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, 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
1,886,450 Shares Outstanding as of December 31, 1995.
<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
1995 1994 1995 1994 1995 1994
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES $ 8,406,787 $ 7,131,698 $ 12,181,636 $ 10,765,960 $ 33,260,015 $ 34,212,764
OPERATING EXPENSES
Purchased gas $ 3,838,121 $ 3,440,503 $ 5,357,051 $ 4,840,736 $ 16,013,471 $ 17,109,484
Operation and maintenance 1,995,766 1,990,854 4,014,795 3,894,266 8,123,326 8,397,707
Depreciation and depletion 622,873 547,405 1,226,522 1,091,379 2,318,701 2,077,014
Taxes other than income 241,224 210,295 472,787 417,679 918,448 887,213
taxes
Income taxes 377,000 120,400 (73,800) (255,200) 1,223,800 1,242,500
Total operating expenses $ 7,074,984 $ 6,309,457 $ 10,997,355 $ 9,988,860 $ 28,597,746 $ 29,713,918
OPERATING INCOME $ 1,331,803 $ 822,241 $ 1,184,281 $ 777,100 $ 4,662,269 $ 4,498,846
OTHER INCOME AND DEDUCTIONS, 7,282 23,615 14,488 30,174 34,896 49,694
NET
INCOME BEFORE INTEREST CHARGES $ 1,339,085 $ 845,856 $ 1,198,769 $ 807,274 $ 4,697,165 $ 4,548,540
INTEREST CHARGES 689,996 617,737 1,310,342 1,212,213 2,486,064 2,318,641
NET INCOME (LOSS) $ 649,089 $ 228,119 $ (111,573) $ (404,939) $ 2,211,101 $ 2,229,899
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,883,326 1,847,354 1,879,037 1,844,837 1,867,994 1,838,806
NET INCOME (LOSS) PER COMMON $ .34 $ .12 $ (.06) $ (.22) $ 1.18 $ 1.21
SHARE
DIVIDENDS DECLARED PER COMMON $ .28 $ .28 $ .56 $ .56 $ 1.12 $ 1.115
SHARE
</TABLE>
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
ASSETS December 31, 1995 June 30, 1995 December 31, 1994
<S> <C> <C> <C>
UTILITY PLANT $ 92,959,368 $ 84,944,969 $ 81,985,956
Less-Accumulated provision
for depreciation (25,555,643) (24,588,203) (23,770,812)
Net utility plant $ 67,403,725 $ 60,356,766 $ 58,215,144
CURRENT ASSETS
Cash and cash equivalents $ 441,938 $ 135,779 $ 490,513
Accounts receivable - net 2,090,988 1,236,199 1,467,632
Deferred gas cost 1,165,093 - 2,167,331
Gas in storage 488,658 490,710 497,740
Materials and supplies 437,814 527,442 442,311
Prepayments 146,498 423,246 114,813
Total current assets $ 4,770,989 $ 2,813,376 $ 5,180,340
OTHER ASSETS
Cash surrender value of
officers' life insurance $ 295,137 $ 293,116 $ 277,603
Note receivable from officer 118,000 130,000 73,000
Unamortized debt expense and other 2,311,058 2,355,458 2,399,858
Total other assets $ 2,724,195 $ 2,778,574 $ 2,750,461
Total assets $ 74,898,909 $ 65,948,716 $ 66,145,945
LIABILITIES AND SHAREHOLDERS' EQUITY
CAPITALIZATION
Common shareholders' equity $ 21,645,813 $ 22,511,513 $ 20,915,700
Long-term debt 25,066,182 23,702,200 24,307,000
Total capitalization $ 46,711,995 $ 46,213,713 $ 45,222,700
CURRENT LIABILITIES
Notes payable $ 12,710,000 $ 5,675,000 $ 8,030,000
Current portion of long-term debt 1,063,200 1,057,700 500,000
Accounts payable 4,338,009 1,955,231 2,431,053
Accrued taxes 35,682 363,948 (14,463)
Refunds due customers 382,433 479,637 333,808
Advance recovery of gas cost - 1,111,786 -
Customers' deposits 380,647 331,708 415,437
Accrued interest on debt 594,071 473,001 524,745
Accrued vacation 451,046 454,728 449,757
Other current and accrued
liabilities 379,467 349,872 299,126
Total current liabilities $ 20,334,555 $ 12,252,611 $ 12,969,463
DEFERRED CREDITS AND OTHER
Deferred income taxes $ 5,933,500 $ 5,510,400 $ 5,563,700
Investment tax credits 814,900 850,400 886,100
Regulatory liability 889,800 912,900 1,289,200
Advances for construction and other 214,159 208,692 214,782
Total deferred credits and other $ 7,852,359 $ 7,482,392 $ 7,953,782
Total liabilities $ 74,898,909 $ 65,948,716 $66,145,945
</TABLE>
<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
1995 1994 1995 1994
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ (111,573) $ (404,939) $2,211,101 $ 2,229,899
Adjustments to reconcile net
income to net cash from
operating activities:
Depreciation, depletion
