Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. DELTA NATURAL GAS CO INC (277375) 10-K published on Sep 01, 2017 at 12:41 pm
Reporting Period: Jun 29, 2017
(a) Jacob Halberstam, et al v. Delta Natural Gas Company, Inc., et al. Clark Circuit Court, Kentucky. The plaintiff filed this complaint on April 13, 2017, on behalf of himself and all Delta shareholders against Delta, its directors and PNG and Merger Sub. The plaintiff alleges that the defendants breached fiduciary duties to the Delta shareholders and aided and abetted breaches of fiduciary duties in connection with the Merger Agreement, under the terms of which Delta would be merged with and into Merger Sub, with Delta being the surviving corporation and becoming a wholly owned subsidiary of PNG. The plaintiff seeks to enjoin the consummation of the proposed transaction or, if the proposed transaction is closed, damages from Delta’s directors.
(b) Paul Parshall, et al. v. Delta Natural Gas Company, Inc., et al, United States District Court for the Eastern District of Kentucky at Lexington. The plaintiff filed this complaint on April 28, 2017, on behalf of himself and all Delta shareholders against Delta, its directors, PNG, Merger Sub and SteelRiver Infrastructure Fund North America, LP. The plaintiff alleges that the defendants violated Sections 14(a) and 20(a) of the Securities Exchange Act of 1934 in connection with the Merger Agreement. The complaint has been dismissed without prejudice.
Counsel for Delta, counsel for PNG, Merger Sub and SteelRiver Infrastructure Fund North America, LP and counsel for the plaintiffs in the three lawsuits described above have entered a confidential memorandum of understanding dated May 25, 2017, under the terms of which the litigation will be settled, subject to court approval, with Delta making additional disclosures to its shareholders, which has been done. It is anticipated that the plaintiffs will seek an order from the Clark Circuit Court requiring Delta to pay attorneys’ fees and expenses of the plaintiffs. The amount of the anticipated fee request and any amount of settlement is unknown. During 2017, no expense has been recognized related to the fee request or settlement in the Consolidated Statement of Income. Delta is insured for such litigation, subject to a $1 million deductible.
Consolidated income per common share of $0.77 for 2017 decreased, as compared to our consolidated income of $0.78 for 2016, due to incurring $1,612,000 of Merger-related costs which were partially offset by increased non-regulated revenues, net of natural gas costs (as further discussed in Results of Operations). Our non-regulated segment experienced increased revenues, net of natural gas costs, due to increased sales prices for natural gas and natural gas liquids and the sale of our production inventory. Our non-regulated segment produces and stores natural gas which it sells when favorable market conditions arise.
We provide 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 reporting purposes, differences in capitalization thresholds for tax reporting purposes versus financial reporting purposes, differences in recognition of purchased natural gas costs and certain accruals which are not currently deductible for income tax purposes. We utilize the asset and liability method for accounting for income taxes, which requires that deferred income tax assets and liabilities be computed using tax rates that will be in effect when the book and tax temporary differences reverse. Changes in tax rates applied to accumulated deferred income taxes are not immediately recognized in operating results because of ratemaking treatment. A regulatory liability has been established to recognize the regulatory obligation to refund these excess deferred taxes through customer rates. The net deferred income tax liability is presented as non-current in deferred income taxes on the accompanying Consolidated Balance Sheets. The temporary differences which gave rise to the net accumulated deferred income tax liability for the periods are as follows: