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, 2000
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)
859-744-6171
(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
2,471,960 Shares Outstanding as of September 30, 2000.
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Twelve Months Ended
September 30 September 30
2000 1999 2000 1999
OPERATING REVENUES $ 6,722,188 $ 4,753,043 $ 47,895,922 $ 38,487,145
OPERATING EXPENSES
Purchased gas $ 3,757,006 $ 1,259,111 $ 23,712,730 $ 16,206,022
Operation and
maintenance 2,119,742 2,308,117 8,950,769 9,293,176
Depreciation and
depletion 983,698 974,067 3,998,722 3,876,133
Taxes other than
income taxes 343,847 347,201 1,335,132 1,371,017
Income taxes (634,175) (480,075) 1,914,400 1,175,800
Total operating
expenses $ 6,570,118 $ 4,408,421 $ 39,911,753 $ 31,922,148
OPERATING INCOME $ 152,070 $ 344,622 $ 7,984,169 $ 6,564,997
OTHER INCOME AND
DEDUCTIONS, NET 13,188 4,582 51,473 33,646
INCOME BEFORE INTEREST
CHARGES $ 165,258 $ 349,204 $ 8,035,642 $ 6,598,643
INTEREST CHARGES 1,221,068 1,151,063 4,824,736 4,555,934
NET INCOME (LOSS) $(1,055,810) $ (801,859) $ 3,210,906 $ 2,042,709
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 2,466,031 2,417,032 2,445,580 2,402,942
BASIC AND DILUTED
EARNINGS (LOSS)
PER COMMON SHARE $ (.43) $ (.33) $ 1.31 $ 0.85
DIVIDENDS DECLARED
PER COMMON SHARE $ .285 $ .285 $ 1.14 $ 1.14
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
ASSETS September 30, 2000 June 30, 2000 September 30, 1999
GAS UTILITY PLANT $ 143,221,055 $ 141,986,856 $ 136,506,274
Less-Accumulated
provision
for depreciation (42,992,457) (42,067,229) (39,225,816)
Net gas plant $ 100,228,598 $ 99,919,627 $ 97,280,458
CURRENT ASSETS
Cash and cash
equivalents $ 419,842 $ 395,994 $ 182,052
Accounts receivable
- net 1,642,916 2,790,840 623,019
Gas in storage 7,267,319 2,963,137 5,591,253
Deferred gas costs 768,398 - -
Materials and supplies 485,343 464,141 723,914
Prepayments 907,179 399,853 685,846
Total current
assets $ 11,490,997 $ 7,013,965 $ 7,806,084
OTHER ASSETS
Cash surrender value
of officers' life
insurance $ 356,753 $ 356,753 $ 339,450
Note receivable from
officer 146,000 152,000 116,000
Unamortized debt
expense and other 5,330,348 5,476,574 5,042,731
Total other
assets $ 5,833,101 $ 5,985,327 $ 5,498,181
Total assets $117,552,696 $112,918,919 $110,584,723
LIABILITIES AND SHAREHOLDERS' EQUITY
CAPITALIZATION
Common shareholders'
equity $ 29,746,269 $ 31,297,418 $ 28,662,526
Long-term debt 50,508,022 50,723,795 51,570,208
Total capitalization $ 80,254,291 $ 82,021,213 $ 80,232,734
CURRENT LIABILITIES
Notes payable $ 16,800,000 $ 9,625,000 $ 10,980,000
Current portion of
long-term debt 1,750,000 1,750,000 2,450,000
Accounts payable 3,829,396 3,955,143 2,474,303
Accrued taxes 200,005 1,239,566 461,682
Refunds due customers 42,918 44,028 39,002
Advance recovery of
gas costs - 74,246 609,839
Customers' deposits 431,545 421,900 544,469
Accrued interest
on debt 1,731,292 1,192,932 1,574,214
Accrued vacation 519,066 519,066 584,014
Other accrued liabilities 315,980 391,247 388,415
Total current
liabilities $ 25,620,202 $ 19,213,128 $ 20,105,938
DEFERRED CREDITS AND OTHER
Deferred income taxes $ 10,403,299 $ 10,403,299 $ 8,826,655
Investment tax credits 504,400 504,400 567,800
Regulatory liability 687,450 693,825 754,250
Advances for construc-
tion and other 83,054 83,054 97,346
Total deferred
credits and other $ 11,678,203 $ 11,684,578 $ 10,246,051
Total liabilities and
shareholders' equity $117,552,696 $112,918,919 $110,584,723
DELTA NATURAL GAS COMPANY, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended Twelve Months Ended
September 30 September 30
2000 1999 2000 1999
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss) $ (1,055,810) $ (801,859) $ 3,210,906 $ 2,042,709
Adjustments to recon-
cile net income
(loss) to net cash
from operating
activities:
Depreciation, depletion
and amortization 1,144,151 1,059,357 4,633,549 4,090,105
Deferred income taxes and
Investment tax credits (6,375) (6,375) 1,446,444 662,880
Other, net 180,639 174,651 862,566 633,546
(Increase) decrease in other
assets (4,521,430) (2,044,655) (5,449,976) (1,138,423)
Increase (decrease) in
other liabilities (693,680) (199,420) 989,811 779,758
Net cash provided by
(used in) operating
activities $ (4,952,505) $ (1,818,301) $ 5,693,300 $ 7,070,575
CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures $(1,476,308) $(2,933,613) $(7,338,348) $(8,606,999)
Net cash used in
investing
activities $(1,476,308) $ (2,933,613) $(7,338,348) $(8,606,999)
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividends on common
stock $ (703,058) $ (690,460) $ (2,789,970) $(2,740,266)
Issuance of common
stock, net 207,719 242,838 662,808 699,320
Repayment of long-term
debt (227,000) (152,000) (1,810,000) (365,000)
Issuance of notes
payable 10,570,000 7,160,000 24,980,000 21,570,000
Repayment of notes
payable (3,395,000) (1,875,000) (19,160,000) (17,640,000)
Net cash provided
by financing
activities $ 6,452,661 $ 4,685,378 $ 1,882,838 $ 1,524,054
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS $ 23,848 $ (66,536) $ 237,790 $ (12,370)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 395,994 248,588 182,052 194,422
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 419,842 $ 182,052 $ 419,842 $ 182,052
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the period for
Interest $ 642,418 $ 843,042 $ 4,506,498 $ 4,734,443
Income taxes (net
of refunds) $ 297,725 $ 199,531 $ 632,102 $ 531,154
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 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 Delta Resources, to customers not on Delta's
system, and to Delta for system supply. Enpro, Inc. owns and
operates production properties and undeveloped acreage. All
subsidiaries of Delta are included in the consolidated
financial statements. Intercompany balances and transactions
have been eliminated. Reclassifications have been made to
prior year balance sheet amounts to conform with current year
presentation.
