UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________.
Commission file number 0-8788.
DELTA NATURAL GAS COMPANY, INC.__________
(Exact name of registrant as specified in its charter)
________KENTUCKY_______ ___________61-0458329_____________
(State of Incorporation) (IRS Employer Identification Number)
3617 Lexington Road, Winchester, Kentucky 40391___
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 859-744-6171.
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
_______None________ __________None________
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $1 Par Value
(Title of class)
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]
As of August 22, 2000, Delta Natural Gas Company, Inc. had outstanding
2,466,825 shares of common stock $1 Par Value, and the aggregate market
value of the voting stock held by non-affiliates was approximately
$41,936,025.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's definitive proxy statement to be filed with the Commission
not later than 120 days after June 30, 2000, is incorporated by reference in
Part III of this Report.
TABLE OF CONTENTS
Page Number
PART I
Item 1.Business 1
General 1
Gas Operations and Supply 1
Regulatory Matters 3
Capital Expenditures 4
Financing 5
Employees 5
Consolidated Statistics 6
Item 2. Properties 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of
Security Holders 8
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 8
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 16
Item 8. Financial Statements and Supplementary Data 17
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 17
PART III
Item 10. Directors and Executive Officers of the Registrant 17
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial
Owners and Management 17
Item 13. Certain Relationships and Related Transactions 18
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 18
Signatures 21
PART I
Item 1. Business
General
Delta Natural Gas Company, Inc. ("Delta" or "the Company"), a regulated public
utility, was organized in 1949. Delta established its first retail gas
distribution system in 1951, which provided service to 300 customers in
Owingsville and Frenchburg, Kentucky. As a result of acquisitions and
expansions of its customer base within its existing service areas, Delta
provides retail gas distribution service to 40,000 customers in central and
southeastern Kentucky and, additionally, provides transportation service to
industrial customers and interconnected pipelines located in the area.
Gas Operations and Supply
The Company purchases, produces and stores natural gas for distribution to
its retail customers and also provides transportation service to industrial
customers and inter-connected pipelines through facilities located in 23
predominantly rural counties in central and southeastern Kentucky. The
economy of Delta's service area is based principally on light industry,
farming and coal mining. The communities in Delta's service area typically
contain populations of less than 20,000. The four largest service areas are
Nicholasville, Corbin, Berea and Middlesboro, where Delta serves 7,000,
6,500, 4,000 and 3,400 customers, respectively.
The communities served by Delta continue to expand, resulting in growth
opportunities for the Company. Industrial parks have been developed in
several areas and have resulted in additional industrial customers, some of
which are on-system transportation customers.
Currently, over 99% of Delta's customers are residential and commercial.
Delta's remaining, light industrial customers purchased 5% of the total
volume of gas sold by Delta at retail during 2000.
The Company's revenues are affected by various factors, including rates
billed to customers, the cost of natural gas, economic conditions in the
areas that the Company serves, weather conditions and competition. Delta
competes for customers and sales with alternative sources of energy,
including electricity, coal, oil, propane and wood. The Company's marketing
subsidiaries, which purchase gas and resell it to various industrial
customers and others, also compete for their customers with producers and
marketers of natural gas. Higher gas costs, which the Company is generally
able to pass through to customers, may influence customers to conserve, or,
in the case of industrial customers, to use alternative energy sources. Also,
the potential bypass of Delta's system by industrial customers and others is a
competitive concern that Delta has addressed and will continue to address.
Delta's retail sales are seasonal and temperature-sensitive as the majority
of the gas sold by Delta is used for heating. This seasonality impacts
Delta's liquidity position and its management of its working capital
requirements during each twelve month period, and changes in the average
temperature during the winter months impacts its revenues year-to-year.
Delta's current tariffs provide for some adjustments of gas rates through a
weather normalization tariff. (See Management's Discussion and Analysis of
Financial Condition and Results of Operations).
Retail gas sales in 2000 were 3,837,000 Mcf, generating $31,728,000 in
revenues, as compared to 3,813,000 Mcf and $28,541,000 in revenues for 1999.
Heating degree days billed during 2000 were 88.3% of normal as compared with
88.8% in 1999. Sales volumes increased by 24,000 Mcf, or 1%, in 2000 as
compared to 1999.
Delta's transportation of natural gas during 2000 generated revenues of
$4,578,000 as compared with $4,470,000 during 1999. Of the total
transportation in 2000, $4,056,000 (4,703,000 Mcf) and $522,000 (1,672,000
Mcf) were earned for transportation for on-system and off-system customers,
respectively. Of the total transportation for 1999, $4,107,000 (4,434,000
Mcf) and $363,000 (1,144,000 Mcf) were earned for transportation for on-
system and off-system customers, respectively.
As an active participant in many areas of the natural gas industry, Delta
plans to continue its efforts to expand its gas distribution system. Delta
continues to consider acquisitions of other gas systems, some of which are
contiguous to its existing service areas, as well as expansion within its
existing service areas. During October, 1999 Delta acquired the Mt. Olivet
Natural Gas Company in Robertson and Mason counties, consisting of
approximately 300 primarily residential customers.
The Company also anticipates continuing activity in gas production and
transportation and plans to pursue and increase these activities wherever
practicable. The Company will continue to consider the construction or
acquisition of additional transmission, storage and gathering facilities
to provide for increased transportation, enhanced supply and system flexibility.
Some producers in Delta's service area can access certain pipeline delivery
systems other than Delta, which provides competition from others for
transportation of such gas. Delta will continue its efforts to purchase or
transport any natural gas available that is produced in reasonable proximity
to its facilities.
Delta receives its gas supply from a combination of interstate and Kentucky
sources. Delta's interstate gas supply is transported and/or stored by
Tennessee Gas Pipeline Company ("Tennessee"), Columbia Gas Transmission
Corporation ("Columbia"), Columbia Gulf and Texas Eastern Transmission
Corporation. Delta acquires its interstate gas supply from gas marketers.
Delta's agreements with Tennessee extend until 2005 and thereafter continue
on a year-to-year basis until terminated by either party. Tennessee is
obligated under the agreements to transport up to 17,000 Mcf per day for
Delta. Delta acquires its gas for transportation by Tennessee under an
agreement with gas marketers. During 2000, Delta purchased 1,144,000 Mcf
from two gas marketers under one agreement that terminated April 30, 2000
and another agreement that began May 1, 2000 and extends through April 30,
2003.
Delta's agreements with Columbia and Columbia Gulf extend until 2008 and
thereafter continue on a year-to-year basis until terminated by one of the
parties to the particular agreement. Columbia and Columbia Gulf are
obligated under the agreements to transport up to 12,500 Mcf per day and
4,200 Mcf per day, respectively, for Delta. Delta acquires its gas for
transportation by Columbia and Columbia Gulf under agreements with a gas
marketer. During 2000, Delta purchased a total of 824,000 Mcf from the gas
marketer under an agreement that extends through April 30, 2001 and
continues thereafter on a year-to-year basis.
Delta has an agreement with Columbia Natural Resources ("CNR") to purchase
natural gas from CNR through October 31, 2004. Delta purchased 373,000
Mcf from CNR during 2000.
Delta has an agreement with its wholly-owned subsidiary, Enpro, Inc.
("Enpro"), to purchase natural gas, and during 2000 Delta purchased a total
of 192,000 Mcf from Enpro. Enpro also produces oil, but that production has
not been significant.
Delta's wholly-owned subsidiaries, Delta Resources, Inc. ("Delta Resources")
and Delgasco, Inc. ("Delgasco") purchase gas under agreements with various
marketers and Kentucky producers. The gas is resold to industrial customers
on Delta's system, to Delta for system supply and to others.
Delta owns and operates an underground natural gas storage field, with an
estimated working capacity of 4,000,000 Mcf. This field has been used to
provide a portion of Delta's winter supply needs since 1996. This storage
capability permits Delta to purchase and store gas during the non-heating
months, and then withdraw and sell the gas during the peak usage months.
Although there are competitors for the acquisition of gas supplies, Delta
continues to seek additional new gas supplies from all available sources,
including those in the proximity of its facilities in southeastern Kentucky.
Also, Delta Resources and Delgasco continue to pursue acquisitions of new gas
supplies from Kentucky producers and others. Delta will continue to
maintain an active gas supply management program that emphasizes long-term
reliability and the pursuit of cost effective sources of gas for its
customers.
Regulatory Matters
Delta is subject to the regulatory authority of the Public Service Commission
of Kentucky ("PSC") with respect to various aspects of Delta's business,
including rates and service to retail and transportation customers. The
company monitors the need to file a general rate case as a way to adjust its
sales prices.
On December 27, 1999, Delta received approval from the PSC for an annual
revenue increase of $420,000. This resulted from a general rate case that
Delta had filed with the PSC during July, 1999. The new tariffs include a
weather normalization tariff whereby Delta is permitted to adjust rates for
the billing months of December through April to reflect variations
from normal weather. The new rates were effective for service on and after
January 1, 2000.
