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, 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
2,319,359 Shares Outstanding as of September 30, 1996.
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
Three Months Ended Twelve Months Ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 4,074,332 $ 3,774,849 $ 36,875,538 $ 31,984,926
OPERATING EXPENSES
Purchased gas $ 1,646,240 $ 1,518,930 $ 17,517,065 $ 15,615,853
Operation and maintenance 1,858,430 2,019,029 8,481,912 8,118,414
Depreciation and depletion 727,190 603,649 2,634,493 2,243,233
Taxes other than income 246,123 231,563 1,050,842 887,519
taxes
Income taxes (439,800) (450,800) 1,570,500 967,200
Total operating expenses $ 4,038,183 $ 3,922,371 $ 31,254,812 $ 27,832,219
OPERATING INCOME $ 36,149 $ (147,522) $ 5,620,726 $ 4,152,707
THER INCOME AND DEDUCTIONS, 14,003 7,206 39,300 51,229
NET
INCOME BEFORE INTEREST CHARGES $ 50,152 $ (140,316) $ 5,660,026 $ 4,203,936
INTEREST CHARGES 784,448 620,346 2,972,311 2,413,805
NET INCOME (LOSS) $ (734,296) $ (760,662) $ 2,687,715 $ 1,790,131
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 2,212,638 1,875,427 1,988,707 1,859,334
NET INCOME (LOSS) PER COMMON $ ( .33) $ ( .41) $ 1.35 $ .96
SHARE
DIVIDENDS DECLARED PER COMMON $ .285 $ .28 $ 1.125 $ 1.12
SHARE 1.125
</TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS September 30, June 30, 1996 September
1996 30, 1995
UTILITY PLANT $103,908,130 $ 98,795,623 $ 87,538,629
Less-Accumulated provision
for depreciation (27,245,397) (26,749,774 (25,026,445)
Net utility plant $ 76,662,733 $ 72,045,849 $ 62,512,184
CURRENT ASSETS
Cash and cash equivalents $ 260,072 $ 151,633 $ 155,517
Accounts receivable - net 384,482 2,096,454 708,882
Deferred gas cost 3,540,863 2,676,357 -
Gas in storage 479,216 427,164 497,492
Materials and supplies 587,990 652,139 503,713
Prepayments 241,636 369,544 305,039
Total current assets $ 5,494,259 $ 6,373,291 $ 2,170,643
OTHER ASSETS
Cash surrender value of
officers' life insurance $ 312,913 $ 304,339 $ 293,457
Note receivable from officer 120,000 126,000 124,000
Unamortized debt expense and 2,924,658 2,291,158 2,333,258
other
Total other assets $ 3,357,571 $ 2,721,497 $ 2,750,715
Total assets $85,514,563 $81,140,637 $ 67,433,542
LIABILITIES AND SHAREHOLDERS'
EQUITY
CAPITALIZATION
Common shareholders' equity $28,601,950 $23,628,323 $ 21,441,250
Long-term debt 38,997,690 24,488,916 23,621,009
Notes payable refinanced
subsequent to yearend - 18,075,000 -
Total capitalization $67,599,640 $66,192,239 $ 45,062,259
CURRENT LIABILITIES
Notes payable $ 3,355,000 $ - $ 9,565,000
Current portion of long-term debt 1,584,800 1,084,800 1,057,700
Accounts payable 1,999,886 2,826,438 1,556,149
Accrued taxes (103,741) 93,554 (76,996)
Refunds due customers 116,090 23,354 445,549
Advance recovery of gas cost - - 843,772
Customers' deposits 302,043 304,246 327,588
Accrued interest on debt 647,917 637,596 385,416
Accrued vacation 485,847 485,847 454,728
Other current and accrued
liabilities 271,143 238,571 326,723
Total current liabilities $ 8,658,985 $ 5,694,406 $ 14,885,629
DEFERRED CREDITS AND OTHER
Deferred income taxes $ 7,318,500 $ 7,318,500 $ 5,510,400
Investment tax credits 779,400 779,400 850,400
Regulatory liability 938,300 938,300 912,900
Advances for construction and 219,738 217,792 211,954
other
Total deferred credits and $ 9,255,938 $ 9,253,992 $ 7,485,654
other
Total liabilities $85,514,563 $81,140,637 $ 67,433,542
<TABLE>
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended Twelve Months Ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ (734,296) $ (760,662) $ 2,687,715 $ 1,790,131
Adjustments to reconcile net
income (loss) to net cash from
operating activities:
Depreciation, depletion
and amortization 783,527 625,849 2,821,034 2,332,033
Deferred income taxes and
investment tax credits - - 1,762,500 (77,000)
Other, net 133,978 96,180 522,271 539,689
Decrease (increase) in other
assets 984,897 668,130 (4,078,289) ( 209,668)
Increase (decrease) in other
liabilities (888,475) (1,253,720) 307,812 2,797,757
Net cash provided by (used
in) operating activities $ 279,631 $ (624,223) $ 4,023,043 $ 7,172,942
CASH FLOWS FROM INVESTING
ACTIVITIES:
Capital expenditures $(5,478,052) $ (2,855,247) $(15,929,336) $ (8,589,777)
Net cash used in
investing activities $(5,478,052) $ (2,855,247) $(15,929,336) $ (8,589,777)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Dividends on common stock $ (659,786) $ (525,467) $ (2,247,733) $ (2,082,908)
Issuance of common stock, net 6,367,709 215,866 6,720,718 599,091
Issuance of long-term debt, net 14,334,834 - 14,310,334 -
Repayment of long-term debt (15,897) (81,191) (562,471) (321,291)
Issuance of short-term debt 5,015,000 5,200,000 25,770,000 20,070,000
Repayment of short-term debt (19,735,000) (1,310,000) (31,980,000) (16,930,000)
Net cash provided by
financing activities $ 5,306,860 $ 3,499,208 $ 12,010,848 $ 1,334,892
NET INCREASE (DECREASE)IN
CASH AND CASH EQUIVALENTS $ 108,439 $ 19,738 $ 104,555 $ (81,943)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 151,633 135,779 155,517 237,460
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 260,072 $ 155,517 $ 260,072 $ 155,517
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period
for:
Interest $ 742,461 $ 685,731 $ 2,547,821 $ 2,385,953
Income taxes (net of refunds) $ (66,222) $ (34,588) $ 161,926 $ 1,000,911
</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.
operates an underground natural gas storage field that it
leases from Delta. Enpro, Inc. owns and operates 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, 1996 for additional footnote disclosures, including a
summary of significant accounting policies.
