,480 $ 63,602,115
</TABLE>
<TABLE>
DELTA NATURAL GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)
<CAPTION>
Nine Months Ended Twelve Months Ended
March 31 March 31
1995 1994 1995 1994
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 1,851,055 $ 2,749,726 $ 1,772,330 $ 2,901,450
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion
and amortization 1,705,442 1,574,071 2,200,642 2,051,880
Deferred income taxes and
investment tax credits 388,300 287,200 975,900 842,200
Other, net 434,170 321,462 559,680 476,105
(Increase) decrease in certain
assets (117,566) (1,776,201) 3,204,489 614,973
Increase (decrease) in certain
liabilities 1,116,022 (303,725) (15,870) (1,491,709)
Net cash provided by
operating activities $ 5,377,423 $ 2,852,533 $ 8,697,171 $ 5,394,899
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures $(5,766,671) $(4,753,123) $(8,388,558) $(6,584,106)
Net cash used in
investing activities $(5,766,671) $(4,753,123) $(8,388,558) $(6,584,106)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends on common stock $(1,551,653) $(1,458,541) $(2,065,479) $(1,911,024)
Issuance of common stock, net 273,593 3,862,905 375,801 3,960,448
Issuance of debentures, net - 14,246,937 - 14,246,937
Repayment of long-term debt (409,000) (11,330,286) (409,000) (11,353,167)
Increase (decrease) in
short-term debt 2,190,000 (3,130,000) 1,555,000 (4,475,000)
Net cash provided by (used
in)financing activities $ 502,940 $ 2,191,015 $ (543,678) $ 468,194
NET INCREASE IN CASH AND
CASH EQUIVALENTS $ 113,692 $ 290,425 $ (235,065) $ (721,013)
CASH AND EQUIVALENTS, BEGINNING 156,547 214,879 505,304 1,226,317
CASH AND EQUIVALENTS, END $ 270,239 $ 505,304 $ 270,239 $ 505,304
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period
for:
Interest $ 1,688,087 $ 1,618,951 $ 2,210,841 $ 2,161,666
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 $5.8 million was
expended during the nine months ended March 31, 1995. 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 $4.9 million was borrowed at March 31, 1995.
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 $4.9 million at March 31, 1995.
The primary sources and uses of cash for the nine and twelve
month periods ending March 31, 1995 and 1994 are summarized below:
Nine Months Ended March 31
Sources (Uses) 1995 1994
Provided by
operating activities $ 5,377,423 $ 2,852,533
Capital expenditures $ (5,766,671) $ (4,753,123)
Issuance of common stock, net $ 273,593 $ 3,862,905
Issuance of debentures, net $ - $ 14,246,937
Repayment of long-term
debt $ (409,000) $(11,330,286)
Dividends on common stock $ (1,551,653) $ (1,458,541)
Increase (decrease) in
short-term debt $ 2,190,000 $ (3,130,000)
Twelve Months Ended March 31
1995 1994
Sources (Uses)
Provided by operating
activities $ 8,697,171 $ 5,394,899
Capital expenditures $ (8,388,558) $ (6,584,106)
Issuance of common stock, net $ 375,801 $ 3,960,448
Issuance of debentures, net $ - $ 14,246,937
Repayment of long-term
debt $ (409,000) $(11,353,167)
Dividends on common stock $ (2,065,479) $ (1,911,024)
Increase (decrease) in short-
term debt $ 1,555,000 $ (4,475,000)
RESULTS OF OPERATIONS
Operating Revenues
The decreases in operating revenues for the three, nine and
twelve months ended March 31, 1995 of approximately $1,591,000,
$2,226,000 and $1,837,000 respectively, were due primarily to
decreases in retail sales volumes of approximately 307,000 Mcf,
543,000 Mcf and 599,000 Mcf for the three, nine and twelve months
ended March 31, 1995, respectively, as a result of the warmer winter
weather in 1995. Billed degree days were approximately 106%, 84% and
92% of the thirty-year average degree days for the three, nine and
twelve months ended March 31, 1995, respectively, as compared with
approximately 119%, 99% and 107% for the similar periods of 1994.
These decreases were partially offset by increased volumes transported
for on-system customers for the three, nine and twelve months ended
March 31, 1995 of approximately 68,000 Mcf, 160,000 Mcf and 174,000
Mcf, respectively, as compared with the similar periods of 1994.
Also, customers as of March 31, 1995 increased by 1,139, or 3.4%, and
this helped to offset the decreases in retail sales volumes.
Operating Expenses
The decreases in purchased gas expense for the three, nine, and
twelve months ended March 31, 1995 of approximately $963,000,
$1,104,000 and $671,000, 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 1995 periods. The decreases were partially offset by increases in
the cost of gas purchased for retail sales.
The increase in operation and maintenance expense for the twelve
months ended March 31, 1995 of approximately $349,000 was primarily
due to wage and benefit cost increases and the general effects of
inflation.
The increases in depreciation expense for the three, nine and
twelve months ended March 31, 1995 of approximately $51,000, $150,000
and $180,000, respectively, were due primarily to additional
depreciable plant.
The increase in taxes other than income taxes for the nine and
twelve months ended March 31, 1995 of approximately $11,000 and
$60,000, 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, nine and twelve
months ended March 31, 1995, of $268,000, $536,000 and $738,000,
respectively, were primarily due to changes in net income.
Interest Charges
The increases in interest charges for the three, nine and twelve
months ended March 31, 1995 of $30,000, $134,000 and $127,000,
respectively, were due primarily to increased average short-term
borrowings and higher interest rates.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The detailed information required by Item 1 has been disclosed in
previous reports filed with the Commission and is unchanged from the
information as presented in Item 3 of Form 10-K for the period ending
June 30, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. 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: May 9, 1995 Glenn R. Jennings
President and Chief Executive Officer
(Duly Authorized Officer)
/s/ John F. Hall
John F. Hall
Vice President - Finance,
Secretary and Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> OPUR1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 58,713,325
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 4,355,211
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 2,722,261
<TOTAL-ASSETS> 65,790,797
<COMMON> 1,855,760
<CAPITAL-SURPLUS-PAID-IN> 18,202,057
<RETAINED-EARNINGS> 2,679,969
<TOTAL-COMMON-STOCKHOLDERS-EQ> 22,737,786
0
0
<LONG-TERM-DEBT-NET> 24,091,000
<SHORT-TERM-NOTES> 4,895,000
<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> 13,567,011
<TOT-CAPITALIZATION-AND-LIAB> 65,790,797
<GROSS-OPERATING-REVENUE> 25,669,241
<INCOME-TAX-EXPENSE> 1,065,400
<OTHER-OPERATING-EXPENSES> 20,984,323
<TOTAL-OPERATING-EXPENSES> 22,049,723
<OPERATING-INCOME-LOSS> 3,619,518
<OTHER-INCOME-NET> 37,858
<INCOME-BEFORE-INTEREST-EXPEN> 3,657,376
<TOTAL-INTEREST-EXPENSE> 1,806,321
<NET-INCOME> 1,851,055
0
<EARNINGS-AVAILABLE-FOR-COMM> 1,851,055
<COMMON-STOCK-DIVIDENDS> 1,551,653
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 5,377,423
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