Effective November 30, 1997, Delta received approval from the PSC for an
annual revenue increase of $1,670,000. This resulted from a general rate
case that Delta had filed with the PSC during March, 1997. Effective May 1,
1998, Delta received approval from the PSC for an additional annual revenue
increase of $117,000 in this rate case, resulting from a rehearing of
certain tax-related items.
Delta's rates include a Gas Cost Recovery ("GCR") clause, which permits
changes in Delta's gas costs to be reflected in the rates charged to
customers. The GCR requires Delta to make quarterly filings with the PSC,
but such procedure does not require a general rate case.
During 1997, the PSC established a proceeding to investigate affiliate
transactions. This regulatory process ultimately culminated in new
Kentucky legislation this year. The legislation requires that affiliate
transactions be conducted on an arms-length basis. Delta does not expect
the legislation to have a significant effect on its financial condition or
results of operations.
The PSC convened proceedings during 1997 with various regulated utilities
and other interested parties to discuss the potential unbundling of natural
gas rates and services in Kentucky. On July 1, 1998 the PSC concluded the
proceedings without requiring further unbundling at this time of prices and
service options for residential and small commercial customers. Delta
participated actively in those meetings and plans to continue to provide
comments in future discussions concerning regulatory and legislative issues
relating to unbundling.
In addition to PSC regulation, Delta may obtain non-exclusive franchises from
the cities and communities in which it operates authorizing it to place its
facilities in the streets and public grounds. However, no utility may
obtain a franchise until it has obtained from the PSC a Certificate of
Convenience and Necessity authorizing it to bid on the franchise. Delta
holds franchises in four of the cities and seven other communities it
serves. In the other cities and communities served by the Company, either
Delta's franchises have expired, the communities do not have governmental
organizations authorized to grant franchises, or the local governments
have not required or do not want to offer a franchise. Delta attempts to
acquire or reacquire franchises whenever feasible.
Without a franchise, a local government could require Delta to cease its
occupation of the streets and public grounds or prohibit Delta from
extending its facilities into any new area of that city or community.
To date, the absence of a franchise has had no adverse effect on Delta's
operations.
Capital Expenditures
Capital expenditures during 2000 were $8.8 million and for 2001 are estimated
to be $5.5 million. The Company's planned expenditures include system extensions
as well as the replacement and improvement of existing transmission,
distribution, gathering and general facilities.
Financing
The Company's capital expenditures and operating cash requirements are met
through the use of internally generated funds and a short-term line of credit.
The available line of credit at June 30, 2000 was $25 million of which $9.6
million had been borrowed. These short-term borrowings are periodically
repaid with long-term debt and equity securities, as was done in March, 1998
when the net proceeds of $24.1 million from the sale of $25 million of
debentures was used to repay short-term notes payable, as well as to redeem
the Company's 9% debentures, that would have matured in 2011, in the amount
of $10 million.
Present plans are to utilize the short-term line of credit to help meet
planned capital expenditures and operating cash requirements. The amounts
and types of future long-term debt and equity financings will depend upon
the Company's capital needs and market conditions.
During 2000 the requirements of the Employee Stock Purchase Plan (see Note
3(c) of the Notes to Consolidated Financial Statements) were met through the
issuance of 6,726 shares of common stock resulting in an increase of
$113,000 in Delta's common shareholders' equity. The Dividend Reinvestment
and Stock Purchase Plan (see Note 4 of the Notes to Consolidated Financial
Statements) resulted in the issuance of 37,499 shares of common stock
providing an increase of $571,000 in Delta's common shareholders' equity.
Employees
Delta employed a total of 157 full-time employees on June 30, 2000. Delta
considers its relationship with its employees to be satisfactory. Delta's
employees are not represented by unions or subject to any collective
bargaining agreements.
Consolidated Statistics
For the Years Ended June 30, 2000 1999 1998 1997 1996
Retail Customers Served,
End of Period
Residential .............. 33,028 32,239 31,596 31,380 29,840
Commercial ............... 5,008 4,868 4,753 4,761 4,453
Industrial ............... 67 68 70 74 75
Total ................. 38,103 37,175 36,419 36,215 34,368
Operating Revenues ($000)
Residential sales ........ 19,672 17,329 19,969 19,694 16,540
Commercial sales ......... 10,952 10,039 11,890 11,977 9,788
Industrial sales ......... 1,104 1,173 1,576 1,890 1,483
On-system transportation . 4,056 4,107 3,877 3,214 2,913
Off-system transportation 522 363 483 382 418
Subsidiary sales ......... 9,431 5,491 6,335 4,904 5,297
Other .................... 190 170 128 108 137
Total ................. 45,927 38,672 44,258 42,169 36,576
System Throughput
(Million Cu. Ft.)
Residential sales ........ 2,266 2,223 2,377 2,464 2,741
Commercial sales ......... 1,397 1,401 1,504 1,557 1,673
Industrial sales ......... 174 189 231 278 291
Total retail sales .... 3,837 3,813 4,112 4,299 4,705
On-system transportation.. 4,703 4,434 3,467 2,863 2,570
Off-system transportation. 1,672 1,144 1,489 1,205 1,134
Total ................. 10,212 9,391 9,068 8,367 8,409
Average Annual Consumption Per
End of Period Residential
Customer (Thousand Cu. Ft.). 69 69 75 79 92
Lexington, Kentucky Degree Days
Actual .................... 4,162 4,188 4,397 4,867 5,280
Percent of 30 year average
(4,714) ................. 88.3 88.8 93.3 103.2 112.0
Average Revenue Per Mcf Sold
at Retail ($) ............. 8.27 7.49 8.13 7.81 5.91
Average Gas Cost Per Mcf Sold
at Retail ($) ............. 3.77 3.69 4.60 4.62 2.81
Item 2. Properties
Delta owns its corporate headquarters in Winchester, Kentucky. In addition,
Delta owns ten office buildings used for branch operations in the cities it
serves. Also, Delta owns a building in Laurel County used for training as
well as equipment and materials storage.
The Company owns 2,213 miles of natural gas gathering, transmission,
distribution and service lines. These lines range in size up to twelve
inches in diameter.
Delta holds leases for the storage of natural gas under 8,000 acres located
in Bell County, Kentucky. This property was developed for the underground
storage of natural gas and has an estimated capacity to store 4,000,000 Mcf
of gas.
Delta owns the rights to any oil and gas underlying 3,500 acres in Bell
County. Portions of these properties are used by Delta for the storage of
natural gas. The maximum capacity of the storage facilities is estimated to
be 550,000 Mcf. These properties otherwise are currently non-producing, and
no reserve studies have been undertaken on the properties.
All the foregoing property described in this Item 2 is used principally in
connection with Delta's regulated natural gas distribution, transmission and
storage segment. See Note (10) to Delta's Consolidated Financial Statements
for a description of Delta's two business segments.
In addition, through its three wholly-owned subsidiaries, Enpro, Delgasco and
Delta Resources, the Company operates its unregulated segment, which involves
related ventures consisting of natural gas marketing and production. The
properties described in the following two paragraphs, which properties are
owned by Enpro, are used in connection with Delta's unregulated segment.
Enpro owns interests in certain oil and gas leases relating to 11,000 acres
located in Bell, Knox and Whitley Counties. There presently are 56 gas wells
and 7 oil wells producing from these properties. Enpro's remaining proved,
developed natural gas reserves are estimated at 3,800,000 Mcf. Oil
production from the property has not been significant. Also, Enpro owns
the oil and gas underlying 11,500 additional acres in Bell, Clay and Knox
Counties. These properties are currently non-producing, and no reserve
studies have been performed on the properties.
Under the terms of an agreement with a producer relating to 14,000 acres of
Enpro's undeveloped holdings, the producer is conducting exploration
activities on the acreage. Enpro reserved the option to participate in
wells drilled and also retained certain working and royalty interests in
any production from future wells.
There are no significant encumbrances on the Company's assets.
Item 3. Legal Proceedings
Delta and its subsidiaries are not parties to any legal proceedings which are
expected to have a materially adverse impact on the financial condition or
results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted during the fourth quarter of 2000.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Delta has paid cash dividends on its common stock each year since 1964.
While it is the intention of the Board of Directors to continue to declare
dividends on a quarterly basis, the frequency and amount of future dividends
will depend upon the Company's earnings, financial requirements and other
relevant factors, including limitations imposed by the indenture for the
Debentures. There were 2,374 record holders of Delta's common stock as of
August 1, 2000.
Delta's common stock is traded in the National Association of Securities
Dealers Automated Quotation ("NASDAQ") National Market System under the
symbol DGAS. The accompanying table reflects the high and low sales prices
during each quarter as reported by NASDAQ and the quarterly dividends
declared per share.
Range of Stock Prices($) Dividends
Quarter High Low Per Share($)
Fiscal 2000
First 17.75 14.125 .285
Second 16.25 14.375 .285
Third 15.625 13.813 .285
Fourth 15.75 13.625 .285
Fiscal 1999
First 18.00 16.438 .285
Second 19.00 16.75 .285
Third 19.00 17.25 .285
Fourth 17.75 16.438 .285
During July, 1999, Delta distributed 6,726 shares of its common stock to its
employees under its Employee Stock Purchase Plan (see Note 3(c) of the Notes
to Consolidated Financial Statements). Delta received cash consideration of
$16.80 per share for one-half of those shares (3,363 shares), for a total
cash consideration of $56,498, while one-half of the shares (3,363
shares) were provided to the employees without cash consideration as a part of
Delta's compensation and benefits for its employees. The securities were sold
pursuant to the exemption from registration provided by Rule 147 under the
Securities Act of 1933. This exemption was relied upon in light of the
facts that Delta is incorporated and doing business in Kentucky, and all
eligible employees are residents of Kentucky. Similarly, in July, 2000,
Delta distributed 6,540 shares of its common stock to its employees at
$15.33 per share under the same program.
Also, during June, 2000, Delta provided a total of 900 shares of its common
stock to its directors (100 shares per director). Delta received no cash
consideration for the shares, which were provided to its directors as a part
of their compensation. This transaction may not involve a "sale" of
securities under the Securities Act of 1933, and in any event, the
securities were qualified for an exemption from registration provided by
Rule 147 under the Securities Act of 1933. This exemption was relied upon
in light of the facts that Delta is incorporated and doing business in
Kentucky, and all directors are residents of Kentucky.
No underwriters were engaged in connections with any of the foregoing
transactions, and thus no underwriter discounts or commissions were paid in
connection with any of the foregoing.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
For the Years Ended June 30, 2000 1999 1998(a) 1997 1996(b)
Summary of Operations ($)
<S> <C> <C> <C> <C> <C>
Operating
Revenues ........... 45,926,775 38,672,238 44,258,000 42,169,185 36,576,055
Operating
Income ............... 8,176,722 6,652,070 6,731,859 5,315,582 5,437,055
Net income ........... 3,464,857 2,150,794 2,451,272 1,724,265 2,661,349
Basic and diluted
Earnings per
Common share ......... 1.42 .90 1.04 .75 1.41
Dividends
Declared per
Common share ......... 1.14 1.14 1.14 1.14 1.12
Average Number of
Common Shares
Outstanding ............. 2,433,397 2,394,181 2,359,598 2,294,134 1,886,629
Total Assets ($)......... 112,918,919 107,473,117 102,866,613 96,681,165 81,140,637
Capitalization ($).......
Common share-
Holders' equity ...... 31,297,418 29,912,007 29,810,294 29,474,569 23,628,323
Long-term debt ....... 50,723,795 51,699,700 52,612,494 38,107,860 24,488,916
Notes payable re-
Financed subsequent
To yearend............ - - - - 18,075,000
Total
Capitalization ....... 82,021,213 81,611,707 82,422,788 67,582,429 66,192,239
Short-Term
Debt ($)(c).............. 11,375,000 8,145,000 3,665,000 12,852,600 1,084,800
For the Years Ended June 30, 2000 1999 1998(a) 1997 1996(b)
Other Items ($)
Capital
Expenditures ....... 8,795,653 7,982,143 11,193,613 16,648,994 13,373,416
Total plant ........ 141,986,856 133,804,954 127,028,159 116,829,158 98,795,623
</TABLE>
_____________________
(a) During March, 1998, $25,000,000 of debentures were sold, and the proceeds
were used to repay short-term debt and to redeem the Company's $10,000,000 of
9% debentures.
(b) During July, 1996, $15,000,000 of debentures and 400,000 shares of common
stock were sold, and the proceeds were used to repay short-term debt and for
general corporate purposes. The balance of the note payable at June 30, 1996
($18,075,000) is included in total capitalization as a result of the
subsequent refinancing.
(c) Includes current portion of long-term debt.
Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The Company's utility operations are subject to regulation by the PSC, which
plays a significant role in determining the Company's return on equity.
The PSC approves rates that are intended to permit a specified rate of
return on investment. The Company's rate tariffs allow the cost of gas to
be passed through to customers (see Business - Regulatory Matters).
The Company's business is temperature-sensitive. Accordingly, the Company's
sales volumes in any given period reflect, in addition to other factors, the
impact of weather, with colder temperatures generally resulting in increased
sales volumes by the Company. The Company anticipates that this sensitivity
to seasonal and other weather conditions will continue to be reflected in
the Company's sales volumes in future periods. However, Delta's current
tariffs, approved by the PSC effective January 1, 2000, provide for some
adjustment of gas rates through a weather normalization tariff. Under the
weather normalization tariff, Delta's rates for residential and small non-
residential customers are generally increased when winter weather is warmer
than normal and decreased when winter weather is colder than normal. Delta
is permitted to adjust rates for these classes of customers for the billing
months of December through April under this tariff.
Liquidity and Capital Resources
Because of the seasonal nature of Delta's sales, the smallest proportion of
cash generated from operations is received during the warmer months when sales
volumes decrease considerably. Additionally, most construction activity takes
place during the non-heating season because of more favorable weather
conditions. During the warmer, non-heating months, therefore, cash needs for
operations and construction are partially met through short-term borrowings.
Capital expenditures for Delta for fiscal 2001 are expected to be $5.5
million. Delta has been generating internally only a portion of the cash
necessary for its capital expenditure requirements and thus 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 $25,000,000, of which $9,625,000 was borrowed
at June 30, 2000. The line of credit, which is with Bank One, Kentucky, NA,
requires renewal during November, 2000. These short-term borrowings are
periodically repaid with the net proceeds from the sale of long-term debt
and equity securities, as was done in March, 1998, when the net proceeds of
$24,100,000 from the sale of $25,000,000 of debentures were used to repay
short-term debt and to redeem the Company's 9% debentures, that would have
matured in 2011, in the amount of $10,000,000.
The primary cash flows during the last three years are summarized below:
2000 1999 1998
Provided by operating activities $ 8,827,505 $ 6,680,276 $ 8,922,037
Used in investing activities (8,795,653) (7,982,143) (11,193,613)
Provided by financing activities 115,554 1,431,919 1,909,689
Net increase (decrease) in cash
and cash equivalents $ 147,406 $ 130,052 $ (361,887)
Cash provided by operating activities consists of net income and noncash
items including depreciation, depletion, amortization and deferred income
taxes. Additionally, changes in working capital are also included in cash
provided by operating activities. The Company expects that internally
generated cash, coupled with short-term borrowings, will be sufficient to
satisfy its operating, normal capital expenditure and dividend requirements.
Results of Operations
Operating Revenues
The increase in operating revenues for 2000 of $7,254,600 was primarily
attributable to increased gas rates and increased non-regulated sales
volumes. Gas rates increased due to higher gas prices coupled with
increases from the impact of the weather normalization tariff.
Non-regulated revenues increased due to the 1,092,000 Mcf, or 52.6% ,
increase in non-regulated sales volumes.
The decrease in operating revenues for 1999 of $5,585,800 was primarily
attributable to lower gas rates and lower sales volumes. Gas rates
decreased due to lower gas prices. Sales volumes declined primarily due
to milder winter weather.
Heating degree days billed for 2000 were 88.3% of normal as compared with
88.8% of normal for 1999 and 93.3% of normal for 1998.
The following table sets forth certain comparisons for variations in revenues
for the last two fiscal years:
Increase (Decrease) 2000 compared to 1999 1999 compared to 1998
Variations in regulated revenues
Gas rates $ 2,307,700 $ (2,656,100)
Weather normalization adjustment 679,200 -
Sales volumes 199,500 (2,237,400)
Transportation 109,100 110,200
Other 20,100 41,700
Total $ 3,315,600 $ (4,741,600)
Variations in non-regulated revenues
Gas rates $ 595,000 $ (80,600)
Sales volumes 3,344,000 (763,600)
Total $ 3,939,000 $ (844,200)
Total variations in revenues $ 7,254,600 $ (5,585,800)
Variations in regulated volumes (%)
Gas Sales 0.6% (7.3%)
Transportation 14.2% 12.6%
Variations in non-regulated volumes (%)
Gas Sales 52.6% (11.9%)
Operating Expenses
The increase in purchased gas expense for 2000 of $4,747,000 was due
primarily to increased gas purchases for non-regulated sales and from
increases in the cost of gas purchased for retail sales.
The decrease in purchased gas expense for 1999 of $6,032,000 was due
primarily to the decreases in the cost of gas purchased for retail sales
and from decreased gas purchases for retail sales resulting from the warmer
winter weather in 1999.
The increases in depreciation expense during 2000 and 1999 of $148,000 and
$396,000, respectively, were due primarily to additional depreciable plant.
Changes in income taxes during 2000 and 1999 of $829,000 and $162,000,
respectively, were primarily due to changes in net income.
Interest Charges
The increase in other interest charges during 2000 was due primarily to
increased average short-term borrowings.
The increase in interest on long-term debt during 1999 was due primarily to
the issuance of $25 million of 7.15% Debentures in March, 1998. The decrease
in other interest during 1999 was due primarily to decreased average short-
term borrowings.
Basic and Diluted Earnings Per Common Share
For the years ended June 30, 2000, 1999 and 1998, basic earnings per common
share changed as a result of changes in net income and the increased average
common shares outstanding that resulted from the common shares issued under
Delta's dividend reinvestment plan and shares issued to employees during the
periods. There are no potentially dilutive securities, therefore basic
and diluted earnings per common share are the same.
Factors That May Affect Future Results
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the other sections of this report contain forward-looking
statements that are not statements of historical facts. These forward-
looking statements are identified by their language, which may in some cases
include words such as "estimates", "expects", "plans", "anticipates",
"intends", "will continue", "believes", and similar expressions. Such
forward-looking statements may concern future matters (among other matters)
such as: Delta's cost and the availability of natural gas supplies; Delta's
capital expenditures; its sources and availability of funding for operation and
expansion; Delta's anticipated growth and growth opportunities through system
expansion and acquisition; competitive conditions; Delta's productive and
transportation activities; regulatory and legislative matters; dividends;
and external and internal funding sources.
Such forward-looking statements are accordingly subject to important risks and
uncertainties that could cause the Company's actual results to differ
materially from those expressed in any such forward-looking statements.
Factors that could cause future results to differ materially from those
expressed in or implied by the forward-looking statements or historical
results include the impact or outcome of:
- The ongoing restructuring of the gas industry and the outcome of the
regulatory proceedings related to that restructuring.
- The changing regulatory environment generally.
- A change in the right under present regulatory rules to recover through rates
changes in costs of gas supply.
- Uncertainty as to regulatory approval for full recovery of Delta's costs and
for its expenditures for regulatory assets.
- Uncertainty in Delta's capital expenditure requirements.
- Changes in economic conditions, demographic patterns and weather conditions
in Delta's retail service areas.
- Changes affecting Delta's cost of providing gas service, including changes in
interest rates, changes in the availability of external sources of financing
for Delta's operations, tax laws, environmental laws, and the general rate
of inflation.
- Changes affecting the cost of competing energy alternatives and competing gas
distributors.
- Changes in accounting principles or the application of such principles to
Delta.
New Accounting Pronouncements
Delta adopted SFAS No. 128, "Earnings per Share", during fiscal 1998. The
adoption of this standard had no effect upon current or prior period
earnings per common share.
Delta adopted SFAS No. 130, "Comprehensive Income", during fiscal 1999.
SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The adoption of this statement had no impact on
the financial statements of the Company.
Delta adopted SFAS No. 131, "Disclosure About Segments of an Enterprise and
Related Information", and SFAS No. 132, "Employers' Disclosures About
Pensions and Other Postretirement Benefits", during fiscal 1999. These
statements do not affect the accounting recognition or measurements of
transactions, but rather require expanded disclosures regarding
financial results.
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 standardizes the
accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. The statement has
subsequently been amended by SFAS No. 137 issued June, 1999 and SFAS No.
138 issued June, 2000. This statement, as amended, is effective for fiscal
years beginning after June 15, 2000, and thus for the Company's fiscal year
2001. Delta is currently not a party to any derivatives for hedging or
other purposes. Delta has concluded that its contracts for the purchase,
sale, transportation and storage of natural gas constitute "normal purchases
and sales" under SFAS No. 133 and, as such, are not subject to the
accounting requirements of the new standard. Therefore, the Company
believes that adoption of this standard will not have a material effect on
its financial position or results of operation.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
As discussed in "Gas Operations and Supply" under Item 1, the Company is a
party to long-term fixed-price gas purchase and transportation contracts.
Therefore, the prices the Company pays under these contracts may differ from
the current market prices. However, the Company has minimal price risk
resulting from these contracts as these costs are passed through to customers
either through Delta's gas cost recovery mechanism or specific contracts
with customers. The Company currently is not a party to hedge instruments
or other agreements that represent derivatives.
Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE PAGE
Management's Statement of Responsibility for Financial
Reporting and Accounting 23
Report of Independent Public Accountants 24
Consolidated Statements of Income for the years
ended June 30, 2000, 1999, and 1998 25
Consolidated Statements of Cash Flows for the
years ended June 30, 2000, 1999 and 1998 26
Consolidated Balance Sheets as of June 30,
2000 and 1999 28
Consolidated Statements of Changes in
Shareholders' Equity for the years
ended June 30, 2000, 1999, and 1998 30
Consolidated Statements of Capitalization
as of June 30, 2000 and 1999 31
Notes to Consolidated Financial Statements 32
Schedule II - Valuation and Qualifying Accounts
for the years ended June 30, 2000, 1999, and 1998 42
Schedules other than those listed above are omitted because they are not
required, not applicable or the required information is shown in the
financial statements or notes thereto.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
Registrant intends to file a definitive proxy statement with the Commission
pursuant to Regulation 14A (17 CFR 240.14a) not later than 120 days after the
close of the fiscal year. In accordance with General Instruction G(3) to
Form 10-K, the information called for by Items 10, 11, 12 and 13 is
incorporated herein by reference to the definitive proxy statement. Neither
the report on Executive Compensation nor the performance graph included in
the Company's definitive proxy statement shall be deemed incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) - Financial Statements, Schedules and Exhibits
(1) - Financial Statements
See Index at Item 8
(2) - Financial Statement Schedules
See Index at Item 8
(3) - Exhibits
Exhibit No.
3(a) - Delta's Amended and Restated Articles of Incorporation
are incorporated herein by reference to Exhibit 3(a) to
Delta's Form 10-Q for the period ended March 31, 1990.
3(b) - Delta's By-Laws as amended August 21, 1996 are incorporated
herein by reference to Exhibit 3(b) to Delta's Form 10-K for
the period ended June 30, 1996.
4(a) - The Indenture dated September 1, 1993 in respect of
6 5/8% Debentures due October 1, 2023, is incorporated
herein by reference to Exhibit 4(e) to Delta's Form S-2
dated September 2, 1993.
4(b) - The Indenture dated July 1, 1996 in respect of 8.3%
Debentures due August 1, 2026, is incorporated
herein by reference to Exhibit 4(c) to Delta's Form S-2 dated
June 21, 1996.
4(c) - The Indenture dated March 1, 1998 in respect of 7.15%
Debentures due April 1, 2018, is incorporated herein by reference
to Exhibit 4(d) to Delta's Form S-2 dated March 11, 1998.
10(a) - Certain of Delta's material natural gas supply contracts are
incorporated herein by reference to Exhibit 10 to Delta's
Form 10 for the year ended June 30, 1978 and by reference
to Exhibits C and D to Delta's Form 10-K for the year ended
June 30, 1980.
10(b) - Assignment to Delta by Wiser of its Columbia Service Agreement,
including a copy of said Service Agreement, is incorporated herein
by reference to Exhibit 2(D) to Delta's Form 8-K dated
February 9, 1981.
10(c) - Contract between Tennessee and Delta (amends earlier contract
for Nicholasville and Wilmore Service Areas) is incorporated
herein by reference to Exhibit 10(d) to Delta's Form 10-Q for
the period ended September 30, 1990.
10(d) - Contract between Tennessee and Delta (amends earlier contract
for Jeffersonville Service Area) is incorporated herein by
reference to Exhibit 10(e) to Delta's Form 10-Q for the
period ended September 30, 1990.
10(e) - Contract between Tennessee and Delta (amends earlier contract
for Salt Lick Service Area) is incorporated herein by reference
to Exhibit 10(f) to Delta's Form 10-Q for the period
ended September 30, 1990.
10(f) - Contract between Tennessee and Delta (amends earlier contract
for Berea Service Area) is incorporated herein by reference to
Exhibit 10(g) to Delta's Form 10-Q for the period ended
September 30, 1990.
10(g) - Service Agreements between Columbia and Delta (amends
earlier service agreements for Cumberland, Stanton and
Owingsville service areas) are incorporated herein by
reference to Exhibit 10(h) to Delta's Form 10-Q for the
period ended September 30, 1990.
10(h) - Employment agreements between Delta and six officers, those
being John B. Brown, Johnny L. Caudill, John F. Hall,
Robert C. Hazelrigg, Alan L. Heath and Glenn R. Jennings,
are incorporated herein by reference to Exhibit 10(k) to
Delta's Form 10-Q for the period ended March 31, 2000.
10(i) - Agreement between Delta and Harrison D. Peet, Chairman
of the Board, is incorporated herein by reference to Exhibit 10(l)
to Delta's Form 10-Q for the period ended March 31, 2000.
