Proxy Statement (definitive) (def 14a)

Delta Natural Gas Company, Inc.

3617 Lexington Road

Winchester, Kentucky 40391

Notice To Common Shareholders Of Annual Meeting

To Be Held November 20, 2014

It is our pleasure to invite you to attend our Annual Meeting of Shareholders that will be held at the principal office of the Company, 3617 Lexington Road, Winchester, Kentucky, on Thursday, November 20, 2014 at 10:00 a.m. for the purposes of:


(1)	Ratifying the Audit Committee's appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending June 30, 2015;


(2)	Electing (a) three directors for three year terms expiring in 2017 and (b) one director for a one-year term expiring in 2015;


(3)	Approving, on a non-binding advisory basis, the compensation we paid to our named executive officers for fiscal year 2014;


(4)	Acting on such other business as may properly come before the meeting.

Holders of Common Stock of record at the close of business on October 2, 2014 will be entitled to vote at the meeting. If you plan to attend, please contact us as that will assist us in our planning. You can do this by calling Emily P. Bennett at 1-800-676-1933, extension 1116, or by e-mailing Ms. Bennett at ebennett@deltagas.com.

/s/Glenn R. Jennings

Glenn R. Jennings

Chairman of the Board,

President and Chief Executive Officer

Winchester, Kentucky

October 10, 2014

Regardless of whether you plan to attend the meeting, please vote online, by telephone, or sign, date and mail a proxy card.

Proxy Statement

Delta Natural Gas Company, Inc.

3617 Lexington Road

Winchester, Kentucky 40391

Annual Shareholders' Meeting - November 20, 2014

Our Board of Directors has authorized us to furnish you this proxy statement to solicit proxies for use at our annual meeting of shareholders to be held on November 20, 2014, and at any adjournments. These materials are also available on Delta's website at http://www.deltagas.com/proxy.htm.

2014 Annual Report to Shareholders containing Financial Statements

We are mailing our fiscal 2014 Annual Report to Shareholders containing financial statements along with this proxy statement and proxy to our shareholders on or about October 10, 2014. We will also provide copies of this proxy statement, the accompanying proxy and our fiscal 2014 Annual Report, including financial statements, to brokers, dealers, banks and voting trustees and their nominees for mailing to beneficial owners.

Solicitation Costs

Our directors, officers and regular employees may solicit proxies in person or by telephone, e-mail or other online methods. We will pay all of the expenses of this solicitation of proxies, including reimbursing brokers, dealers, banks and other persons holding our common stock in their names, or in the names of nominees, for their expenses in providing proxy materials to the beneficial owners. Computershare Investor Services, LLC, as part of its duties as our registrar and transfer agent, mails our proxy solicitation materials to our shareholders. Fees for this service are included in the annual fee we pay to Computershare for its services as registrar and transfer agent.

Revoking Your Proxy

You may revoke your proxy at any time before it is exercised by giving notice to our Corporate Secretary, Mr. John B. Brown, Chief Financial Officer, Treasurer and Secretary of Delta, at the address listed at the top of the page.

PROPOSAL 1

Ratification of the Appointment by the Audit Committee of Deloitte & Touche LLP

as the Independent Registered Public Accounting Firm of the Company

for the Fiscal Year Ending June 30, 2015

We are asking our shareholders to ratify the appointment by the Audit Committee of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2015. Deloitte & Touche LLP has served as our independent registered public accounting firm since 2002. The Audit Committee has reappointed Deloitte & Touche LLP as the independent registered public accounting firm to audit our consolidated financial statements and internal control over financial reporting as of and for the fiscal year ending June 30, 2015.

The Audit Committee is solely responsible for selecting the Company's independent registered public accounting firm. Although shareholder ratification of the appointment of Deloitte & Touche LLP is not required by law or the Company's organizational documents, the Board of Directors believes that it is desirable to do so. If the shareholders do not ratify the appointment of Deloitte & Touche LLP, the Audit Committee will consider whether to engage another independent registered public accounting firm.

Recommendation of the Board of Directors

The Board of Directors recommends voting "FOR" the ratification of the appointment by the Audit Committee of Deloitte & Touche LLP as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2015.

PROPOSAL 2

Election of Directors

Our Board of Directors is divided into three classes. Each class has a three-year term that expires at our annual meeting of shareholders in either 2014, 2015 or 2016. We recently amended our By-Laws to increase our Board of Directors' size from 7 members to 8 members. The terms of three directors, Glenn R. Jennings, Lewis N. Melton and Arthur E. Walker, Jr., are scheduled to end in 2014. Lewis N. Melton does not intend to stand for re-election. Glenn R. Jennings and Arthur E. Walker, Jr. are nominated to continue as directors for three-year terms ending in 2017. Fred N. Parker is nominated to serve as a director for a three-year term ending in 2017 and Jacob P. Cline, III is nominated to serve as a director for a one-year term ending in 2015.

If the enclosed proxy is duly executed and received in time for the meeting, and if no contrary specification is made as provided therein, the shares represented by this proxy will be voted for Glenn R. Jennings, Fred N. Parker, Arthur E. Walker, Jr. and Jacob P. Cline, III as directors. If any nominee should refuse or be unable to serve, the proxy will be voted for such person as our Board of Directors shall designate. We presently have no knowledge that any of the nominees will refuse or be unable to serve.

The names of directors and nominees and certain information about them are set forth below. Our Board of Directors has determined that, except for Mr. Jennings, who is an employee of Delta, all directors are "independent", as defined in Rule 5605(a)(2) of the listing standards for the NASDAQ OMX Group.

Recommendation of the Board of Directors

The Board of Directors recommends voting "FOR" the nominees listed on the enclosed proxy, Glenn R. Jennings, Fred N. Parker and Arthur E. Walker, Jr. for three year terms expiring in 2017 and Jacob P. Cline, III, for a one year term expiring in 2015.



Name, Age, Position		Additional Business
Held With Delta and		Experience During
Period of Service		Last Five Years
As Director		And Other Information (1)

Jacob P. Cline, III – 64 Nominee		Mr. Cline founded the Cline Law Office in Middlesboro, Kentucky in 1985 and has developed a practice whose specialties include business transactions, litigation and insurance litigation. Prior to founding the Cline Law Office, Mr. Cline gained experience in corporate law, serving as general counsel for a public corporation in the energy industry. In addition, Mr. Cline serves on the Board of Directors of First State Bancshares, Inc. and First State Financial, Inc. Mr. Cline received his J.D. from the University of Kentucky College of Law and completed an executive program in corporate taxation and labor law at Harvard Law School.

		Delta will benefit from Mr. Cline's expertise in legal, regulatory and business issues, from his legal experience and from his experience serving on bank boards. Further, Mr. Cline is familiar with our service territory and more specifically with our customers in the Bell County and Knox County, Kentucky areas. As a result, our Board of Directors will benefit from Mr. Cline's knowledge of the cultural, political and business climate in Kentucky.

		A current committee member recommended the committee consider Mr. Cline as a Board of Directors' nominee candidate.

Sandra C. Gray (2) – 64 Director – 2012 to present		Named President of Asbury University in Wilmore, Kentucky in 2007, Dr. Gray has a Ph.D. in Public Administration with a finance emphasis and a Masters of Business Administration from the University of Kentucky. Dr. Gray has several years of experience both teaching business and economics at the college level and working in the finance industry. Dr. Gray brings a national view to Delta, with experience coordinating the University's Board of Trustees with its members from several different states while at the same time having experience serving on national not-for-profit boards. Delta's customer base includes many colleges and universities, including Asbury, and Dr. Gray represents the perspectives of that important industry segment of our Company as well as the growing customer areas of Nicholasville and Jessamine County in Kentucky.




Name, Age, Position Held With Delta and Period of Service As Director		Additional Business Experience During Last Five Years And Other Information (1)

Edward J. Holmes (2) – 62 Director – 2012 to present		Mr. Holmes is the founder and President of EHI Consultants. Led by Mr. Holmes since 1995, EHI Consultants provides planning, engineering, environmental, public facilitation, federal support and disadvantaged business enterprise services to its clients. Mr. Holmes gained utility management and regulatory experience as Vice President at Cincinnati Bell Telephone responsible for its business development and regulatory activities. Mr. Holmes served as Vice Chairman of the Kentucky Public Service Commission for eight years, where he was involved at the state and national levels on electric restructuring, water regulatory and natural gas issues. He served as Chair of the Committee on Gas for the National Association of Regulatory Utility Commissioners, as a member of the Gas Technology Institute Advisory Council, as a member of the Interstate Oil and Gas Compact Commission working group on pipeline siting and as a member of the Keystone Group-Final Report on Natural Gas Infrastructure. He has testified before Congress and the Federal Energy Regulatory Commission on energy matters. Our Board benefits from Mr. Holmes' experience as an energy regulator, his knowledge of business and government and his relationships with community and state leaders. His involvement provides the Board with his important familiarity of the issues affecting business and the natural gas industry.


Glenn R. Jennings (3) – 65 Chairman of the Board, President and Chief Executive Officer – Director – 1984 to present		Mr. Jennings currently serves as our Chairman of the Board, President and Chief Executive Officer. He also serves the energy industry as a board member and committee member of the American Gas Association and the Southern Gas Association. He is Chairman of the American Gas Association Small Member Council. He also serves on, and is a past chair of, the Financial Research Institute Advisory Board. Mr. Jennings has worked for over thirty five years for Delta, twenty nine as Chief Executive Officer and nine as Chairman of the Board. Mr. Jennings, a Certified Public Accountant in Kentucky, brings to the Board of Directors his experience as a former internal auditor at Berea College, and as an auditor with Arthur Andersen & Co. specializing in public utility companies. Mr. Jennings' civic involvement includes serving on community boards, including past service as chairman of the board of a local bank and as a member of the Berea, Kentucky City Council. He is currently a member of the Board of Trustees of Berea College, Berea, Kentucky. He is familiar with Delta's service territory and customers in the Madison County, Kentucky area. Mr. Jennings provides the Board experience in all facets of the Company's operations, risks, business strategy, finances, regulation, political and business climate.