and amortization 1,270,922 1,135,779 2,407,501 2,175,138
Deferred income taxes and
investment tax credits 364,500 388,300 (100,800) 975,900
Other, net 237,052 282,769 556,267 525,099
Decrease (increase) in other
assets (476,382) (32,432) (703,996) 2,730,227
Increase (decrease) in other
liabilities (118,182) (753,733) 3,123,507 (2,003,639)
Net cash provided by
operating activities $ 1,166,337 $ 615,744 $7,493,580 $ 6,632,624
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures $ (8,510,533) $ (4,569,626) $(12,063,549) $ (8,144,495)
Net cash used in
investing activities $ (8,510,533) $ (4,569,626) $(12,063,549) $ (8,144,495)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends on common stock $ (1,052,488) $ (1,033,072) $(2,092,790) $ (2,050,367)
Issuance of common stock, net 298,361 188,920 611,802 455,191
Increase (decrease) in long-
term debt 1,369,482 (193,000) 1,322,382 (193,000)
Increase (decrease) in notes
payable 7,035,000 5,325,000 4,680,000 3,435,000
Net cash provided by
financing activities $ 7,650,355 $ 4,287,848 $4,521,394 $ 1,646,824
NET INCREASE (DECREASE)IN
CASH AND CASH EQUIVALENTS $ 306,159 $ 333,966 $ (48,575) $ 134,953
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 135,779 156,547 490,513 355,560
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 441,938 $ 490,513 $441,938 $ 490,513
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period
for:
Interest $ 1,144,872 $ 1,070,406 $2,327,938 $ 2,108,510
Income taxes $ (34,588) $ 233,046 $ 997,308 $ 948,046
</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 or other
large use 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 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. 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.
(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 $8.5 million
was expended during the six months ended December 31, 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 $20 million, of which
approximately $12.7 million was borrowed at December 31, 1995.
These short-term borrowings are periodically repaid with long-term
debt and equity securities.
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 $12.7 million at December 31,
1995.
The primary sources and uses of cash for the six and twelve
month periods ending December 31, 1995 and 1994 are summarized
below:
Sources (Uses) Six Months Ended December 31
1995 1994
Provided by operating
activities $ 1,166,337 $ 615,744
Capital expenditures $ (8,510,533) $ (4,569,626)
Dividends on common stock $ (1,052,488) $ (1,033,072)
Issuance of common stock, net $ 298,361 $ 188,920
Increase (decrease) in long-
term debt $ 1,369,482 $ (193,000)
Increase (decrease) in
notes payable $ 7,035,000 $ 5,325,000
Sources (Uses) Twelve Months Ended
December 31
1995 1994
Provided by operating
activities $ 7,493,580 $ 6,632,624
Capital expenditures $ (12,063,549) $ (8,144,495)
Dividends on common stock $ (2,092,790) $ (2,050,367)
Issuance of common stock, net $ 611,802 $ 455,191
Increase (decrease) in long-
term debt $ 1,322,382 $ (193,000)
Increase (decrease) in
notes payable $ 4,680,000 $ 3,435,000
RESULTS OF OPERATIONS
Operating Revenues
The increases in operating revenues for the three and six
months ended December 31, 1995 of approximately $1,275,000 and
$1,416,000, respectively, were due primarily to increases in retail
sales volumes of approximately 293,000 Mcf and 297,000 Mcf for the
respective periods as a result of the colder winter weather in
1995. Billed degree days were approximately 72% of the thirty-year
average degree days for the six months ended December 31, 1995 as
compared with approximately 52% for the similar period of 1994. In
addition, on-system transportation volumes for the three and six
months ended December 31, 1995 increased approximately 60,000 Mcf
and 102,000 Mcf, respectively, as compared with the similar periods
of 1994. These increases were partially offset by decreases in the
cost of gas purchased that were reflected in rates billed to
customers through Delta's gas cost recovery clause.
The decrease in operating revenues of approximately $953,000
for the twelve months ended December 31, 1995 was primarily due to
decreases in the cost of gas purchased that were reflected in rates
billed to customers through Delta's gas cost recovery clause.
Contributing to the decrease in operating revenues was a decrease
in retail sales volumes of approximately 77,000 Mcf, and a decrease
in off-system transportation volumes of approximately 446,000 Mcf
due primarily to reduced deliveries from some local production.
This decrease was partially offset by an increase of approximately
212,000 Mcf transported for on-system customers.
Operating Expenses
The increases in purchased gas expense for the three and six
months ended December 31, 1995 of approximately $398,000 and
$516,000, respectively, were due primarily to increased gas
purchases for retail sales resulting from increases in retail sales
volumes for the periods as the winter weather was colder during the
1995 periods. The increases were partially offset by decreases in
the cost of gas purchased for retail sales. The decrease in
purchased gas expense for the twelve months ended December 31, 1995
of approximately $1,096,000 was due primarily to decreases in the
cost of gas purchased for retail sales.
The increases in depreciation expense for the three, six and
twelve months ended December 31, 1995 of approximately $75,000,
$135,000 and $242,000, 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, 1995 of approximately
$31,000, $55,000 and $31,000, respectively, were primarily due to
increased property taxes, which resulted from increased plant and
property valuation, and to increased payroll taxes, which resulted
from increased wages.
The increases in income taxes for the three and six months
ended December 31, 1995, of $257,000 and $181,000, respectively,
and the decrease in income taxes for the twelve months ended
December 31, 1995 of $19,000, 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, 1995 of $72,000, $98,000 and
$167,000, respectively, were due primarily to increased average
short-term borrowings.
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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The Registrant held its annual meeting of
shareholders on November 16, 1995.
(b) Donald R. Crowe and Billy Joe Hall were elected to
Delta's Board of Directors for three-year terms expiring
in 1998. Glenn R. Jennings, Virgil E. Scott and Arthur
E. Walker, Jr. will continue to serve on Delta's Board of
Directors until the election in 1996 and Jane W. Hylton,
Harrison D. Peet and Henry C. Thompson will continue to
serve on Delta's Board of Directors until the election in
1997.
(c) The total shares voted in the election of Directors
were 1,669,739. There were no broker non-votes. The
shares voted for each Nominee were:
Donald R. Crowe For 1,648,827 Withheld 20,912
Billy Joe Hall For 1,648,743 Withheld 20,996
The shares voted for the appointment of Arthur
Andersen LLP as auditors of the Company for 1996 were as
follows (there were no broker non-votes):
For 1,630,189
Against 16,717
Abstain 22,832
(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 12, 1996 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> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 67,403,725
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 4,770,989
<TOTAL-DEFERRED-CHARGES> 2,311,058
<OTHER-ASSETS> 413,137
<TOTAL-ASSETS> 74,898,909
<COMMON> 1,886,450
<CAPITAL-SURPLUS-PAID-IN> 18,698,496
<RETAINED-EARNINGS> 1,060,867
<TOTAL-COMMON-STOCKHOLDERS-EQ> 21,645,813
0
0
<LONG-TERM-DEBT-NET> 25,066,182
<SHORT-TERM-NOTES> 12,710,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,063,200
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 14,413,714
<TOT-CAPITALIZATION-AND-LIAB> 74,898,909
<GROSS-OPERATING-REVENUE> 12,181,636
<INCOME-TAX-EXPENSE> (73,800)
<OTHER-OPERATING-EXPENSES> 11,071,155
<TOTAL-OPERATING-EXPENSES> 10,997,355
<OPERATING-INCOME-LOSS> 1,184,281
<OTHER-INCOME-NET> 14,488
<INCOME-BEFORE-INTEREST-EXPEN> 1,198,769
<TOTAL-INTEREST-EXPENSE> 1,310,342
<NET-INCOME> (111,573)
0
<EARNINGS-AVAILABLE-FOR-COMM> (111,573)
<COMMON-STOCK-DIVIDENDS> 1,052,488
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<EPS-PRIMARY> (.06)
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</TABLE>