12 - Computation of the Consolidated Ratio of Earnings to Fixed
Charges.
21 - Subsidiaries of the Registrant.
23 - Consent of Independent Public Accountants.
27 - Financial Data Schedule.
(b) Reports on 8-K.
No reports on Form 8-K were filed during the three months ended June 30, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on the
6th day of September, 2000.
DELTA NATURAL GAS COMPANY, INC.
By: /s/Glenn R. Jennings
Glenn R. Jennings, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
(i) Principal Executive Officer:
/s/Glenn R. Jennings____________ President, Chief Executive September 6, 2000
(Glenn R. Jennings) Officer and Vice Chairman
of the Board
(ii) Principal Financial Officer:
/s/John F. Hall Vice-President - Finance, September 6, 2000
(John F. Hall) Secretary and Treasurer
(iii) Principal Accounting Officer:
/s/John B. Brown Controller September 6, 2000
(John B. Brown)
(iv) A Majority of the Board of Directors:
/s/H. D. Peet Chairman of the Board September 6, 2000
(H. D. Peet)
/s/Donald R. Crowe Director September 6, 2000
(Donald R. Crowe)
/s/Jane Hylton Green Director September 6, 2000
(Jane Hylton Green)
____________________________ Director September 6, 2000
(Lanny D. Greer)
/s/Billy Joe Hall Director September 6, 2000
(Billy Joe Hall)
/s/Lewis N. Melton Director September 6, 2000
(Lewis N. Melton)
/s/Henry C. Thompson Director September 6, 2000
(Henry C. Thompson)
/s/Arthur E. Walker, Jr. Director September 6, 2000
(Arthur E. Walker, Jr.)
Management's Statement of Responsibility for Financial Reporting and Accounting
Management is responsible for the preparation, presentation and integrity of
the financial statements and other financial information in this report. In
preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amount of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reporting period.
Actual results could differ from these estimates. The Company maintains a
system of accounting and internal controls which management believes
provides reasonable assurance that the accounting records are reliable for
purposes of preparing financial statements and that the assets are properly
accounted for and protected. The Board of Directors pursues its oversight
role for these financial statements through its Audit Committee which
consists of four outside directors. The Audit Committee meets periodically
with management to review the work and monitor the discharge of their
responsibilities. The Audit Committee also meets periodically with the
Company's internal auditor as well as Arthur Andersen LLP, the independent
auditors, who have full and free access to the Audit Committee, with or
without management present, to discuss internal accounting control,
auditing and financial reporting matters.
Glenn R. Jennings John F. Hall John B. Brown
President & Chief Executive Vice President - Finance, Controller
Officer Secretary & Treasurer
Report of Independent Public Accountants
To the Board of Directors and Shareholders of Delta Natural Gas Company, Inc.:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of DELTA NATURAL GAS COMPANY, INC. (a Kentucky corporation)
and subsidiary companies as of June 30, 2000 and 1999, and the related
consolidated statements of income, cash flows and changes in shareholders'
equity for each of the three years in the period ended June 30, 2000. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Delta Natural Gas
Company, Inc. and subsidiary companies as of June 30, 2000 and 1999, and the
results of their operations and their cash flows for each of the three years
in the period ended June 30, 2000, in conformity with accounting principles
generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in the Index to
Consolidated Financial Statements and Schedule is presented for purposes of
complying with the Securities and Exchange Commission rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial
data required to be set forth therein in relation to the basic financial
statements taken as a whole.
Arthur Andersen LLP
Louisville, Kentucky
August 15, 2000
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Income
For the Years Ended June 30, 2000 1999 1998
Operating Revenues .............. $45,926,775 $ 38,672,238 $ 44,258,000
Operating Expenses
Purchased gas ................ $21,214,834 $ 16,467,988 $ 22,499,488
Operation and maintenance
(Note 1) ................... 9,139,143 9,137,107 8,968,213
Depreciation and depletion
(Note 1) ................... 3,989,090 3,840,996 3,445,382
Taxes other than income
taxes ...................... 1,338,486 1,334,977 1,212,058
Income taxes (Note 2) ........ 2,068,500 1,239,100 1,401,000
Total operating expenses... $37,750,053 $ 32,020,168 $ 37,526,141
Operating Income ................ $ 8,176,722 $ 6,652,070 $ 6,731,859
Other Income and Deductions, Net. 42,866 33,660 67,911
Income Before Interest Charges... $ 8,219,588 $ 6,685,730 $ 6,799,770
Interest Charges
Interest on long-term debt.... $ 3,845,565 $ 3,912,826 $ 3,326,681
Other interest ............... 748,006 460,950 897,265
Amortization of debt expense 161,160 161,160 124,552
Total interest charges .... $ 4,754,731 $ 4,534,936 $ 4,348,498
Net Income $ 3,464,857 $ 2,150,794 $ 2,451,272
Weighted Average Number of
Common Shares Outstanding ..... 2,433,397 2,394,181 2,359,598
Basic and Diluted Earnings Per
Common Share..................... $ 1.42 $ .90 $ 1.04
Dividends Declared Per Common
Share ......................... $ 1.14 $ 1.14 $ 1.14
The accompanying notes to consolidated financial statements are an integral
part of these statements.
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Cash Flows
For the Years Ended June 30, 2000 1999 1998
Cash Flows From Operating Activities
Net income ...................... $ 3,464,857 $ 2,150,794 $ 2,451,272
Adjustments to reconcile net
income to net cash from
operating activities
Depreciation, depletion and
amortization ............... 4,584,976 4,370,197 3,755,929
Deferred income taxes and
investment tax credits ..... 1,446,444 662,880 (29,400)
Other - net .................. 841,877 730,601 698,584
(Increase) decrease in assets
Accounts receivable .......... (1,160,957) 908,917 (124,168)
Gas in storage ............... 48,005 (1,451,177) (840,829)
Materials and supplies ....... 200,689 (144,468) 252,746
Prepayments .................. (51,964) 53,642 70,648
Other assets ................. (906,274) (875,815) (55,440)
Increase (decrease) in
liabilities
Accounts payable ............. 1,630,760 273,755 (336,089)
Refunds due customers ........ 2,679 (75,774) (460,751)
Advance recovery of gas cost.. (1,124,219) 50,446 3,328,625
Accrued taxes ................ 284,891 (131,091) (46,549)
Other current liabilities .... (302,553) 160,329 257,055
Advances for construction and
other ...................... (131,706) (2,960) 404
Net cash provided by
operating activities .... $ 8,827,505 $ 6,680,276 $ 8,922,037
Cash Flows From Investing Activities
Capital expenditures ............ $ (8,795,653) $ (7,982,143) $(11,193,613)
Net cash used in investing
activities .............. $ (8,795,653) $ (7,982,143) $(11,193,613)
The accompanying notes to consolidated financial statements are an integral
part of these statements.
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Cash Flows (continued)
For the Years Ended June 30, 2000 1999 1998
Cash Flows From Financing
Activities
Dividends on common stock ....... $ (2,777,372) $ (2,728,997) $ (2,690,233)
Issuance of common stock, net.... 697,926 679,916 574,686
Issuance of debentures, net...... - - 23,837,795
Repayment of long-term debt ..... (1,735,000) (339,000) (10,822,559)
Issuance of notes payable........ 27,810,000 21,615,000 26,200,000
Repayment of notes payable....... (23,880,000) (17,795,000) (35,190,000)
Net cash provided by
financing activities $ 115,554 $ 1,431,919 $ 1,909,689
Net Increase (Decrease) in Cash and
Cash Equivalents ................... $ 147,406 $ 130,052 $ (361,887)
Cash and Cash Equivalents,
Beginning of Year .................. 248,588 118,536 480,423
Cash and Cash Equivalents,
End of Year ........................ $ 395,994 $ 248,588 $ 118,536
Supplemental Disclosures of Cash
Flow Information
Cash paid during the year for:
Interest $ 4,626,542 $ 4,685,458 $ 4,291,005
Income taxes (net of refunds) $ 533,908 $ 712,023 $ 1,642,964
The accompanying notes to consolidated financial statements are an integral part
of these statements.
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Balance Sheets
As of June 30, 2000 1999
Assets
Gas Utility Plant, at cost ............... $141,986,856 $133,804,954
Less - Accumulated provision for
depreciation ....................... (42,067,229) (38,308,798)
Net gas plant $ 99,919,627 $ 95,496,156
Current Assets
Cash and cash equivalents ............. $ 395,994 $ 248,588
Accounts receivable, less accumulated
provisions for doubtful accounts of
$144,380 and $138,514 in 2000 and
1999, respectively .................. 2,790,840 1,629,883
Gas in storage, at average cost ....... 2,963,137 3,501,177
Materials and supplies, at first-in,
first-out cost ...................... 464,141 664,830
Prepayments ........................... 240,053 188,089
Total current assets $ 6,854,165 $ 6,232,567
Other Assets
Cash surrender value of officers' life
insurance (face amount of $1,236,009) $ 356,753 $ 339,450
Note receivable from officer .......... 152,000 122,000
Unamortized debt expense and other
(Note 6) ............................ 5,636,374 5,282,944
Total other assets $ 6,145,127 $ 5,744,394
Total assets $112,918,919 $107,473,117
The accompanying notes to consolidated financial statements are an integral
part of these statements.
