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, 1996
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
1,894,951 Shares Outstanding as of March 31, 1996.
<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 Nine Months Ended Twelve Months Ended
March 31 March 31 March 31
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES $16,023,581 $ 14,903,281 $28,205,217 $25,669,241 $34,380,315 $32,621,371
OPERATING EXPENSES
Purchased gas $7,961,672 $ 7,903,996 $13,318,723 $12,744,732 $16,071,147 $16,146,899
Operation and maintenance 2,148,759 2,059,921 6,163,554 5,954,187 8,212,164 8,415,103
Depreciation and depletion 610,832 547,463 1,837,354 1,638,842 2,382,070 2,128,066
Taxes other than income taxes 280,710 228,883 753,497 646,562 970,275 886,213
Income taxes 1,600,000 1,320,600 1,526,200 1,065,400 1,503,200 974,100
Total operating expenses $12,601,973 $ 12,060,863 $23,599,328 $22,049,723 $29,138,856 $28,550,381
OPERATING INCOME $3,421,608 $ 2,842,418 $ 4,605,889 $3,619,518 $5,241,459 $4,070,990
OTHER INCOME AND DEDUCTIONS, NET 1,031 7,684 15,519 37,858 28,243 49,783
INCOME BEFORE INTEREST CHARGES $3,422,639 $ 2,850,102 $ 4,621,408 $3,657,376 $5,269,702 $4,120,773
INTEREST CHARGES 697,195 594,108 2,007,537 1,806,321 2,589,151 2,348,443
NET INCOME $2,725,444 $ 2,255,994 $2,613,871 $1,851,055 $2,680,551 $1,772,330
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 1,890,068 1,852,445 1,882,708 1,847,319 1,877,207 1,844,359
NET INCOME PER COMMON SHARE $1.44 $ 1.22 $1.39 $1.00 $1.43 $ .96
DIVIDENDS DECLARED PER COMMON SHARE $.28 $ .28 $.84 $.84 $1.12 $ 1.12
</TABLE>
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
ASSETS March 31, 1996 June 30, 1995 March 31, 1995
<S> <C> <C> <C>
UTILITY PLANT $ 95,017,635 $ 84,944,969 $82,915,276
Less-Accumulated provision
for depreciation (26,086,634) (24,588,203) (24,201,951)
Net utility plant $ 68,931,001 $ 60,356,766 $58,713,325
CURRENT ASSETS
Cash and cash equivalents $ 201,301 $ 135,779 $ 270,239
Accounts receivable - net 3,532,467 1,236,199 2,678,983
Deferred gas cost 3,506,175 - -
Gas in storage 349,909 490,710 428,194
Materials and supplies 526,717 527,442 415,689
Prepayments 525,405 423,246 562,106
Total current assets $ 8,641,974 $ 2,813,376 $4,355,211
OTHER ASSETS
Cash surrender value of
officers' life insurance $ 295,137 $ 293,116 $ 277,603
Note receivable from officer 112,000 130,000 67,000
Unamortized debt expense and other 2,288,857 2,355,458 2,377,658
Total other assets $ 2,695,994 $ 2,778,574 $2,722,261
Total assets $ 80,268,969 $65,948,716 $65,790,797
LIABILITIES AND SHAREHOLDERS' EQUITY
CAPITALIZATION
Common shareholders' equity $ 23,986,407 $22,511,513 $22,737,786
Long-term debt 24,976,650 23,702,200 24,091,000
Total capitalization $ 48,963,057 $46,213,713 $46,828,786
CURRENT LIABILITIES
Notes payable $ 15,460,000 $ 5,675,000 $4,895,000
Current portion of long-term debt 1,063,200 1,057,700 500,000
Accounts payable 3,494,601 1,955,231 1,642,764
Accrued taxes 1,793,307 363,948 1,417,469
Refunds due customers 101,967 479,637 529,225
Advance recovery of gas cost - 1,111,786 436,105
Customers' deposits 374,842 331,708 416,628
Accrued interest on debt 585,926 473,001 478,972
Accrued vacation 445,335 454,728 432,407
Other current and accrued
liabilities 113,017 349,872 265,108
Total current liabilities $ 23,432,195 $12,252,611 $11,013,678
DEFERRED CREDITS AND OTHER
Deferred income taxes $ 5,952,100 $ 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 216,917 208,692 209,333
Total deferred credits and other $ 7,873,717 $ 7,482,392 $7,948,333
Total liabilities $ 80,268,969 $ 65,948,716 $65,790,797
</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
1996 1995 1996 1995
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $ 2,613,871 $ 1,851,055 $ 2,680,551 $ 1,772,330
Adjustments to reconcile net
income to net cash from
operating activities:
Depreciation, depletion
and amortization 1,903,955 1,705,442 2,470,872 2,200,642
Deferred income taxes and
investment tax credits 383,100 388,300 (82,200) 975,900
Other, net 355,575 434,170 527,730 559,680
Decrease (increase) in other
assets (6,858,883) (117,566) (4,854,340) 3,204,489
Increase (decrease) in other
liabilities 2,509,095 1,116,022 1,734,006 (15,870)
Net cash provided by
operating activities $ 906,713 $ 5,377,423 $ 2,476,619 $ 8,697,171
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures $ (8,967,164) $ (5,766,671) $ (11,327,477) $ (8,388,558)
Net cash used in
investing activities $ (8,967,164) $ (5,766,671) $ (11,327,477) $ (8,388,558)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends on common stock $ (1,581,873) $ (1,551,653) $ (2,103,594) $ (2,065,479)
Issuance of common stock, net 442,896 273,593 671,664 375,801
Decrease in long-term debt (520,050) (409,000) (351,150) (409,000)
Issuance of short-term debt 19,060,000 14,650,000 23,905,000 18,670,000
Repayment of short-term debt (9,275,000) (12,460,000) (13,340,000) (17,115,000)
Net cash provided by (used
in) financing activities $ 8,125,973 $ 502,940 $ 8,781,920 $ (543,678)
NET INCREASE (DECREASE)IN
CASH AND CASH EQUIVALENTS $ 65,522 $ 113,692 $ (68,938) $ (235,065)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 135,779 156,547 270,239 505,304
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 201,301 $ 270,239 $ 201,301 $ 270,239
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,828,012 $ 1,688,087 $ 2,393,397 $ 2,210,841
Income taxes (net of refunds) $ (31,310) $ 233,046 $ 1,000,586 $ 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 $9.0 million
was expended during the nine months ended March 31, 1996. 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 $15.5 million was borrowed at March 31, 1996. The
line of credit, which is with Bank One, Kentucky, NA, expires
during November, 1996. These short-term borrowings are
periodically repaid with the net proceeds from the sale of 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 approximately $15.5 million at
March 31, 1996.