(3) On July 19, 1996, Delta completed the issuance and sale
of $15,000,000 of 8.3% Debentures that mature in July, 2026
and 400,000 shares of common stock. The net proceeds of
approximately $20.4 million were used to repay short-term
notes payable and for working capital
(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 1997 are expected to
be approximately $16.4 million, of which approximately $5.5 million
was expended during the three months ended September 30, 1996.
Planned capital expenditures for fiscal 1997 include approximately
$6 million for storage project expenditures. 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
$3.4 million was borrowed at September 30, 1996. The line of
credit, which is with Bank One, Kentucky, NA, expires November 15,
1996 and Delta plans to extend the line of credit through November
15, 1997. These short-term borrowings are periodically repaid with
long-term debt and equity securities, as was done in July, 1996
when the net proceeds of approximately $20,400,000 from the sale of
$15,000,000 of debentures and 400,000 shares of common stock was
used to repay short-term debt and for working capital.
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.
The primary cash flows during the three and twelve month
periods ending September 30, 1996 and 1995 are summarized below:
Three Months Ended September 30
1996 1995
Provided by (used in)
operating activities $ 279,631 $ (624,223)
Used in investing activities (5,478,052) (2,855,247)
Provided by financing
activities 5,306,860 3,499,208
Net increase in cash and cash
equivalents $ 108,439 $ 19,738
Twelve Months Ended September 30
1996 1995
Provided by operating
activities $ 4,023,043 $ 7,172,942
Used in investing activities (15,929,336) (8,589,777)
Provided by financing
activities 12,010,848 1,334,892
Net increase (decrease) in
cash and cash equivalents $ 104,555 $ (81,943)
RESULTS OF OPERATIONS
Operating Revenues
The increase in operating revenues for the twelve months ended September
30, 1996 of approximately $4,891,000, was due primarily to an increase in
retail sales volumes of approximately 994,000 Mcf, or 27%, as a result of the
colder winter weather in 1996. Billed degree days were approximately 112% of
normal weather for 1996 as compared with approximately 89% for 1995. In
addition, on-system transportation volumes for 1996 increased approximately
256,000 Mcf, or 11%. 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 by a decrease in off-system
transportation volumes of approximately 252,000 Mcf, or 19%, due primarily to
reduced deliveries from local producers.
Operating Expenses
The increase in purchased gas expense of approximately $1,901,000 for
the twelve months ended September 30, 1996 was due primarily to the increased
gas purchases for retail sales resulting from the colder winter weather
during 1996. The increase was partially offset by decreases in the cost of
gas purchased for retail sales.
The increases in depreciation and depletion expense for the three and
twelve months ended September 30, 1996 of approximately $124,000 and
$391,000, respectively, were primarily due to additional depreciable plant.
The increase in taxes other than income taxes for the twelve months
ended September 30, 1996 of approximately $163,000, was 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 increase in income taxes for the twelve months ending September 30,
1996 of approximately $603,000 was primarily due to the increase in net
income.
Interest Charges
The increases in interest charges for the three and twelve months ended
September 30, 1996 of approximately $164,000 and $559,000, respectively, were
due primarily to increased borrowings for the periods.
Net Income (Loss) Per Common Share
For the periods ended September 30, 1996, the net income (loss) per
common share was diluted by the increased average common shares outstanding
that resulted from the additional 400,000 shares of common stock issued in
July, 1996, as well as the common shares issued under Delta's dividend
reinvestment plan and shares issued to employees during the 1996 periods.
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, 1996.
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: November 11, 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> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 76,662,733
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 5,494,259
<TOTAL-DEFERRED-CHARGES> 2,924,658
<OTHER-ASSETS> 432,913
<TOTAL-ASSETS> 85,514,563
<COMMON> 2,319,359
<CAPITAL-SURPLUS-PAID-IN> 24,903,810
<RETAINED-EARNINGS> 1,378,781
<TOTAL-COMMON-STOCKHOLDERS-EQ> 28,601,950
0
0
<LONG-TERM-DEBT-NET> 38,997,690
<SHORT-TERM-NOTES> 3,355,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,584,800
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 12,975,123
<TOT-CAPITALIZATION-AND-LIAB> 85,514,563
<GROSS-OPERATING-REVENUE> 4,074,332
<INCOME-TAX-EXPENSE> (439,800)
<OTHER-OPERATING-EXPENSES> 4,477,983
<TOTAL-OPERATING-EXPENSES> 4,038,183
<OPERATING-INCOME-LOSS> 36,149
<OTHER-INCOME-NET> 14,003
<INCOME-BEFORE-INTEREST-EXPEN> 50,152
<TOTAL-INTEREST-EXPENSE> 784,448
<NET-INCOME> (734,296)
0
<EARNINGS-AVAILABLE-FOR-COMM> (734,296)
<COMMON-STOCK-DIVIDENDS> 659,786
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 279,631
<EPS-PRIMARY> (.33)
<EPS-DILUTED> (.33)
</TABLE>