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Balance Sheets (continued)
As of June 30, 2000 1999
Liabilities and Shareholders' Equity
Capitalization (See Consolidated Statements
of Capitalization)
Common shareholders' equity .......... $ 31,297,418 $ 29,912,007
Long-term debt (Notes 6 and 7)........ 50,723,795 51,699,700
Total capitalization .............. $ 82,021,213 $ 81,611,707
Current Liabilities
Notes payable (Note 5) ............... $ 9,625,000 $ 5,695,000
Current portion of long-term
debt (Notes 6 and 7)................ 1,750,000 2,450,000
Accounts payable ..................... 3,955,143 2,324,383
Accrued taxes ........................ 1,239,566 954,675
Refunds due customers ................ 44,028 41,349
Advance recovery of gas costs ........ 74,246 1,198,465
Customers' deposits .................. 421,900 524,263
Accrued interest on debt ............. 1,192,932 1,225,903
Accrued vacation ..................... 519,066 584,014
Other accrued liabilities ............ 391,247 493,518
Total current liabilities $ 19,213,128 $ 15,491,570
Deferred Credits and Other
Deferred income taxes ................ $ 10,403,299 $ 8,826,655
Investment tax credits ............... 504,400 567,800
Regulatory liability (Note 2) ........ 693,825 760,625
Advances for construction and other... 83,054 214,760
Total deferred credits and other .. $ 11,684,578 $ 10,369,840
Commitments and Contingencies (Note 8) .. ____________ ____________
Total liabilities and
shareholders' equity ......... $112,918,919 $107,473,117
The accompanying notes to consolidated financial statements are an
integral part of these statements.
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Changes in
Shareholders' Equity
For the Years Ended June 30, 2000 1999 1998
Common Shares
Balance, beginning of year ......... $ 2,413,942 $ 2,375,093 $ 2,342,223
$1.00 par value of 45,125, 38,849
and 32,870 shares issued in 2000,
1999 and 1998, respectively
Dividend reinvestment and stock
purchase plan ............... 37,499 32,551 27,124
Employee stock purchase plan and
other ......................... 7,626 6,298 5,746
Balance, end of year ............... $ 2,459,067 $ 2,413,942 $ 2,375,093
Premium on Common Shares
Balance, beginning of year ......... $ 28,386,194 $ 27,745,127 $ 27,203,311
Premium on issuance of common shares
Dividend reinvestment and stock
purchase plan ................ 533,760 536,520 446,432
Employee stock purchase plan and
other ..................... 119,041 104,547 95,384
Balance, end of year .............. $ 29,038,995 $ 28,386,194 $ 27,745,127
Capital Stock Expense
Balance, beginning and end of year $ (1,917,020) $ (1,917,020) $ (1,917,020)
Retained Earnings
Balance, beginning of year ........ $ 1,028,891 $ 1,607,094 $ 1,846,055
Net income ...................... 3,464,857 2,150,794 2,451,272
Cash dividends declared on common
shares (See Consolidated
Statements of Income for rates). (2,777,372) (2,728,997) (2,690,233)
Balance, end of year .............. $ 1,716,376 $ 1,028,891 $ 1,607,094
The accompanying notes to consolidated financial statements are an integral
part of these statements.
Delta Natural Gas Company, Inc. and Subsidiary Companies
Consolidated Statements of Capitalization
As of June 30, 2000 1999
Common Shareholders' Equity
Common shares, par value $1.00 per share
(Notes 3 and 4)
Authorized 6,000,000 shares
Issued and outstanding 2,459,067 and
2,413,942 shares in 2000 and
1999, respectively ................... $ 2,459,067 $ 2,413,942
Premium on common shares .................. 29,038,995 28,386,194
Capital stock expense ..................... (1,917,020) (1,917,020)
Retained earnings (Note 6) ................ 1,716,376 1,028,891
Total common shareholders' equity ...... $31,297,418 $29,912,007
Long-Term Debt (Notes 6 and 7)
Debentures, 8.3%, due 2026 ................ $14,925,000 $15,000,000
Debentures, 6 5/8%, due 2023 .............. 12,243,000 12,886,000
Debentures, 7.15%, due 2018 . . . . . . . . 24,668,000 24,985,000
Promissory note from acquisition of under-
ground storage, non-interest bearing,
due through 2001 (less unamortized
discount of $62,205 and $121,300 in
2000 and 1999, respectively) 637,795 1,278,700
Total long-term debt ................. $52,473,795 $54,149,700
Less amounts due within one year,
included in current liabilities ....... (1,750,000) (2,450,000)
Net long-term debt ................... $50,723,795 $51,699,700
Total capitalization .............. $82,021,213 $81,611,707
The accompanying notes to consolidated financial statements are an
integral part of these statements.
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
(a) Principles of Consolidation -- Delta Natural Gas Company, Inc. ("Delta" or
"the Company") has three wholly-owned subsidiaries. Delta Resources, Inc.
("Delta 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, to customers not on Delta's system,
and to Delta for system supply. Enpro, Inc. owns and operates production
properties and undeveloped acreage. Deltran, Inc., which operated an
underground natural gas storage field that it leased from Delta through
December 31, 1999, was dissolved during February, 2000. All subsidiaries of
Delta are included in the consolidated financial statements. Intercompany
balances and transactions have been eliminated.
(b) Cash Equivalents -- For the purposes of the Consolidated Statements of
Cash Flows, all temporary cash investments with a maturity of three months
or less at the date of purchase are considered cash equivalents.
(c) Depreciation -- The Company determines its provision for depreciation
using the straight-line method and by the application of rates to various
classes of utility plant. The rates are based upon the estimated service
lives of the properties and were equivalent to composite rates of 3.1%,
3.2% and 3.1% of average depreciable plant for 2000, 1999 and 1998,
respectively.
(d) Maintenance -- All expenditures for maintenance and repairs of units of
property are charged to the appropriate maintenance expense accounts. A
betterment or replacement of a unit of property is accounted for as an
addition and retirement of utility plant. At the time of such a retirement,
the accumulated provision for depreciation is charged with the original cost
of the property retired and also for the net cost of removal.
(e) Gas Cost Recovery -- Delta has a Gas Cost Recovery ("GCR") clause which
provides for a dollar-tracker that matches revenues and gas costs and
provides eventual dollar-for-dollar recovery of all gas costs incurred.
The Company expenses gas costs based on the amount of gas costs recovered
through revenue. Any differences between actual gas costs and those
estimated costs billed are deferred and reflected in the computation of
future billings to customers using the GCR mechanism.
(f) Revenue Recognition -- The Company records revenues as billed to its
customers on a monthly meter reading cycle. At the end of each month, gas
service which has been rendered from the latest date of each cycle meter
reading to the month-end is unbilled.
(g) Revenues and Customer Receivables -- The Company has 40,000 customers in
central and southeastern Kentucky. Revenues and customer receivables arise
primarily from sales of natural gas to customers and from transportation
services for others. Provisions for doubtful accounts are recorded to
reflect the expected net realizable value of accounts receivable.
(h) Use of Estimates -- The preparation of financial statements in conformity
with accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
(i) New Accounting Pronouncements -- Delta adopted SFAS No. 128, "Earnings per
Share", during fiscal 1998. The adoption of this standard had no effect
upon current or prior period earnings per common share.
Delta adopted SFAS No. 130, "Comprehensive Income", during fiscal 1999. SFAS
No. 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial
statements. The adoption of this statement had no impact on the financial
statements of the Company.
Delta adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information", and SFAS No. 132, "Employers' Disclosures About
Pensions and Other Postretirement Benefits", during fiscal 1999. These
statements do not affect the accounting recognition or measurements of
transactions, but rather require expanded disclosures regarding financial
results.
In June, 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 standardizes the
accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. The statement has subsequently
been amended by SFAS No. 137 issued June, 1999 and SFAS No. 138 issued June,
2000. This statement, as amended, is effective for fiscal years beginning
after June 15, 2000, and thus for the Company's fiscal year 2001. Delta is
currently not a party to any derivatives for hedging or other purposes.
Delta has concluded that its contracts for the purchase, sale,
transportation and storage of natural gas constitute "normal purchases and
sales" under SFAS No. 133 and, as such, are not subject to the accounting
requirements of the new standard. Therefore, the Company believes that
adoption of this standard will not have a material effect on its financial
position or results of operations.