Name, Age, Position Held With Delta and Period of Service As Director		Additional Business Experience During Last Five Years And Other Information (1)

Michael J. Kistner (4) – 71 Director – 2002 to present		Mr. Kistner has provided financial consulting since 1996 to clients primarily in Louisville, Kentucky, founding MJK Consulting in 2002. Mr. Kistner has also taught at McKendree University's Radcliff, Kentucky campus.
		A retired audit partner with Arthur Andersen & Co., Mr. Kistner worked for 27 years with the firm, specializing in public utilities and related Securities and Exchange Commission filings. He is a Certified Public Accountant and continues to build on his knowledge of our industry by completing continuing education courses related to public utilities and the SEC. In addition to the utility specific financial accounting and internal control expertise that Mr. Kistner brings to the Board, he also has three years of experience serving as Chief Financial Officer, Chief Administrative Officer and Co-Chief Executive Officer of a men's clothing business, providing additional financial and managerial expertise. Mr. Kistner's qualifications and experience are beneficial in the proper oversight of our financial reporting and financial risk management functions as our designated "Audit Committee financial expert", as defined by Securities and Exchange Commission regulations.

Fred N. Parker – 60 Nominee		Mr. Parker is the President and CEO of Kentucky River Coal Corporation and its subsidiary, Kentucky River Properties LLC. Mr. Parker also serves on the Board of Directors of these two Lexington, Kentucky based land and natural resource management firms. In addition, Mr. Parker serves on the Board of Directors of the Farmers Capital Bank Corporation in Frankfort, Kentucky (NASDAQ: FFKT). Mr. Parker is a Certified Public Accountant, a Chartered Financial Analyst and has a Masters of Business Administration from the University of Kentucky.


		A CEO for many years, Mr. Parker is experienced at directing corporations and will bring strategic insight to Delta’s board. Having both reported to and served on boards, he is also very familiar with board structure and corporate governance responsibilities. In addition to his corporate leadership experience, Mr. Parker possesses relevant technical skills with respect to accounting, finance and investments within the energy industry. Through his serving on a public company board, Mr. Parker possesses valuable knowledge of the Securities and Exchange Commission and NASDAQ OMX, as well as the experience of service on a public company board.

		An attorney with a law firm serving Delta recommended the committee consider Mr. Parker as a board nominee candidate.



Name, Age, Position Held With Delta and Period of Service As Director		Additional Business Experience During Last Five Years And Other Information (1)

Arthur E. Walker, Jr. (3) – 69 Director – 1981 to present		Mr. Walker currently serves as President and principal owner of The Walker Company. The Walker Company, based in Mt. Sterling, Kentucky, performs general and highway construction. Mr. Walker's 30 years of management experience give him insight and experience into the operations, challenges and complex issues facing corporations. He has served on many trade association and community boards and is familiar with Delta's service territory and customers in the Montgomery County, Menifee County and Bath County, Kentucky areas. Our Board also benefits from Mr. Walker's knowledge of the cultural, political and business climate in Kentucky. Mr. Walker provides a rich historical perspective to the Board of Directors, with his father being one of our initial investors who served as a director from 1951-1981.



Michael R. Whitley (4) – 71 Director – 2000 to present		Mr. Whitley's career spanning nearly 35 years was with KU Energy Corporation and later with LG&E Energy Corporation, from which he retired in 1998. Both companies were diversified energy service companies. Non-utility business activities were focused on energy related opportunities and were conducted under a separate subsidiary, KU Capital Corporation. During his tenure, Mr. Whitley served in various leadership positions, including Chairman of the Board, President and Chief Executive Officer. Following the combination of KU Energy Corporation and LG&E Energy Corporation, Mr. Whitley became Vice-Chairman, President and Chief Operating Officer of the merged company. Mr. Whitley's business and civic activities have included service on bank, hospital and business boards and various utility industry involvements. Mr. Whitley's experience managing a major holding company combined with his other business and professional activities brings to the Board his experience and insight with respect to the Company's challenges, opportunities and operations.


(1)	Except for Delta's subsidiaries (Delta Resources, Inc., Delgasco, Inc. and Enpro, Inc.), none of the organizations or companies listed in this column is Delta's parent, subsidiary or affiliate.


(2)	Term expires on date of Annual Meeting of Shareholders in 2016.


(3)	Term expires on November 20, 2014.


(4)	Term expires on date of Annual Meeting of Shareholders in 2015.

Board Leadership, Committees and Meetings

Board Leadership Structure

Glenn R. Jennings serves as our Chairman of the Board, President and Chief Executive Officer. By combining these three positions we are able to take full advantage of Mr. Jennings' knowledge and skill sets by facilitating his efficient and effective execution of his various responsibilities, which include strategic planning, risk oversight, business development and the execution, with management, of day-to-day operations. The combining of the three positions also reduces the potential for duplication of efforts and provides clear leadership for us.

As described below, we have a committee structure that includes our Audit Committee and our Corporate Governance and Compensation Committee. Those two committees are composed entirely of independent directors and oversee critical parts of our operations and governance. See "Audit Committee" and "Corporate Governance and Compensation Committee". We have a lead independent director, currently Mr. Whitley, whose role is to chair Board meetings in the absence of our Chairman of the Board. Our lead independent director chairs our regular meetings comprised solely of independent directors.

We believe that combining the responsibilities of the Chairman of the Board, President and Chief Executive Officer in Mr. Jennings, while at the same time utilizing the governance practices described in the immediately preceding paragraph, provide an appropriate balance between efficiency, on the one hand, and effective board monitoring and independent oversight, on the other.

We do not have a risk management committee or similar committee with delegated authority to manage our overall risk. Instead, we administer our risk oversight function through Mr. Jennings and the full Board.

Audit Committee

We have a separately designated standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. Our Audit Committee is comprised of Mr. Holmes, Mr. Kistner (Chairman) and Mr. Whitley. The committee met four times during fiscal 2014. Our Board of Directors has adopted a written charter for the Audit Committee. A current copy of the Audit Committee's charter is available on our website at www.deltagas.com. Under the terms of the Audit Committee charter, the committee is directly responsible for the appointment, compensation, retention and oversight of the work of our independent registered public accounting firm. The Audit Committee charter also empowers the committee to review audit results and financial statements, review the system of internal control and make reports and recommendations to the Board.

The Audit Committee is composed entirely of directors who are able to read and understand fundamental financial statements, including a company's balance sheet, income statement and cash flow statement, and who are "independent" as defined by applicable listing standards of the NASDAQ OMX Group. Our Board of Directors has determined that Michael J. Kistner is the "Audit Committee financial expert", as defined by Securities and Exchange Commission regulations. Mr. Kistner is "independent", as defined by applicable listing standards of the NASDAQ OMX Group.

Corporate Governance and Compensation Committee

We have a standing Corporate Governance and Compensation Committee comprised of Mr. Melton (Chairman), Dr. Gray, Mr. Walker and Mr. Whitley. The committee met five times during fiscal 2014. Our Board of Directors has adopted a written charter for the Corporate Governance and Compensation Committee. A current copy of the Corporate Governance and Compensation Committee's charter is available on our website at www.deltagas.com.

Under the terms of the Corporate Governance and Compensation Committee charter, the committee is empowered to make recommendations to the Board of Directors as to the compensation of directors and executive officers and other personnel matters. The committee, however, has final authority to grant all awards under our Incentive Compensation Plan. The committee reports all such awards to the full board. See "Compensation Discussion and Analysis" and "Grants of Plan Based Awards".

The Corporate Governance and Compensation Committee's charter has no provision with respect to which the committee may delegate any authority to other persons.

The committee reviews directors' compensation and recommends (except with regard to awards under our Incentive Compensation Plan) changes when appropriate to the full board. The committee engages the services of consultants as needed to assist in evaluating directors' compensation. The committee has periodically employed Mercer, a human resources consulting firm, to study the compensation of directors and executive officers. Mercer has also advised the committee on the development and operation of our Incentive Compensation Plan and our Corporate Governance Guidelines. The committee considered the results of Mercer's earlier work as it determined compensation for fiscal 2014. Mercer completed, in April, 2014, at the Committee's request an evaluation of the competitiveness of our executive compensation and benefits programs and also a review of the competitiveness of our outside director compensation program. The Committee has reviewed and will consider in future compensation discussions this work performed by Mercer. See "Role of Market Data and Consultant in Determining Compensation" under "Compensation Discussion and Analysis".

Under the terms of its charter, the Corporate Governance and Compensation Committee is also charged with the responsibility to identify and recommend to the Board of Directors individuals who would make suitable directors. In identifying and recommending candidates for the Board of Directors, the committee gives due consideration to the intelligence, integrity, diversity, education and business experience of potential directors and the amount of time such candidates can reasonably be expected to devote to Board responsibilities. In considering the qualifications of potential nominees for board membership, the committee does not assign specific weights to particular criteria. Instead, the committee considers the qualifications of our directors as a group, in an effort to provide a composite mix of qualifications that will allow the board to fulfill its responsibilities. Except as described in this paragraph, the committee does not have a formal policy with respect to board diversity. The committee's recommendations are to be consistent with maintaining a high quality, diverse and actively engaged Board of Directors. The committee identifies candidates through its own business and personal contacts and through recommendations by board members, officers, business partners and employees. The committee may obtain, as needed, advice and assistance from other advisors to identify board candidates. Other than the reviews by Mercer in April, 2014 as discussed above, no such advisor was employed during fiscal 2014.

The committee considers shareholder recommendations for board membership. In evaluating shareholder recommendations, the committee applies the same criteria as applied to its own candidates, as described in the immediately preceding paragraph. Such shareholder recommendations for our 2015 annual meeting must be made in writing and received at our principal executive office by approximately June 12, 2015 (the date

120 days prior to the first anniversary of the date the 2014 annual meeting proxy statement was first mailed).