The net increase (decrease) in cash and cash equivalents for
the nine and twelve month periods ending March 31, 1996 and 1995 is
summarized below:
Nine Months Ended March 31
1996 1995
Provided by operating
activities $ 906,713 $ 5,377,423
Used in investing activities (8,967,164) (5,766,671)
Provided by financing
activities 8,125,973 502,940
Net increase in cash and cash
equivalents $ 65,522 $ 113,692
Twelve Months Ended March 31
1996 1995
Provided by operating
activities $ 2,476,619 $ 8,697,171
Used in investing activities (11,327,477) (8,388,558)
Provided by (used in)
financing activities 8,781,920 (543,678)
Net decrease in cash and cash
equivalents $ (68,938) $ (235,065)
RESULTS OF OPERATIONS
Operating Revenues
The increases in operating revenues for the three, nine and
twelve months ended March 31, 1996 of approximately $1,120,000,
$2,536,000 and $1,759,000, respectively, were due primarily to
increases in retail sales volumes of approximately 365,000 Mcf,
662,000 Mcf and 595,000 Mcf for the respective periods as a result
of the colder winter weather in 1996. Billed degree days were
approximately 117.7%, 100.6%, and 105.0% of the normal (thirty-year
average) degree days for the three, nine and twelve months ended
March 31, 1996 as compared with approximately 106.5%, 83.4% and
91.9% for the similar period of 1995. In addition, on-system
transportation volumes for the three, nine and twelve months ended
March 31, 1996 increased approximately 15,000 Mcf, 117,000 Mcf and
160,000 Mcf, respectively, as compared with the similar periods of
1995. 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 and a decrease
in off-system transportation volumes for the nine and twelve months
ended March 31, 1996, of approximately 266,000 Mcf and 392,000 Mcf,
respectively, as compared with similar periods of 1995, due
primarily to reduced deliveries from local producers.
Operating Expenses
The increase in purchased gas expense for the nine months
ended March 31, 1996 of approximately $574,000 was due primarily to
increased gas purchases for retail sales resulting from increases
in retail sales volumes for the period as the winter weather was
colder during the 1996 period. The increase was partially offset
by decreases in the cost of gas purchased for retail sales.
The increases in depreciation expense for the three, nine and
twelve months ended March 31, 1996 of approximately $63,000,
$199,000 and $254,000, respectively, were due primarily to
additional depreciable plant.
The increase in taxes other than income taxes for the three,
nine and twelve months ended March 31, 1996 of approximately
$52,000, $107,000 and $84,000, respectively, were primarily due to
increased property taxes, which resulted from increased plant and
property valuations, and to increased payroll taxes, which resulted
from increased wages.
The increases in income taxes for the three, nine and twelve
months ended March 31, 1996, of $279,000, $461,000 and $529,000,
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, 1996 of $103,000, $201,000 and
$241,000, 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 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 3, 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> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 68,931,001
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 8,641,974
<TOTAL-DEFERRED-CHARGES> 2,288,857
<OTHER-ASSETS> 407,137
<TOTAL-ASSETS> 80,268,969
<COMMON> 1,894,951
<CAPITAL-SURPLUS-PAID-IN> 18,834,531
<RETAINED-EARNINGS> 3,256,925
<TOTAL-COMMON-STOCKHOLDERS-EQ> 23,986,407
0
0
<LONG-TERM-DEBT-NET> 24,976,650
<SHORT-TERM-NOTES> 15,460,000
<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> 14,782,712
<TOT-CAPITALIZATION-AND-LIAB> 80,268,969
<GROSS-OPERATING-REVENUE> 28,205,217
<INCOME-TAX-EXPENSE> 1,526,200
<OTHER-OPERATING-EXPENSES> 22,073,128
<TOTAL-OPERATING-EXPENSES> 23,599,328
<OPERATING-INCOME-LOSS> 4,605,889
<OTHER-INCOME-NET> 15,519
<INCOME-BEFORE-INTEREST-EXPEN> 4,621,408
<TOTAL-INTEREST-EXPENSE> 2,007,537
<NET-INCOME> 2,613,871
0
<EARNINGS-AVAILABLE-FOR-COMM> 2,613,871
<COMMON-STOCK-DIVIDENDS> 1,581,874
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 906,713
<EPS-PRIMARY> 1.39
<EPS-DILUTED> 1.39
</TABLE>