(2) Income Taxes
The Company provides for income taxes on temporary differences resulting from
the use of alternative methods of income and expense recognition for financial
and tax reporting purposes. The differences result primarily from the use of
accelerated tax depreciation methods for certain properties versus the
straight-line depreciation method for financial purposes, differences in
recognition of purchased gas cost recoveries and certain other accruals
which are not currently deductible for income tax purposes. Investment tax
credits were deferred for certain periods prior to fiscal 1987 and are being
amortized to income over the estimated useful lives of the applicable
properties. The Company utilizes the liability method for accounting for
income taxes, which requires that deferred income tax assets and liabilities
are computed using tax rates that will be in effect when the book and tax
temporary differences reverse. The change in tax rates applied to
accumulated deferred income taxes may not be immediately recognized in
operating results because of ratemaking treatment. A regulatory liability
has been established to recognize the future revenue requirement impact from
these deferred taxes. The temporary differences which gave rise to the net
accumulated deferred income tax liability for the periods are
as follows:
2000 1999
Deferred Tax Liabilities
Accelerated depreciation $11,521,999 $10,546,000
Accrued pension 988,000 789,700
Debt expense 447,100 467,200
Total $12,957,099 $11,802,900
Deferred Tax Assets
Alternative minimum tax credits $ 1,400,800 $ 1,521,100
Regulatory liabilities 273,700 193,445
Deferred gas cost/unbilled revenue 309,300 718,400
Investment tax credit 199,000 224,000
Other 371,000 319,300
Total $ 2,553,800 $ 2,976,245
Net accumulated deferred
income tax liability $10,403,299 $ 8,826,655
The components of the income tax provision are comprised of the following for
the years ended June 30:
2000 1999 1998
Components of Income Tax Expense
Payable currently
Federal $ 568,100 $ 563,400 $ 1,164,800
State 137,500 63,000 265,600
Total $ 705,600 $ 626,400 $ 1,430,400
Deferred 1,362,900 612,700 (29,400)
Income tax expense $ 2,068,500 $ 1,239,100 $ 1,401,000
Reconciliation of the statutory federal income tax rate to the effective
income tax rate is shown in the table below:
2000 1999 1998
Statutory federal income tax rate 34.0 % 34.0 % 34.0 %
State income taxes net of
federal benefit 5.2 5.2 5.0
Amortization of investment tax credit (1.1) (2.0) (1.8)
Other differences - net (0.4) (0.4) (0.2)
Effective income tax rate 37.7 % 36.8 % 37.0 %
(3) Employee Benefit Plans
(a) Defined Benefit Retirement Plan -- Delta has a trusteed, noncontributory,
defined benefit pension plan covering all eligible employees. Retirement
income is based on the number of years of service and annual rates of
compensation. The Company makes annual contributions equal to the amounts
necessary to fund the plan adequately. The following table provides a
reconciliation of the changes in the plans' benefit obligations and fair
value of assets over the two-year period ended March 31, 2000, and a
statement of the funded status as of March 31 of both years, as recognized
in the Company's consolidated balance sheets at June 30.
2000 1999
Change in Benefit Obligation
Benefit obligation at beginning of year $ 8,286,366 $ 6,745,269
Service cost 535,681 467,417
Interest cost 538,400 471,939
Actuarial loss 91,615 711,063
Effect of curtailment (2,834) -
Benefits paid (1,260,867) (109,322)
Benefit obligation at end of year $ 8,188,361 $ 8,286,366
Change in Plan Assets
Fair value of plan assets at beginning
of year $ 9,188,450 $ 8,637,638
Actual return on plan assets 1,507,558 44,213
Employer contribution 740,908 615,921
Benefits paid (1,260,867) (109,322)
Fair value of plan assets at end of year $ 10,176,049 $ 9,188,450
Funded status $ 1,987,688 $ 902,084
Unrecognized net actuarial loss (gain) (117,267) 512,737
Net transition asset (71,656) (127,183)
Prepaid benefit cost (included in other
assets in the accompanying
balance sheet) $ 1,798,765 $ 1,287,638
The assets of the plan consist primarily of common stocks, bonds and
certificates of deposit. Net pension costs for the years ended June 30
include the following:
2000 1999 1998
Components of Net Periodic Benefit Cost
Service cost $ 535,681 $ 467,417 $ 445,288
Interest cost 538,400 471,939 443,955
Expected return on plan assets (764,449) (715,795) (575,394)
Amortization of net transition asset (42,394) (42,394) (42,394)
Net periodic benefit cost $ 267,238 $ 181,167 $ 271,455
Weighted-Average Assumptions
Discount rate 7.75% 6.50% 7.00%
Expected return on plan assets 8.00% 8.00% 8.00%
Rate of compensation increase 4.00% 4.00% 4.00%
During the plan year ended March 31, 2000, Delta eliminated 16 positions in
conjunction with a workforce reduction plan. Subsequently, 7 additional
positions were eliminated as a result of reorganization of Delta's branch
offices, which was completed by June 30, 2000. These events resulted in
curtailment treatment in the pension plan in accordance with SFAS 88,
"Employers' Accounting for Settlements and Curtailments of Defined Benefit
Pension Plans and for Termination Benefits". The combined impact of the
curtailment gain, the savings in salary expense, and the cost of one time
payments made to severed employees was not material to current year results
of operations.
SFAS No. 106, "Employers' Accounting for Post-Retirement Benefits", and SFAS
No. 112, "Employers' Accounting for Post-Employment Benefits", do not affect
the Company, as Delta does not provide benefits for post-retirement or post-
employment other than the pension plan for retired employees.
(b) Employee Savings Plan -- The Company has an Employee Savings Plan
("Savings Plan") under which eligible employees may elect to contribute any
whole percentage between 2% and 15% of their annual compensation. The
Company will match 50% of the employee's contribution up to a maximum
Company contribution of 2.5% of the employee's annual compensation. For
2000, 1999, and 1998, Delta's Savings Plan expense was $170,800, $169,300
and $156,000, respectively.
(c) Employee Stock Purchase Plan -- The Company has an Employee Stock Purchase
Plan ("Stock Plan") under which qualified permanent employees are eligible to
participate. Under the terms of the Stock Plan, such employees can
contribute on a monthly basis 1% of their annual salary level (as of July 1
of each year) to be used to purchase Delta's common stock. The Company
issues Delta common stock, based upon the fiscal year contributions, using
an average of the last sale price of Delta's stock as quoted in NASDAQ's
National Market System at the close of business for the last five business
days in June and matches those shares so purchased. Therefore, stock with an
equivalent market value of $100,300 was issued in July, 2000. The
continuation and terms of the Stock Plan are subject to approval by Delta's
Board of Directors on an annual basis. Delta's Board has continued the
Stock Plan through June 30, 2001.
(4) Dividend Reinvestment and Stock Purchase Plan
The Company's Dividend Reinvestment and Stock Purchase Plan ("Reinvestment
Plan") provides that shareholders of record can reinvest dividends and also
make limited additional investments of up to $50,000 per year in shares of
common stock of the Company. Under the Reinvestment Plan the Company issued
37,499, 32,551 and 27,124 shares in 2000, 1999 and 1998, respectively.
Delta reserved 200,000 shares for issuance under the Reinvestment Plan in
December, 1994, and as of June 30, 2000 there were 26,430 shares still
available for issuance. The Company plans to reserve additional shares
under the plan during fiscal 2001.
(5) Notes Payable and Line of Credit
Substantially all of the cash balances of Delta are maintained to compensate
the respective banks for banking services and to obtain lines of credit;
however, no specific amounts have been designated as compensating balances,
and Delta has the right of withdrawal of such funds. At June 30, 2000 and
1999, the available line of credit was $25,000,000 of which $9,625,000 and
$5,695,000 had been borrowed at an interest rate of 6.51% and 5.51%, for
2000 and 1999, respectively. The maximum amount borrowed during 2000 and
1999 was $16,700,000 and $9,435,000, respectively. The interest on this
line is, at the option of Delta, either at the daily prime rate or is based
upon certificate of deposit rates. The current line of credit must be
renewed during November, 2000.
Short-term borrowings were repaid in March, 1998, with the net proceeds of
$24,100,000 from the sale of $25,000,000 of debentures. The net proceeds
were also used to redeem the Company's 9% Debentures that would have matured
in April, 2011. The redemption of this debt, the outstanding principal
amount of which was $10,000,000, was completed in April, 1998.
(6) Long-Term Debt
In March, 1998 Delta issued $25,000,000 of 7.15% Debentures that mature in
March, 2018. Redemption of up to $25,000 annually will be made on behalf
of deceased holders within 60 days of notice, subject to an annual aggregate
$750,000 limitation. The 7.15% Debentures can be redeemed by the Company
after April 1, 2003. Restrictions under the indenture agreement covering
the 7.15% Debentures include, among other things, a restriction whereby
dividend payments cannot be made unless consolidated shareholders' equity of
the Company exceeds $21,500,000. No retained earnings are restricted under
the provisions of the indenture.
In July, 1996 Delta issued $15,000,000 of 8.3% Debentures that mature in
July, 2026. Redemption on behalf of deceased holders within 60 days of
notice of up to $25,000 per holder will be made annually, subject to an
annual aggregate limitation of $500,000. The 8.3% Debentures can be
redeemed by the Company beginning in August, 2001 at a 5% premium, such
premium declining ratably until it ceases in August, 2006.
In October, 1993 Delta issued $15,000,000 of 6 5/8% Debentures that mature in
October, 2023. Each holder may require redemption of up to $25,000 annually,
subject to an annual aggregate limitation of $500,000. Such redemption will
also be made on behalf of deceased holders within 60 days of notice, subject
to the annual aggregate $500,000 limitation. The 6 5/8% Debentures can be
redeemed by the Company beginning in October, 1998 at a 5% premium, such
premium declining ratably until it ceases in October, 2003. The Company may
not assume any additional mortgage indebtedness in excess of $2 million
without effectively securing the 6 5/8% Debentures equally to such
additional indebtedness.
Debt issuance expenses are deferred and amortized over the terms of the
related debt. Call premium in 1998 of $300,000 and loss on extinguishment
of debt of $332,000 was deferred and is being amortized over the term of the
related debt consistent with regulatory treatment.
A non-interest bearing promissory note was issued by Delta in November, 1995
in the amount of $1,800,000. The remaining installment of $700,000 due under
this note is payable in 2002. The note was issued when Delta purchased
leases and depleted gas wells to develop them for the underground storage of
natural gas. The promissory note installment is secured by escrow
of 40,000 shares of Delta's common stock. These shares will be issued to
the holder of the promissory note only in the event of default in payment by
Delta.
(7) Fair Values of Financial Instruments
The fair value of the Company's debentures is estimated using discounted cash
flow analysis, based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements. The fair value of the Company's
debentures at June 30, 2000 and 1999 was estimated to be $47,152,000 and
$49,810,000, respectively. The carrying amount in the accompanying
consolidated financial statements as of June 30, 2000 and 1999 is
$51,836,000 and $52,871,000, respectively.
The carrying amount of the Company's other financial instruments including
cash equivalents, accounts receivable, notes receivable, accounts payable
and the non-interest bearing promissory note approximate their fair value.
(8) Commitments and Contingencies
The Company has entered into individual employment agreements with its six
officers and an agreement with the Chairman of the Board. The agreements
expire or may be terminated at various times. The agreements provide for
continuing monthly payments or lump sum payments and continuation of certain
benefits over varying periods in the event employment is altered or
terminated following certain changes in ownership of the Company.
(9) Rates
Reference is made to "Regulatory Matters" herein with respect to rate matters.
(10) Operating Segments
Delta adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information", during fiscal 1999. SFAS No. 131 established standards
for reporting information about operating segments in annual financial
statements and requires selected information about operating segments in
interim financial reports issued to stockholders. It also established
standards for related disclosures about products and services in geographic
areas. Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making
group, in deciding how to allocate resources and in assessing performance.
Delta's chief operating decision making group is the Company's officers.
The Company has two segments: (i) a regulated natural gas distribution,
transmission and storage segment, and (ii) an unregulated segment which
participates in related ventures, consisting of natural gas marketing and
production. The Company operates in a single geographic area of
central and southeastern Kentucky.
The segments follow the same accounting policies as described in the Summary
of Significant Accounting Policies and Principles of Consolidation in Note 1
of the Notes to Consolidated Financial Statements. Because the Company
earns revenues on the transportation of natural gas in its regulated
segment, management evaluates the performance of the unregulated
natural gas marketing subsidiaries based on the additional margin added from
their sales and their ability to maintain contact with customers who choose
to transport on the regulated system. Inter-segment transportation revenue/
expense is recorded at Delta's tariff rates. Transfer pricing for sales of
gas between segments is at cost. Operating expenses, taxes and interest are
allocated to the unregulated segment.
Segment information is shown below for the periods:
($000) 2000 1999 1998
Revenues
Regulated
External customers 33,314 30,000 34,550
Intersegment 4,606 5,496 5,187
Total regulated 37,920 35,496 39,737
Non-regulated
External customers 12,613 8,672 9,708
Intersegment 16,249 15,881 14,467
Total non-regulated 28,862 24,553 24,175
Eliminations for intersegment (20,855) (21,377) (19,654)
Total operating
revenues 45,927 38,672 44,258
($000) 2000 1999 1998
Expenses
Operating expenses
Regulated
Depreciation 3,940 3,804 3,399
Income taxes 1,657 1,001 1,089
Other 24,792 24,398 28,984
Total regulated 30,389 29,203 33,472
Non-regulated
Depreciation 49 37 46
Income taxes 412 238 312
Other 27,755 23,838 23,277
Total non-regulated 28,216 24,113 23,635
Eliminations for intersegment (20,855) (21,296) (19,581)
Total operating expenses 37,750 32,020 37,526
Other Income and Deductions
Regulated 43 25 37
Non-regulated - 9 31
Total other income and
deductions 43 34 68
Interest Charges
Regulated 4,766 4,552 4,380
Non-regulated 41 64 42
Eliminations for intersegment (52) (81) (73)
Total interest charges 4,755 4,535 4,349
Net Income
Regulated 2,808 1,766 1,922
Non-regulated 658 385 529
Total net income 3,465 2,151 2,451
Assets
Regulated 108,876 105,716 101,016
Non-regulated 4,043 1,757 1,851
Total assets 112,919 107,473 102,867
Capital Expenditures
Regulated 8,796 7,981 11,192
Non-regulated - 1 2
Total capital expenditures 8,796 7,982 11,194
(11) Quarterly Financial Data (Unaudited)
The quarterly data reflects, in the opinion of management, all normal
recurring adjustments necessary to present fairly the results for the
interim periods.
Quarter Operating Operating Net Basic and Diluted
Ended Revenues Income Income (Loss) Earnings(Loss) per
Common Share(a)
Fiscal 2000
September 30 $ 4,753,043 $ 344,622 $ (801,859) $ (.33)
December 31 9,964,446 1,869,292 633,318 .26
March 31 20,708,156 4,609,595 3,400,687 1.39
June 30 10,501,130 1,353,213 232,711 .09
Fiscal 1999
September 30 $ 4,938,135 $ 431,693 $ (693,777) $ (.29)
December 31 8,630,074 1,415,274 252,775 .11
March 31 16,890,711 3,651,078 2,515,336 1.05
June 30 8,213,318 1,154,025 76,460 .03
(a) Quarterly earnings per share may not equal annual earnings per share due
to changes in shares outstanding.
SCHEDULE II
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 2000, 1999 AND 1998
Column A Column B Column C Column D Column E
Additions Deductions
Balance Charged to
at Charged to Other Amounts Balance
Beginning Costs and Accounts- Charged Off at End
Description of Period Expenses Recoveries or Paid of Period
Deducted From the Asset to
Which it Applies - Allowance
for doubtful accounts for
the years ended:
June 30, 2000 $ 138,514 $ 213,000 $ 39,086 $ 246,220 $ 144,380
June 30, 1999 $ 120,001 $ 213,385 $ 48,888 $ 243,760 $ 138,514
June 30, 1998 $ 113,945 $ 369,870 $ 46,013 $ 409,827 $ 120,001
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
COMPUTATION OF THE CONSOLIDATED RATIO OF EARNINGS
TO FIXED CHARGES
2000 1999 1998 1997 1996
Earnings:
Net income. . . . . . . $3,464,858 $2,150,794 $2,451,272 $1,724,265 $2,661,349
Provisions for income
taxes . . . . . . . . 2,068,500 1,239,100 1,401,000 964,800 1,559,500
Fixed charges . . . . . 4,754,731 4,534,936 4,348,498 3,632,191 2,808,209
Total $10,288,089 $7,924,830 $8,200,770 $6,321,256 $7,029,058
Fixed Charges:
Interest on debt. . . $ 4,593,571 $4,373,776 $4,223,946 $3,516,825 $2,719,409
Amortization of debt
expense. . . . . . . 161,160 161,160 124,552 115,366 88,800
Total $ 4,754,731 $4,534,936 $4,348,498 $3,632,191 $2,808,209
Ratio of Earnings to
Fixed Charges 2.16x 1.75x 1.89x 1.74x 2.50x
EXHIBIT 21
Subsidiaries of the Registrant
Delgasco, Inc., Enpro, Inc. and Delta Resources, Inc. are wholly-owned
subsidiaries of the Registrant, are incorporated in the state of Kentucky
and do business under their corporate names.
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated August 15, 2000, included in this Form 10-K, into the
Company's previously filed Registration Statement No. 33-56689, relating to
the Dividend Reinvestment and Stock Purchase Plan of the Company.
Arthur Andersen LLP
Louisville, Kentucky
September 6, 2000