(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, 2000 for additional footnote disclosures, including a
summary of significant accounting policies.
(3) 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.
(4) External and intersegment revenues and income (loss) by
business segment are shown below:
($000) Three Months Ended September 30 Twelve Months Ended September 30
2000 1999 2000 1999
Revenues
Regulated
External customers $ 3,522 $ 2,881 $ 33,955 $ 30,007
Intersegment 702 1,281 4,024
5,527
Total regulated $ 4,224 $ 4,162 $ 37,979 $ 35,534
Non-regulated
External customers $ 3,200 $ 1,872 $ 13,941 $ 8,480
Intersegment 9,510 3,842 21,930
13,369
Total non-regulated $ 12,710 $ 5,714 $ 35,871 $ 21,849
Eliminations for intersegment
(10,212)
(5,123)
(25,954)
(18,896)
Total operating revenues $ 6,722 $ 4,753 $ 47,896 $ 38,487
Net Income (Loss)
Regulated $ (1,011) $ (900) $ 2,698 $ 1,694
Non-regulated (45) 98 513 349
Total net income (loss) $ (1,056) $ (802) $ 3,211 $ 2,043
(5) Reference is made to Part II - Item 1 relative to the
status of legal proceedings.
(6) Delta adopted Statement of Financial Accounting
Standards No. 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities" effective
July 1, 2000. The adoption of this standard did not
impact the Company's financial position or results of
operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
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 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 $16,800,000 was borrowed at
September 30, 2000. The line of credit, which is with Bank One,
Kentucky, NA, has been renewed through November, 2001. 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 three and twelve month
periods ending September 30, 2000 and 1999 are summarized below:
Three Months Ended September 30,
2000 1999
Used in operating
activities $ (4,952,505) $ (1,818,301)
Used in investing activities (1,476,308) (2,933,613)
Provided by financing activities 6,452,661 4,685,378
Net increase (decrease) in
cash and cash equivalents $ 23,848 $ (66,536)
Twelve Months Ended September 30,
2000 1999
Provided by operating
activities $ 5,693,300 $ 7,070,575
Used in investing activities (7,338,348) (8,606,999)
Provided by financing activities 1,882,838 1,524,054
Net increase (decrease) in cash
and cash equivalents $ 237,790 $ (12,370)
RESULTS OF OPERATIONS
Operating Revenues
The following table sets forth certain comparisons for
variations in revenues for the three and twelve months ended
September 30, 2000 with the same periods in the preceding year:
Increase (Decrease)
2000 Compared to 1999
Three months ended Twelve months ended
September 30 September 30
Variations in regulated revenues
Gas rates $ 640,500 $ 2,972,100
Weather normalization adjustment - 679,200
Sales volumes 9,600 265,100
Transportation (6,100) 53,400
Other 11,400 26,900
Total $ 655,400 $ 3,996,700
Variations in non-regulated revenues
Gas rates 376,000 934,900
Sales volumes 937,700 4,477,200
Total 1,313,700 5,412,100
Total variations in revenues $1,969,100 $ 9,408,800
Percentage variations in
regulated volumes
Gas sales .4% .9%
Transportation 8.0% 18.3%
Percentage variations in non-
regulated volumes
Gas sales 49.8% 53.7%
Billed heating degree days were 88.4% of thirty year average
("normal") degree days for the twelve months ended September 30,
2000 as compared with 88.7% in 1999.
Operating Expenses
The increases in purchased gas expense of $2,498,000 and
$7,507,000 for the three and twelve months ended September 30,
2000, respectively, were due primarily to the increases in the
cost of gas purchased for retail sales and increased non-
regulated sales volumes.
The changes in income taxes for the three and twelve months
ending September 30, 2000 of $154,000 and $739,000, respectively,
were primarily due to changes in net income.
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, 2000.
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 13, 2000 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)
_/s/John B. Brown__________________
John B. Brown
Controller