All members of the committee are independent as defined in the listing standards of the NASDAQ OMX Group.

Executive Committee

We have a standing Executive Committee comprised of Mr. Jennings (Chairman), Mr. Kistner, Mr. Melton and Mr. Whitley. The committee, which did not meet during fiscal 2014, is empowered to act for and on behalf of our Board of Directors during the interval between the meetings of the Board of Directors, in the management and direction of our business.

Meetings and Board Compensation

During fiscal 2014, our Board of Directors held four meetings. All directors attended 75% or more of the aggregate number of meetings of the Board of Directors and applicable committee meetings. Our stated policy encourages members of the Board of Directors to attend our Annual Meeting of Shareholders. All of our directors attended our 2013 Annual Meeting of Shareholders.

During fiscal 2014, each director other than Mr. Jennings received monthly compensation of $2,200. The Chairman of the Audit Committee, Chairman of the Corporate Governance and Compensation Committee and the Lead Director each also received an additional retainer of $800 per month for such service as a committee chairman or Lead Director.

As part of a director's total compensation and to create a direct linkage with corporate performance, the Board believes that a meaningful portion of a director's compensation should be provided in, or otherwise based on, the Company's common stock. Accordingly, for each of the past several years, the Board has awarded stock to each Independent Director under the Company's Incentive Compensation Plan. Additionally, the Board expects that each Independent Director should maintain ownership of the Company's shares of at least three times the amount of such director's annual cash retainer. Directors who have not met this stock ownership guideline are expected to retain at least 75% of the net shares awarded to them under the Incentive Compensation Plan, and to reinvest at least 50% of any dividends received, until the director meets the stock ownership guidelines.

Directors should refrain from engaging in hedging, derivative or other transactions that have an economically similar effect that would undermine the incentives created by deferred stock compensation structures and stock ownership commitments.

Under our Incentive Compensation Plan, 600 shares of common stock were issued in August, 2013 to each member of our Board of Directors other than Mr. Jennings. Mr. Jennings is not paid any directors' fees as Chairman of the Board of Directors, since he is employed as one of our executive officers.

Under our Incentive Compensation Plan, common stock awards of 1,200 shares were made to each member of our Board of Directors other than Mr. Jennings in August, 2014. The Committee increased the number of shares awarded in 2014 based on the 2014 Mercer market competitive assessment.

Director Compensation

The following table summarizes the compensation to our directors for the year ended June 30, 2014.



Name	Cash Fees		Stock Awards (1)		All Other Compensation		Total
Sandra C. Gray	$	26,400	$	12,318	$	—	$	38,718
Edward J. Holmes	26,400		12,318		—		38,718
Glenn R. Jennings	—		—		—		—
Michael J. Kistner	36,000		12,318		—		48,318
Lewis N. Melton	36,000		12,318		—		48,318
Arthur E. Walker, Jr.	26,400		12,318		—		38,718
Michael R. Whitley	36,000		12,318		—		48,318


(1)	The stock awards are priced at the aggregate grant date fair value. The grant date was August 16, 2013 and the grant fair value of a share of the Company's common stock on the date of grant was $20.53 per share.



Executive Officers

Name	Age	Date Employed by Delta		Position (1)	Date Began In This Position (2)

John B. Brown	47	4/1/1995		Chief Financial Officer, Treasurer and Secretary	5/25/2007
Johnny L. Caudill	65	10/15/1972		Vice President – Distribution	11/20/2008
Glenn R. Jennings	65	1/8/1979		Chairman of the Board, President and Chief Executive Officer	11/17/2005
Brian S. Ramsey	51	8/17/1984		Vice President – Transmission and Gas Supply	11/20/2008
Matthew D. Wesolosky	38	11/1/2005	(3)	Vice President – Controller	11/18/2010	(4)

(1)

Each executive officer is normally elected to serve a one year term. Each executive officer's current term is scheduled to end on November 20, 2014, the date of the Board of Directors' meeting following the 2014 Annual Meeting of Shareholders, except Mr. Jennings. Mr. Jennings has an employment contract in his present capacity through November 30, 2018 (see "Potential Payments Upon Termination Or Change In Control").


(2)	All current executive officers, except Mr. Wesolosky, have functioned as executive officers for at least five years.


(3)	Mr. Wesolosky was also employed by Delta from June 1, 1998 to January 31, 2001.


(4)	Mr. Wesolosky was elected an executive officer on November 18, 2010. Mr. Wesolosky previously held the position of Manager – Accounting and Information Technology.

Audit Committee Report

The Audit Committee of the Board is responsible for providing independent, objective oversight of the Company's accounting functions, internal control over financial reporting and financial reporting processes.

The Audit Committee is made up entirely of directors who are independent, as defined in the NASDAQ OMX Group listing standards. Consistent with the terms of its charter, the committee meets periodically with our independent registered public accounting firm and our internal auditor, with and without Delta's management present, to discuss the independent registered public accounting firm's findings and other financial and accounting matters.

Delta's management is responsible for the Company's accounting functions, internal control over financial reporting and financial reporting processes. The Company's independent registered public accounting firm, Deloitte & Touche LLP ("Deloitte"), is responsible for auditing and expressing an opinion in accordance with auditing standards of the Public Company Accounting Oversight Board (United States) ("PCAOB") on the Company's consolidated financial statements and the effectiveness of the Company's internal control over financial reporting. In connection with these responsibilities, the Audit Committee met with our management and Deloitte to review and discuss the June 30, 2014 financial statements including a discussion of the acceptability and quality of the accounting principles, the reasonableness of critical accounting policies, the clarity of disclosures in the financial statements, and such other matters as are required to be discussed with the Audit Committee under standards established by the Securities and Exchange Commission and the PCAOB. The Audit Committee has discussed with Deloitte its independence from the Company and our management and has received written representation from Deloitte, in accordance with the applicable requirements of the PCAOB, regarding Deloitte's communications with the Audit Committee concerning independence. In addition, the Audit Committee considered whether Deloitte's independence would be jeopardized by providing non-audit services to the Company.

The Audit Committee charter governs the provision of audit and non-audit services by our independent registered public accounting firm. The committee considers annually and, if appropriate, approves the provision of audit services, including audit review and attest services, by our independent registered public accounting firm, and considers, and, if appropriate, pre-approves the nature, extent and cost of all non-audit services provided by the independent registered public accounting firm in accordance with relevant law and appropriate listing rules. The committee regularly reviews summary reports detailing all services, and related fees and expenses, being provided to us by our independent registered public accounting firm. All of the services provided by Deloitte, and related fees and expenses, are approved by our Audit Committee in accordance with the Audit Committee Charter. Our Audit Committee pre-approved all of the services provided by Deloitte during 2014 and 2013.

The following table sets forth the aggregate fees billed to us for the fiscal years ended June 30, 2014 and June 30, 2013 by our independent registered public accounting firm:



	2014		2013
Audit Fees (1)	$	291,500	$	294,500
Audit-Related Fees (2)	26,370		27,000
Tax Fees (3)	12,646		6,200
All Other Fees (4)	8,105		6,160
Total Fees	$	338,621	$	333,860


(1)	Includes fees of $264,500 and $262,500 for auditing and reporting on our annual financial statements for the fiscal years ended 2014 and 2013, respectively, prepared for submission to the SEC on Form 10-K, and for reviews of our interim

financial information for each of the quarters in the fiscal years ending June 30, 2014 and 2013 prepared for submission to the SEC on Form 10-Q. Each total also includes $27,000 of out-of-pocket expenses billed annually and $5,000 in fiscal 2013 for a consent relating to an SEC filing.


(2)	Includes fees and expenses for professional services rendered in fiscal 2014 and 2013, primarily in connection with audits of our employee benefit plans.


(3)	Includes fees and expenses for professional services rendered in fiscal 2014 and 2013 in connection with tax return reviews and consultations.


(4)	Includes fees for training and accounting resources in fiscal 2014 and 2013.

The committee has considered and evaluated the provision of non-audit services by Deloitte and has determined that the provision of such services was not incompatible with maintaining Deloitte's independence.

It is not the duty of the Audit Committee to perform audits or to determine that the Company's financial statements are complete and accurate and in accordance with generally accepted accounting principles. Those items are the responsibility of Delta's management and Deloitte. Members of the Audit Committee, without independent verification, rely on the information provided to them and on the representations made by our management and Deloitte. The committee has reviewed and discussed with our management the results of the audit and the audited financial statements for 2014, and the committee recommended to our Board of Directors that the financial statements for 2014 be included in the Annual Report on Form 10-K for filing with the Securities and Exchange Commission. A representative of Deloitte will be present at our 2014 Annual Meeting of Shareholders to respond to appropriate questions and will have an opportunity to make a statement if they so desire.



	Michael J. Kistner, Committee Chairman
	Edward J. Holmes
	Michael R. Whitley

Corporate Governance and Compensation Committee

Interlocks and Insider Participation

All members of the Corporate Governance and Compensation Committee are non-employee directors, and no member other than Dr. Gray has any direct or indirect material interest in or a relationship with us other than stockholdings as discussed herein and as related to their position as a director. Dr. Gray has an indirect material relationship with us by virtue of her being President of Asbury University, a customer of ours. This relationship is disclosed in "Certain Relationships and Related Transactions". During 2014, none of our executive officers served on any board of directors or compensation committee of any other company for which any of our directors served as an executive officer.

Compensation Discussion and Analysis

This section of the proxy statement describes and analyzes our executive compensation philosophy and program in the context of the compensation paid during the last fiscal year to each person serving as our Chief Executive Officer, our Chief Financial Officer and each of our three other named executive officers.

Executive Summary

Fiscal 2014 was another successful year for our Company, with earnings per share of $1.19 as compared with $1.05 in 2013. Contributing to our improved financial performance was an increase of our distribution throughput, and continued positive contributions by our unregulated business. We believe our senior management performed a significant role in our improved financial results with a focus on controlling expenses, managing risks of our operations and providing leadership for our Company's employees in serving our customers. We believe our senior management was not only focused on current earnings, but continued to pursue ways to increase our business and manage infrastructure for our Company's future.

To appropriately compensate our senior management for leading our Company through a very successful year while continuing to focus on our future, we increased executive compensation primarily through discretionary incentive compensation (short-term cash and equity bonuses) and long-term performance awards, collectively referred to as total incentive compensation. We have over the past several years used year-end corporate performance as a significant factor in compensating our executive officers for their performance and leadership. The following graph demonstrates the extent to which our total incentive compensation paid to executive officers over the last five years relates to corporate performance, measured by earnings per share:

Due to our earnings per share performance in 2014, each of our executives achieved the maximum performance objectives we established at the beginning of 2014 under our long-term equity incentive plan. This entitles our executives to receive shares of restricted stock, which will vest over a period of years, for guiding the Company in achieving these 2014 results. See “Elements of Compensation” for additional details.

A portion of total incentive compensation shown above is discretionary, determined by the Corporate Governance and Compensation Committee after the fiscal year results are known. While the Corporate Governance and Compensation Committee believes that its ability to award discretionary incentive compensation each year based on corporate and individual performance is an important element of our compensation philosophy and program, Delta's Corporate Governance Guidelines restrict such discretionary incentive compensation to 100% of an executive's base compensation. As set forth in "Elements of Compensation", the amounts of the discretionary portions of incentive compensation were significantly less than the base salaries of our executive officers.

Overview

The Corporate Governance and Compensation Committee of our Board of Directors is comprised of independent directors and operates under a written charter approved by our Board of Directors.

The Corporate Governance and Compensation Committee is responsible for developing and making recommendations to our Board of Directors with respect to the Company's executive officer salaries and cash bonuses. See "Committees and Board Meetings". All decisions by the committee relating to the salaries and cash bonuses of our executive officers, including the Chief Executive Officer, are reviewed and given final approval by our Board of Directors. During 2014, no decisions of the committee were modified in any material way or rejected by our Board of Directors. Additionally, the Corporate Governance and Compensation Committee has final authority to grant all awards under our Incentive Compensation Plan. The committee reports all such awards to our full Board of Directors.

The elements of compensation for our executive officers consist of their base salaries, bonuses, stock awards, changes in retirement values and other forms of compensation, including perquisites, as set forth in the "Summary Compensation Table". Our non-contributory, defined benefit retirement plan provides benefits to our employees, including executive officers. We also contribute to an irrevocable trust that will make payments to Mr. Jennings upon his retirement. See "Retirement Benefits".

We chose these forms of compensation for our executive officers because we believe that they provide appropriate incentives for the high quality and responsible management that we desire from our executive officers. Base salaries provide a fixed level of cash compensation for sustained individual performance. The base salary component of our executive officers' compensation program is the least variable relative to Company performance. Cash bonuses reward executives for their contributions to the Company's short-term financial and operational performance in years when the Company's overall performance affords such payments, as recommended by the committee once fiscal year-end results are known. Our Incentive Compensation Plan allows the committee, if it so chooses, to provide equity-based compensation to our executive officers. The Incentive Compensation Plan provides for the grant of incentive compensation awards to our executive officers in order to promote equity ownership through both short-term and long-term incentives. The short-term incentives are accomplished through potential payment of stock bonus awards. The long-term incentive compensation is achieved through potential awards of restricted shares and performance shares. We believe that the Incentive Compensation Plan helps promote our interests and our shareholders' interests through (i) the attraction and retention of executive officers essential to our success, (ii) the motivation of executive officers using both short-term and long-term performance-based incentives linked to performance goals and the interests of our shareholders and (iii) enabling such individuals to share in our growth and success. Benefits and perquisites provide a competitive total compensation program. Benefits additionally support the retention of key executive talent.

A summary of the compensation awarded to our named executive officers is set forth in the "Summary Compensation Table". The components of Mr. Brown's, Mr. Caudill's, Mr. Jennings', Mr. Ramsey's and Mr. Wesolosky's fiscal 2014 compensation are generally consistent with prior years.

Compensation Determination Process

The salary levels, cash and stock bonus awards and performance share awards for 2014 reflect the committee's and the Board of Directors' assessment of our executive officers' responsibilities and contribution to our overall success. While the Board of Directors and the committee do not use any specific, quantified relationship between corporate performance and compensation, they have relied upon market data and consultants for the general parameters of our executive officers' compensation.

Role of Market Data and Consultants in Determining Compensation

Salaries for our executive officers, including our Chief Executive Officer, are determined in a manner similar to that for all of our employees. The committee periodically hires Mercer, a human resources consulting firm, to review industry surveys and to conduct a comparison of the compensation of executives with similar job responsibilities in similarly-sized gas transmission/utility/energy companies so that we can better analyze the competitiveness of our current compensation packages for our executive officers.

The committee received Mercer's most recent recommendations in April, 2014. The committee directly engaged Mercer to conduct a market competitive assessment of our base salaries, annual incentives, target total cash compensation (salaries plus target short-term incentives) and total direct compensation (target total cash compensation plus long-term incentives) by comparing our pay practices to the pay practices of a custom peer group listed below, a broader set of approximately 65 public companies (the revenue proxy group) and published surveys of similar companies, all of which comparison groups were selected by Mercer. Mercer also examined the relationship between our financial performance and our pay levels over one- and three-year periods for us compared with that of the peer groups. The following gas transmission/utility/energy companies, having median revenues of $307 million, were used by Mercer in its most recent custom peer group comparison:



Boardwalk Pipeline Partners, LP	SJW Corp.
Laclede Group, Inc.	Genie Energy, Ltd.
Piedmont Natural Gas Company	NRG Yield, Inc.
Questar Corp.	Pattern Energy Group, Inc.
Suburban Propane Partners	Middlesex Water Company
Northwest Natural Gas Company	Gas Natural, Inc.
South Jersey Industries, Inc.	Connecticut Water Service, Inc.
MGE Energy, Inc.	RGC Resources, Inc.
Chesapeake Utilities Corporation	Corning Natural Gas Corporation
Unitil Corporation	Juhl Energy, Inc.

Evaluation of Stock Gains

The Board of Directors and the committee do not consider changes in the value of previously awarded stock grants when determining executive officer compensation. The value of the stock awards is directly affected by the efforts of our executive officers in managing our Company. Stock awards are now a portion of the compensation package for our executive officers precisely because these awards provide our executive officers with an incentive to manage the Company in a way that will help increase shareholder value. Further, by accepting performance-based stock awards instead of cash, each executive officer undertakes a certain degree of risk and uncertainty and we believe it would be inappropriate to have the value of those awards affect future compensation decisions. Accordingly, realized gains or losses on stock awards are not considered when decisions are made regarding future compensation.

Tax and Accounting Considerations

When determining the equity components of the Company's compensation programs, the committee and Board of Directors are mindful of tax and accounting considerations.

Role of Our Chief Executive Officer

Our Chief Executive Officer aids the committee in obtaining compensation market data through his industry contacts and knowledge of the industry. He makes recommendations to the committee relating to salary adjustments for all executive officers other than himself. He also makes recommendations to the committee relating to cash bonuses and equity compensation for all executive officers, including himself.

Final Recommendations and Determinations

In determining compensation for our executive officers, the committee considers each executive officer's responsibilities and performance over the last year. Each year, the committee also receives employment market information from Mercer regarding changes in salary ranges. It considers its own members' experience and understanding of the employment market and the recommendations of our Chief Executive Officer and Mercer, if Mercer was hired to provide specific guidance. Based upon all of this information, the Corporate Governance and Compensation Committee (i) recommends to our Board of Directors revised salaries, salary ranges and cash bonuses for our executive officers, (ii) grants equity compensation awards to our executive officers and (iii) reports such equity awards to the Board of Directors.

Elements of Compensation

The elements of compensation for our executive officers consist of their base salaries, cash bonuses, stock bonuses, performance stock awards, changes in retirement values, employment and change in control agreements and other forms of compensation, including perquisites, as set forth in the "Summary Compensation Table". Please refer to "Compensation Determination Process" for a description of all of the factors the committee considers when making compensation determinations. The factors identified in the previous section are considered when decisions are made regarding each component of executive officer compensation described below.

Cash Compensation

Base Salaries. Salaries are a major component in our executive officer compensation. The base salary component of our executive officer compensation program is the least variable relative to Company performance. Actual individual salary amounts reflect the committee's and Board of Directors' judgment of each executive officer's overall responsibilities. We attempt to establish salary levels that will promote the overall compensation philosophy of our Company, which is to reward our executive officers for superior management, to provide incentives for high quality and socially responsible management and to maintain our competitive position in the employment market.

Annual Cash Bonus Awards. We have no formal annual cash bonus award program. Each year the committee considers the award of cash bonuses and the amount of cash bonuses based upon its assessment of our overall performance and the contributions and performances of the individual executive officers. The committee recommends bonus amounts in a manner that recognizes and rewards superior performance by our executive officers, that provides incentive for high quality management and that establishes competitive levels of compensation for our executive officers. Based on this process and these criteria, the committee recommended to our Board of Directors that we award bonuses to our executive officers in each of the last several years. Our Board of Directors accepted the committee's recommendations and awarded bonuses in each case.

According to our Corporate Governance Guidelines, in no case shall the value of an employee's annual cash bonus award plus their annual stock bonus award (but excluding any performance share awards) exceed 100% of their base cash salaries in that year. During 2014, the Company paid such discretionary incentive compensation of 55%, 54%, 73%, 67% and 72% of base salaries to Mr. Brown, Mr. Caudill, Mr. Jennings, Mr. Ramsey and Mr. Wesolosky, respectively.

Equity Compensation

Our Incentive Compensation Plan provides for the grant of incentive compensation payable in performance stock, restricted stock and stock bonus awards to our executive officers. We believe that the Incentive Compensation Plan helps promote our interests and our shareholders' interests through the attraction and retention of executive officers essential to our success, the motivation of executive officers using both short-term and long-term performance-based incentives linked to performance goals and the interests of our shareholders, and the enabling of such individuals to share in our growth and success. The short-term incentives are accomplished through the potential payment of stock bonus awards. The long-term incentive compensation is achieved through potential awards of restricted shares and performance shares.

According to our Corporate Governance Guidelines, in no case shall the number of shares of common stock awarded during any fiscal year exceed 100,000 shares in the aggregate. Additionally, our Board of Directors expects that each executive officer should maintain ownership of the Company's shares of at least three times

their annual base cash compensation. Executive officers who have not met this stock ownership guideline are expected to retain at least 75% of the net shares awarded to them under the Incentive Compensation Plan, and to reinvest at least 50% of any dividends received, until the executive officer meets the stock ownership guidelines.

Our Corporate Governance Guidelines provide that executive officers should refrain from engaging in hedging, derivative or other transactions that have an economically similar effect that would undermine the incentives created by deferred stock compensation structures and stock ownership commitments.

Annual Stock Bonus Awards. We have no formal annual stock bonus award program. Each year the committee considers the award of stock bonuses and the amount of stock bonuses based upon its assessment of our overall performance and the contributions and performances of the individual executive officers. The committee awards bonuses in a manner that recognizes and rewards superior performance by our executive officers, that provides incentive for high quality management and that establishes competitive levels of compensation for our executive officers. The committee makes the decision on whether or not to pay stock bonuses to our executive officers and the amount of any such bonuses.

Subsequent to June 30, 2014, the committee issued additional common stock bonus awards under the Incentive Compensation Plan to our executive officers. The awards, granted August 15, 2014, totaled 6,000 shares of common stock.


Ÿ	Performance Shares. As a portion of our compensation we provide long-term incentives to our executive officers in the form of performance shares paid in restricted stock. The committee structures the long term incentive awards both to reward performance and to encourage management continuity.

For the Performance Share Awards, the committee annually selects performance criteria defined as the Company's audited earnings per share before any cash bonuses or stock awards for the applicable fiscal year ending June 30. The committee believes that utilizing a performance measure based upon audited earnings per share aligns management's interests with shareholders' interests. In addition, earnings per share are related to the success of management's efforts. The committee annually determines a targeted performance objective as well as minimum and maximum performance objectives for the Performance Share Awards. These levels are determined taking into consideration historical and anticipated earnings per share and dividend payout ratios. For each performance year, the committee sets the target objective to be a challenging, yet attainable, goal. The minimum performance objective is set to ensure that no incentive awards will be granted in a year in which earnings per share are insufficient to pay awards and still maintain an acceptable dividend payout ratio. The maximum performance objective is set to additionally award performance at levels above the target objective. The specific performance objective levels for the respective fiscal year, are set forth below:



($ per share)	2013	2014
Minimum Performance Objective:	.95	.95
Targeted Performance Objective:	1.00	1.00
Maximum Performance Objective:	1.05	1.05

Since the committee also desires to encourage management retention and reward management continuity, Performance Share Awards are structured to vest over three vesting periods requiring the executive officers to remain employed during the three vesting periods in order to receive all of the awards granted through the plan. Thus if at least one level of the performance criteria is met, then shares of restricted stock will be awarded, which will then vest over three vesting periods.

2013 Performance Objectives. As mentioned above, the committee selected performance criteria defined as the Company's audited earnings per share before any cash bonuses or stock awards for the year ending June 30, 2013. The Company met the targeted Performance Objective for its fiscal year ending June 30, 2013. As a result on August 27, 2013, the named executive officers were collectively awarded 39,000 shares of Company restricted common stock in exchange for their Performance Share Awards.

Since the performance objectives were met, shares of restricted stock were awarded to each executive officer, and the first 1/3 of these shares vested on August 31, 2013 while the second 1/3 vested on August 31, 2014. The final 1/3 of these shares of restricted stock will vest on August 31, 2015 as long as the executive officer remains an employee throughout such restriction period. Further, during the restriction period, the executive officer is able to exercise full voting rights with respect to the restricted stock and is entitled to receive all dividends and other distributions paid with respect to the restricted stock. Dividend rates for holders of restricted stock are the same as for our common shareholders.

2014 Performance Objectives. As mentioned above, the committee selected performance criteria defined as the Company's audited earnings per share before any cash bonuses or stock awards for the year ending June 30, 2014. The individual awards of shares of restricted stock that each named executive officer could realize at each performance level are set forth in the "Grants of Plan-Based Awards" table. The Company met the Maximum Performance Objective for its fiscal year ending June 30, 2014. Refer to the table entitled "Grants of Plan-Based Awards" for the number of shares granted to each executive officer.

Since the performance objectives were met, shares of restricted stock were awarded to each executive officer, and the first 1/3 of these shares vested on August 31, 2014. The second 1/3 will vest on August 31, 2015, and the final 1/3 will vest on August 31, 2016 as long as the executive officer remains an employee throughout each such restriction period. Further, during the restriction period, the executive officer is able to exercise full voting rights with respect to the restricted stock and is entitled to receive all dividends and other distributions paid with respect to the restricted stock. Dividend rates for holders of restricted stock are the same as for other common shareholders.

The actual awards of shares of restricted stock that each named executive officer realized are set forth in the "Outstanding Equity at Fiscal Year-End" table.

2015 Performance Objectives. As part of our executive officer compensation program for 2015, the committee granted new performance share awards that are similar to the awards the committee made at the beginning of our previous fiscal years. The performance criteria are based upon our audited earnings per share before any cash bonuses or stock awards for the year ending June 30, 2015. Assuming the performance objectives are met then the performance shares will be paid in shares of restricted stock and vest in 1/3 increments each year beginning on August 31, 2015 as long as the executive officer remains an employee throughout each such restriction period. Depending on the extent to which the performance objectives are met, total common shares awarded relating to the 2015 performance objectives will range up to 39,000 shares.

Payments under Employment and Change in Control Agreements upon Change in Control or Termination of Employment

We believe our employment agreements and change in control agreements help us attract and retain exceptional executives. Employment and change in control agreements protect both us and our executives by clarifying in advance each party's expectations and rights regarding responsibilities, compensation, circumstances for termination and protection in the event of a change in control of the Company. We also view change in control payments as a part of the executive officer's long term compensation and hence important in attracting and retaining excellent executives, particularly through transition periods following a change in control. Accordingly, we entered into an employment agreement with Mr. Jennings, our Chairman of the Board, President and Chief Executive Officer, and we have entered into change in control agreements with our other named executive officers. The details of these agreements are described in "Potential Payments Upon Termination or Change in Control" below.

Compensation Recovery Policy

The Company shall have the right to recover from its executive officers all or a portion of cash bonuses and incentive compensation granted to them during 2013 or 2014 in the event willful or intentional misconduct by an executive officer causes the Company to issue a restatement of its 2013 or 2014 financial statements. The Company shall have the right to recover all or that portion of the actual cash bonuses and incentive compensation granted to executive officers during 2013 or 2014 that exceeded the amount of cash bonuses and incentive compensation that would have been granted based on the restated 2013 or 2014 financial statements.

Post-Employment Compensation

In addition to the compensation received by the executive officers during 2014, we provide a non-contributory, defined benefit retirement plan that provides benefits to our employees, including executive officers. We also contribute to an irrevocable trust that will make payments to Mr. Jennings upon his retirement. Both of these programs are described in detail under the heading "Retirement Benefits".

Perquisites

As described below in the "Summary Compensation Table", we provide additional forms of compensation, including some perquisites, to our executive officers. We select those forms of compensation or benefits for our executive officers because they are consistent with our executive and employee compensation philosophy described above. We believe that these forms of compensation or benefits enhance our competitive position in the labor and management markets and generally are consistent with the types of non-cash compensation and perquisites paid by our market competitors.

Consideration of Shareholder Advisory Vote

Last year we asked our shareholders for a non-binding advisory vote on our overall executive compensation programs and procedures. While the shareholder vote was not binding, the Board of Directors did review and consider the voting results. Of the shareholders who voted, excluding broker non-votes, 83% voted in favor, 5% voted against, and 12% abstained. Since a substantial majority of our shareholders voted in favor of our executive compensation programs and procedures, we determined that we did not need to consider changing our overall approach to executive compensation.

Compensation Risks

In our compensation policies and practices for our employees, including our executive officers, we have primarily utilized salaries, with cash bonuses (with advice and recommendations from our committee) and equity compensation in the form of stock bonuses and performance shares awarded at the discretion of the committee. See "Compensation Committee Report" and "Summary Compensation Table".

We believe that risks arising from our compensation policies and practices for our employees are not reasonably likely to have a material adverse effect on us and that the mix and design of the elements of our executive officers' compensation do not encourage our management to assume excessive risks. For example, past salary surveys have verified that the salaries of our executive officers are comparable to our peers and thus we do not believe there is anything in our salary compensation structure, or the manner in which raises are awarded, that poses any unnecessary risk.

Additionally, we do not believe any grants under our Incentive Compensation Plan encourage the taking of unnecessary or excessive risks because (i) all of the awards are equity-based compensation that align the interests of our executive officers with those of our shareholders, (ii) the value of the bonus stock awards and restricted stock awards are tied to the market value of our common stock and will be enhanced to the extent the Company achieves improved earnings over a longer period of time, (iii) since the awards are paid in stock, the tax code treatment of long-term versus short-term capital gains also encourages the recipients to hold the stock they receive, which discourages their taking short-term actions to improve earnings that may not have a more long-term effect upon the value of the Company and (iv) the vesting period for the restricted stock also encourages the taking of actions that will have more of a long-term effect upon the value of the Company.

Corporate Governance and Compensation

Committee Report

The Corporate Governance and Compensation Committee has reviewed and discussed with our management the section entitled "Compensation Discussion and Analysis" in this Proxy Statement. Based on its review and discussion with management, the Corporate Governance and Compensation Committee has recommended to our Board of Directors that the section entitled "Compensation Discussion and Analysis" be included in our Annual Report on Form 10-K for the year ended June 30, 2014 and this Proxy Statement.



	Lewis N. Melton, Committee Chairman
	Sandra C. Gray
	Arthur E. Walker, Jr.
	Michael R. Whitley

Summary Compensation Table

The following table sets forth information concerning the compensation of our executive officers.



									Change in
Name and	Fiscal					Stock			Pension			All Other
Principal Position	Year	Salary		Bonus		Awards			Value (1)			Compensation (2)		Total
John B. Brown	2014	$	220,000	$	100,000	$	143,710	(3)	$	74,201		$	28,119	$	566,030
Chief Financial	2013	200,000		70,000		140,595		(4)	8,627			28,761		447,983
Officer, Treasurer and	2012	184,000		50,000		64,344		(5)	78,682			25,871		402,897
Secretary

Johnny L. Caudill	2014	222,000		100,000		143,710		(3)	137,086			25,559		628,355
Vice President –	2013	205,000		70,000		140,595		(4)	74,474			31,186		521,255
Distribution	2012	193,000		50,000		64,344		(5)	174,876			31,329		513,549

Glenn R. Jennings	2014	398,000		250,000		349,010		(3)	331,761		(6)	40,949		1,369,720
Chairman of the Board,	2013	378,000		220,000		346,080		(4)	237,453		(6)	45,949		1,227,482
President and Chief	2012	361,000		150,000		291,080		(5)	317,914		(6)	50,213		1,170,207
Executive Officer

Brian S. Ramsey	2014	181,000		100,000		143,710		(3)	77,499			17,767		519,976
Vice President –	2013	164,000		80,000		140,595		(4)	20,772			22,868		428,235
Transmission and Gas	2012	151,000		60,000		64,344		(5)	77,581			23,025		375,950
Supply

Matthew D. Wesolosky	2014	140,000		80,000		143,710		(3)	27,994			22,944		414,648
Vice President –	2013	126,000		60,000		140,595		(4)	4,431			25,826		356,852
Controller	2012	116,000		40,000		64,344		(5)	24,351			20,129		264,824

(1)

Represents the actuarial increase for the year. The actuarial increase is the change in the present value of the executive's retirement benefits under the qualified defined benefit pension plan established by the Company, determined using interest rate, mortality rate and other assumptions consistent with those used in the Company's financial statements. See Note 6 of the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the fiscal year ending June 30, 2014.



(2) All Other Compensation column includes the following for fiscal 2014:
	Brown		Caudill		Jennings		Ramsey		Wesolosky
Premium for personal portion of life insurance (a)	$	—	$	—	$	638	$	—	$	—
Club dues	—		—		650		—		—
Vehicle provided (a)	13,145		11,177		15,703		9,727		11,556
Communications (phone, internet) (b)	2,374		1,702		2,358		1,827		1,988
Dividends on unvested performance shares	3,800		3,800		11,400		3,800		3,800
Employee savings plan matching company contributions	8,800		8,880		10,200		2,413		5,600
Total	$	28,119	$	25,559	$	40,949	$	17,767	$	22,944


(a)	Amounts reported as taxable to individuals during fiscal 2014.

(b) Reflects total for fiscal 2014 although perquisite value is an indeterminate amount.


(3)	The stock awards include stock bonuses priced at the aggregate grant date fair value. The grant date was August 16, 2013

and the grant date fair value of a share of the Company's common stock on the date of grant was $20.53 per share. The stock awards also include performance shares. The performance shares are detailed in the "Grants of Plan-Based Awards" table. In 2014, the Maximum Performance Objective was achieved. These amounts were calculated based on the fair market value of a share of the Company's common stock on the date of grant (August 16, 2013 at $20.53 per share) and on the assumption that all shares would fully vest for each of the named executive officers. For additional information regarding these awards, see the sections entitled "Annual Stock Bonus Awards" and "Performance Shares" in the Compensation Discussion and Analysis section of this proxy statement.

(4)

The stock awards include stock bonuses priced at the aggregate grant date fair value. The grant date was August 17, 2012 and the grant date fair value of a share of the Company's common stock on the date of grant was $21.63 per share. The stock awards also include performance shares. In 2013, the Maximum Performance Objective was achieved. These amounts were calculated based on the fair market value of a share of the Company's common stock on the date of grant (August 17, 2012 at $21.63 per share) and on the assumption that all shares would fully vest for each of the named executive officers. For additional information regarding these awards, see the sections entitled "Annual Stock Bonus Awards" and "Performance Shares" in the Compensation Discussion and Analysis section of this proxy statement.

(5)

The stock awards include stock bonuses priced at the aggregate grant date fair value. The grant date was August 12, 2011 and the grant date fair value of a share of the Company's common stock on the date of grant was $15.32 per share. The stock awards also include performance shares. In 2012, the Target Performance Objective was achieved. These amounts were calculated based on the fair market value of a share of the Company's common stock on the date of grant (August 12, 2011 at $15.32 per share) and on the assumption that all shares would fully vest for each of the named executive officers. For additional information regarding these awards, see the sections entitled "Annual Stock Bonus Awards" and "Performance Shares" in the Compensation Discussion and Analysis section of this proxy statement.


(6)	Includes change in value of supplemental retirement plan of $168,195, $148,862 and $79,006 for 2014, 2013 and 2012, respectively (see "Retirement Benefits" for a discussion of this retirement benefit).

Grants of Plan-Based Awards

The following table sets forth information concerning the performance shares awards granted to our named executive officers during fiscal 2014.



		Estimated Future Payouts Under Equity Incentive Plan Awards (Number of Shares) (1)
Name	Grant Date	Threshold	Target	Maximum	Grant Date Fair Value of Stock Awards ($)(2)
John B. Brown	August 16, 2013	2,000	4,000	6,000	123,180
Johnny L. Caudill	August 16, 2013	2,000	4,000	6,000	123,180
Glenn R. Jennings	August 16, 2013	5,000	10,000	15,000	307,950
Brian S. Ramsey	August 16, 2013	2,000	4,000	6,000	123,180
Matthew D. Wesolosky	August 16, 2013	2,000	4,000	6,000	123,180

(1)

The amounts reflected in these columns reflect estimated awards of shares of restricted stock that could be realized from the performance share awards made to the named executive officers under the Company's Incentive Compensation Plan. These awards are further described in Footnote (1) to the "Summary Compensation Table" above and in "Elements of Compensation – Performance Shares". The number of shares in these columns reflect the possible number of shares of restricted stock that would be realized and awarded based upon not only satisfaction of the maximum performance benchmark respecting the 2013 performance share awards (which we achieved) but also the target payout that could have resulted if the target benchmark was met or if only the minimum threshold for any payout was met (recognizing that less than the minimum threshold would result in no payments).


(2)	The values shown in this column assume the maximum number of shares of restricted stock were awarded based on the $20.53 per share market price of our common stock as of the grant date.

Outstanding Equity Awards At Fiscal Year-End

The following table sets forth the shares of restricted stock that have been awarded, but not vested, as of June 30, 2014.




Name	Grant Date	Number of Restricted Shares That Have Not Vested	Market Value of Shares That Have Not Vested ($) (1)

John B. Brown	August 16, 2013	6,000 (2)	131,760
	August 17, 2012	4,000 (3)	87,840
	August 12, 2011	1,000 (4)	21,960

Johnny L. Caudill	August 16, 2013	6,000 (2)	131,760
	August 17, 2012	4,000 (3)	87,840
	August 12, 2011	1,000 (4)	21,960

Glenn R. Jennings	August 16, 2013	15,000 (2)	329,400
	August 17, 2012	10,000 (3)	219,600
	August 12, 2011	5,000 (4)	109,800

Brian S. Ramsey	August 16, 2013	6,000 (2)	131,760
	August 17, 2012	4,000 (3)	87,840
	August 12, 2011	1,000 (4)	21,960

Matthew D. Wesolosky	August 16, 2013	6,000 (2)	131,760
	August 17, 2012	4,000 (3)	87,840
	August 12, 2011	1,000 (4)	21,960


(1)	These amounts were calculated based on the fair market value of a share of the Company's common stock on June 30, 2014 at $21.96 per share.


(2)	The first 1/3 of these shares of restricted stock vest on August 31, 2014, the second 1/3 of these shares will vest on August 31, 2015 and the final 1/3 of these shares will vest on August 31, 2016 as long as the executive officer remains an employee throughout each such vesting period.


(3)	One half of these shares of restricted stock vested on August 31, 2014, and the remaining shares of restricted stock will vest on August 31, 2015, as long as the executive officer remains an employee throughout each such vesting period.


(4)	These shares of restricted stock vested on August 31, 2014.

Retirement Benefits

We have a trusteed, non-contributory, defined benefit retirement plan. Also, we have a nonqualified defined contribution supplemental retirement agreement for Mr. Jennings under which we contribute into an irrevocable trust until Mr. Jennings' retirement.

The following table shows the present value of accumulated plan benefits under these plans as of June 30, 2014 for each individual in the "Summary Compensation Table" receiving compensation during 2014.



Name	Plan Name	Number of Years Credited Service	Present Value of Accumulated Benefits ($)	Payments During Last Fiscal Year ($)
John B. Brown	Defined Benefit Retirement Plan	19	290,670 (1)	—
Johnny L. Caudill	Defined Benefit Retirement Plan	42	1,152,201 (1)	—
Glenn R. Jennings	Defined Benefit Retirement Plan	35	1,607,846 (1)	—
	Supplemental Retirement Agreement	—	907,048 (1)	—
Brian S. Ramsey	Defined Benefit Retirement Plan	30	314,395 (1)	—
Matthew D. Wesolosky	Defined Benefit Retirement Plan	11	81,600 (1)	—

______________________________

(1) The amounts were computed using the following significant assumptions:

Mortality – The sex-distinct RP-2000 Mortality Table for annuitants and non-annuitants with projected

mortality improvements using Scale BB on a generational basis

Discount Rate - 4.25%

Assumed Retirement Age - Retirement rates for ages 55-65

The defined benefit retirement plan is available to all employees hired prior to May 9, 2008 as they become eligible. The basic retirement benefit is payable for 120 months certain and life thereafter, based upon a formula of 1.6% of the highest five years average monthly salary for each year of service on or after November 1, 2002 plus the frozen accrued benefit as of October 31, 2002. The frozen accrued benefit is based upon a formula of 1.8% of the highest five years average monthly salary for each year of service plus .55% of the highest five years average monthly salary in excess of covered compensation for each year of service, not to exceed 35 years. The average monthly salary and years of service used in calculating the frozen accrued benefit is determined as of October 31, 2002. The compensation used to determine the average monthly salary under the plan includes only base salary of employees, excluding overtime, bonuses or stock awards, (see "Salary" in the "Summary Compensation Table") and is limited to a maximum of $255,000. The amounts received under the Plan are not subject to any deduction for Social Security benefits received.

In the event of death, disability, normal retirement age or early retirement age, single sums are available at the employee's option for benefits accrued under the defined benefit retirement plan prior to December 1, 2002. For all benefits accrued under the defined benefit retirement plan after December 1, 2002, single sum distributions are available up to $5,000.

Normal retirement age is 65 under the defined benefit retirement plan. Early retirement is available beginning at age 55, with a reduction of benefits calculated at 5% per year for each year less than 65. Mr. Caudill and Mr. Jennings are currently eligible for normal retirement.

In the event of death, our executive officers are entitled to benefits under our defined benefit retirement plan. The payments would be made as lump sum settlements. See "Termination Table".

In the event of disability, our executive officers are entitled to disability benefits under our defined benefit retirement plan. Payments would be made as monthly annuities. See "Termination Table".

Beginning in 2005, we began contributing $60,000 annually into an irrevocable trust under a nonqualified defined contribution supplemental retirement agreement with Mr. Jennings. Mr. Jennings has made no contributions to the trust. The trust experienced $168,195 of net investment gains during fiscal 2014. The assets of the trust consist of exchange traded mutual funds and are recorded at fair value based on observable market prices from active markets. Net realized and unrealized gains and losses are included in earnings each period. No withdrawals have been made from the trust during the fiscal year. Our contributions and the trust's earnings are reported under Change in Pension Value in the Summary Compensation Table for Mr. Jennings for each year presented. At retirement, the trustee will make annual payments of $100,000 to Mr. Jennings until the trust is depleted. The Board of Directors, upon the recommendation of the Corporate Governance and Compensation Committee, established the supplemental retirement agreement with Mr. Jennings to restore benefits that executives lose due to qualified employee benefit plan limitations.

The committee provided the benefit to Mr. Jennings in consideration of services currently rendered by him on behalf of the Company, as well as providing an inducement for Mr. Jennings to provide future valuable services until retirement. The Committee believes that the supplemental retirement agreement, together with the other elements of Mr. Jennings' compensation, achieves the goal to provide fair and appropriate levels of compensation that will ensure our ability to attract and retain a competent and engaged management team. The supplemental retirement agreement did not impact our other compensation elements for him or other executive officers.

Potential Payments Upon

Termination Or Change In Control

Recognizing that our executive officers' contributions to our growth and success have been significant, our Board of Directors desires to provide for the continued employment of the executive officers in order to encourage and reinforce the continued attention and dedication of the executive officers as members of our management. In order to formalize our Board of Directors' wishes for continued employment of the executive officers, we have entered into agreements with each of our executive officers. All of the agreements provide for payments to the executive officers in the event that their employment terminates after a change in control. Our Board of Directors believes that we are at risk of losing our executive officers in the event of a change in control. The payments, as structured, provide incentive to the executive officers to continue their employment throughout such a transition period and provide an incentive to the successor company to retain the present executive officers. The agreements also all include a non-compete provision which protects us from certain business risks such as threats from competitors, loss of confidentiality or trade secrets and solicitation of customers and employees. Our Board of Directors believes that the importance of the benefits provided by such agreements increases with position and level of responsibility; therefore, in addition to the material terms previously discussed, our agreement with Mr. Jennings also defines our right to terminate the employment relationship with him and provides for payments to be made to him if he is terminated in violation of the terms of the agreement at any time during the employment agreement period. As previously discussed, the intent of our compensation program is to help us attract and retain the appropriate executive talent. Our Board of Directors believes, in addition to protecting us from certain business risks, the employment agreement helps retain Mr. Jennings by providing a competitive employment arrangement with respect to a change in control or termination without cause.

Mr. Jennings' Employment Agreement

Our agreement with Mr. Jennings provides for his employment in his present capacity through November 30, 2018. The agreement automatically extends one additional year on each November 30, unless either we or Mr. Jennings delivers to the other notice that such automatic extension shall not occur.

Under the provisions of his employment agreement, Mr. Jennings will receive payments if we terminate his employment in violation of the terms of the agreement. Termination by us without cause is a violation of the employment agreement. Mr. Jennings may also receive payments if he terminates his employment following a change in control. Mr. Jennings receives no payments under the employment agreement in the event he dies, resigns prior to a change in control, resigns in bad faith following a change in control, becomes disabled or if we terminate him for cause.

If we terminate Mr. Jennings' employment in violation of his agreement, including a termination without cause, we are required to continue to pay Mr. Jennings his salary for the number of years remaining under the agreement, but in no event for less than three years. In addition, during the same period Mr. Jennings will continue to participate in all employee benefits and programs for which he otherwise would have been eligible and may at his option elect to receive title to the automobile then being provided to him by us. While we also will pay Mr. Jennings an amount equal to any excise taxes he is required to pay as a result of payments made to him under his employment agreement, the Company has committed to not enter into future agreements reimbursing employees for excise taxes paid. See Column I in "Termination Table". See also the discussion below on the effect of termination with respect to Mr. Jennings' performance share awards.

Mr. Jennings also may terminate his employment following a change in control if he determines in good faith that, due to the change in control, either his continued employment is not in our best interests or he is unable to carry out his duties effectively. A change in control is defined generally to include (i) the acquisition of 20% of our voting stock by any entity, group or person, (ii) a change in the majority of our Board of Directors or (iii) certain organic changes involving us (e.g., reorganizations, mergers, share exchanges, consolidations, liquidations, sale of substantially all of our assets, or similar transactions) that result in significant shifts in the ownership or control of us. If Mr. Jennings terminates his employment in good faith following a change in control, as described in the preceding paragraph, we are required to pay him in a lump sum at the time of his termination. The lump sum shall be in an amount equal to the total of his salary for the number of years remaining under his employment agreement, or if the total number of years left on his employment agreement is less than three, we are required to pay him an amount equal to three years of his salary.

If Mr. Jennings terminates his employment in good faith following a change in control, then for the number of years remaining under his employment agreement, but in no event for less than three years, he will also continue to participate in all employee benefits and programs for which he otherwise would have been eligible. He also may, at his option, elect to receive title to the automobile then being provided to him by us. We will pay Mr. Jennings an amount equal to any excise taxes he is required to pay as a result of payments made to him under the agreement. See Column IV in "Termination Table". See also the discussion below under "Performance Share Awards" on the effect of termination with respect to Mr. Jennings' performance share awards.

In the event Mr. Jennings is terminated by us in violation of his employment agreement or if he terminates his employment in good faith following a change in control, we agree to pay any losses or damages he suffers as a result of such termination, including legal expenses. We also agree to pay Mr. Jennings' legal expenses generated by any actions regarding the validity or enforceability of the employment agreement or liability under the agreement.

Mr. Jennings' employment agreement contains a non-compete provision. Under the terms of the non-compete, Mr. Jennings' right to payments under his employment agreement ceases if he becomes an employee, owner or manager of a retail natural gas distribution business that has operations in any county where we had (and currently have) pipeline facilities as of the execution date of the employment agreement.

According to our Corporate Governance Guidelines, we will not enter into any new employment agreements with any of our officers.

Change in Control Agreements

Our other executive officers, Mr. Brown, Mr. Caudill, Mr. Ramsey and Mr. Wesolosky, do not have an employment agreement. Each of these executive officers is appointed for a one year term by our Board of Directors.

We do, however, have an agreement with each of these executive officers, which becomes operative in the event of a change in control. For the purpose of these change in control agreements, a change in control is defined generally to include (i) the acquisition of 20% of our voting stock by any entity, group or person, (ii) a change in the majority of our Board of Directors or (iii) certain organic changes involving us (e.g., reorganizations, mergers, share exchanges, consolidations, liquidations, sale of substantially all of our assets, or similar transactions) that result in significant shifts in our ownership or control.

These change in control agreements with these executive officers provide that, following a change in control, each of the four officers may continue in our employment in their customary positions for a period of three years. During this time they will receive compensation consisting of (i) a base salary that is not less than the annual rate in effect on the day before the change in control, with such increase as may thereafter be awarded in accordance with our regular compensation practices and (ii) incentive and bonus awards that are not less than the annualized amounts of any such awards paid to them for the twelve months ending on the date of a change in control. In addition, their change in control agreements provide for the continuance, at not less than the levels immediately before the change in control, of their employee benefit plans and practices. See Column IV in "Termination Table". See also the discussion below, under "Performance Share Awards", on the effect of termination with respect to the officers' performance share awards.

The change in control agreements also provide that if we terminate Mr. Brown, Mr. Caudill, Mr. Ramsey or Mr. Wesolosky without cause during the three year period following a change in control, their compensation and benefits and service credits under the employee benefit plans will continue for the remainder of the period, but in no event for less than two years following termination of employment. If Mr. Brown, Mr. Caudill, Mr. Ramsey or Mr. Wesolosky terminates their employment under their change in control agreement because they determine in good faith that, due to the change in control, their continued employment is not in our best interests or they are unable to carry out their duties effectively, then that termination is considered a termination by us without cause. Under the change in control agreements, executive officers receive no payments if we terminate them for cause or if they are terminated due to their death or retirement.

If terminated without cause, Mr. Brown, Mr. Caudill, Mr. Ramsey or Mr. Wesolosky may elect to receive their total base salary due as a lump sum payment and may elect to receive title to the automobile then currently being furnished to them. While we also agree to pay the four executive officers an amount equal to any excise taxes they are required to pay as a result of payments made to them under the change in control agreement, according to our Corporate Governance Guidelines we will not enter into future agreements reimbursing employees for excise taxes paid.

In addition, we also agree to pay the legal expenses of the executive officers that may be generated by any actions regarding the validity or enforceability of the change in control agreement or liability under the agreement.

The executive officers' change in control agreements contain a non-compete provision. Under the terms of the non-compete, an executive officer's right to payments under the change in control agreement ceases if the executive officer becomes an employee, owner or manager of a retail natural gas distribution business that has operations in any county where we had (and currently have) pipeline facilities as of the execution date of the agreement for the applicable executive officer.

Defined Benefit Retirement Plan

All executive officers have accumulated retirement benefits under our defined benefit retirement plan, which would be available to them if they terminated their employment with us as of June 30, 2014. Their monthly benefits are available whether their employment is terminated with or without cause either before or after a change in control. See Columns I and III in "Termination Table".

The amounts described in the immediately preceding paragraph are not available in the event of death or disability. In the event of death, all executive officers would receive benefits in the form of lump sum settlements. See Column V in "Termination Table". In the event of disability, all executive officers would receive benefits under our defined benefit retirement plan. In addition, all executive officers are entitled to monthly benefits under our insured disability plan that we maintain for our employees. See Column VI in "Termination Table".

Performance Share Awards and Restricted Stock

On August 12, 2011, August 17, 2012 and August 16, 2013, our Board of Directors approved and awarded performance shares to Mr. Brown, Mr. Caudill, Mr. Jennings, Mr. Ramsey and Mr. Wesolosky. The performance shares include both performance and service conditions. If performance conditions are met, the recipients receive one share of restricted stock for each performance share awarded. As long as the executive officer remains our employee, then the shares of restricted stock vest over time and are exchanged for shares of our common stock. For more information regarding the performance and service conditions, see "Performance Shares" under "Compensation Discussion and Analysis".

The performance conditions for each of the 2011, 2012 and 2013 awards were met. As a result each 2011 performance award share was exchanged for one share of restricted stock effective June 30, 2012 (“2012 Restricted Stock”). Similarly, each 2012 performance award share was exchanged for one share of restricted stock effective June 30, 2013 (“2013 Restricted Stock”) and each 2013 performance award share was exchanged for one share of restricted stock effective June 30, 2014 (“2014 Restricted Stock”). Once shares of Restricted Stock vest, then they are owned fully by the recipient. As of June 30, 2014, the presentation date for the Termination Table, two-thirds (2/3) of the shares of 2012 Restricted Stock had vested and one-third (1/3) of the shares of 2013 Restricted Stock had vested. The recipients of shares of the 2012, 2013 and 2014 Restricted Stock may receive payments for previously unvested shares upon termination or change in control.

The Termination Table at the end of this section presents the value of the shares of 2012 Restricted Stock, 2013 Restricted Stock and 2014 Restricted Stock, on an aggregated basis, each recipient would have been entitled to receive as of June 30, 2014 in each of the termination scenarios presented. Additionally, the number of shares of 2012 Restricted Stock, 2013 Restricted Stock and 2014 Restricted Stock each recipient

would have been entitled to receive if an event of termination had occurred after June 30, 2014 varies depending upon the type of termination, as described below.

Resignation or Termination

Executive officers forfeit all of their unvested shares of 2012 Restricted Stock, 2013 Restricted Stock and 2014 Restricted Stock if they resign or are otherwise terminated before the shares vest.

Retirement between June 30-August 31, 2014

2012 Restricted Stock. If executive officers had retired on June 30, 2014 or before the termination of the third restriction period (August 31, 2014), then the executive officers would receive a number of shares of common stock equal to that number of shares of common stock they would otherwise have been entitled to receive had they been active employees at the end of the third restriction period (August 31, 2014) multiplied by the portion of the third restriction period during which they were active employees, as shown in Column II for Mr. Caudill and Mr. Jennings. The executive officers' remaining shares of 2012 Restricted Stock would then be forfeited.

2013 Restricted Stock. If executive officers had retired on June 30, 2014 or before the termination of the second restriction period (August 31, 2014), then the executive officers would receive a number of shares of common stock equal to that number of shares of common stock they would otherwise have been entitled to receive had they been active employees at the end of the second restriction period (August 31, 2014) multiplied by the portion of the second restriction period during which they were active employees, as shown in Column II for Mr. Caudill and Mr. Jennings. The executive officers' remaining shares of 2013 Restricted Stock would then be forfeited.

2014 Restricted Stock. If executive officers had retired on June 30, 2014 or before the termination of the first restriction period (August 31, 2014), then the executive officers would receive one-third of the shares of common stock that they would otherwise have been entitled to receive had they been active employees at the end of the first restriction period (August 31, 2014), as shown in Column II for Mr. Caudill and Mr. Jennings. The executive officers' remaining shares of 2014 Restricted Stock would then be forfeited.

No value for the shares of 2012 Restricted Stock, 2013 Restricted Stock or 2014 Restricted Stock was included in Column II for Mr. Brown, Mr. Ramsey or Mr. Wesolosky because none of these executive officers was eligible for retirement on June 30, 2014.

Change in Control

If a change in control occurred on or after June 30, 2014 but before all of the vesting periods terminate for the 2012 Restricted Stock, the 2013 Restricted Stock or for the 2014 Restricted Stock, all shares of restricted stock would immediately vest and the executive officers would receive shares of our common stock in exchange for their shares of restricted stock, as shown in Column IV.

Death

If executive officers die on or after June 30, 2014, but before all of the vesting periods terminate for the 2012 Restricted Stock, the 2013 Restricted Stock or for the 2014 Restricted Stock, all shares of restricted stock would immediately vest for any such deceased executive officers and their beneficiaries would receive shares of our common stock rather than shares of our restricted stock as shown in Column V.

Disability between June 30-August 31, 2014

2012 Restricted Stock. If executive officers had become disabled on June 30, 2014 or before the termination of the third restriction period (August 31, 2014), then such disabled executive officers would receive a number of shares of common stock equal to that number of shares of common stock they would otherwise have been entitled to receive had they been active employees at the end of the third restriction period (August 31, 2014) multiplied by the portion of the third restriction period during which they were active employees, as shown in Column VII. The disabled executive officers' remaining shares of 2012 Restricted Stock would then be forfeited.

2013 Restricted Stock. If executive officers had become disabled on June 30, 2014 or before the termination of the second restriction period (August 31, 2014), then such disabled executive officers would receive a number of shares of common stock equal to that number of shares of common stock they would otherwise have been entitled to receive had they been active employees at the end of the second restriction period (August 31, 2014) multiplied by the portion of the second restriction period during which they were active employees, as shown in Column VII. The disabled executive officers' remaining shares of 2013 Restricted Stock would then be forfeited.

2014 Restricted Stock. If executive officers had become disabled on June 30, 2014 or before the termination of the first restriction period (August 31, 2014), such disabled executive officers would receive one-third of the shares of common stock that they would otherwise have been entitled to receive had they been active employees at the end of the first restriction period (August 31, 2014), as shown in Column VII. The disabled executive officers' remaining shares of 2014 Restricted Stock would then be forfeited.

Disability and Retirement between September 1, 2014-August 31, 2016

If executive officers become disabled or retire on or after September 1, 2014 but before all of the restriction periods terminate for the 2013 Restricted Stock (August 31, 2015) or for the 2014 Restricted Stock (August 31, 2016), then the number of shares of restricted stock that will vest and be exchanged for common stock shall equal the number of shares of common stock such disabled or retired executive officers would otherwise be entitled to receive had they been active employees at the end of the applicable restriction period (August 31, 2015 or August 31, 2016) multiplied by the portion of the restriction period during which they were active employees. The disabled or retired executive officers' remaining shares of restricted stock would then be forfeited.

The following "Termination Table" sets forth potential payments payable to the individuals in the "Summary Compensation Table" in the event they terminate their employment under varying circumstances. The "Termination Table" assumes that the termination occurred as of June 30, 2014.

Termination Table



($)	I		II		III		IV			V	VI	VII
	Payments Before a Change in Control (1)				Payments Following a Change in Control					Payments in the Event of Death	Payments in the Event of Disability
Name	Monthly			Lump Sum	Monthly			Lump Sum		Lump Sum	Monthly (2)	Lump Sum
John B. Brown
Accrued vacation benefits	—			19,731	—			19,731		19,731	—	19,731
Defined benefit retirement plan	—	(3)		—	—	(4)		—		901,786	702	—
Change of control agreement	—			—	—			1,317,000	(5)	—	—	—
Excise taxes (grossed up)	—			—	—			380,000		—	—	—
Performance award shares (6)	—			—	—			241,560		241,560	—	109,800
Insured disability plan	—			—	—			—		—	13,613	—
	—			19,731	—			1,958,291		1,163,077	14,315	129,531
Johnny L. Caudill
Accrued vacation benefits	—			27,304	—			27,304		27,304	—	27,304
Defined benefit retirement plan	7,470	(3)		—	8,605	(4)		—		1,194,063	7,470	—
Change of control agreement	—			—	—			1,503,975	(5)	—	—	—
Excise taxes (grossed-up)	—			—	—			430,000		—	—	—
Performance award shares (6)	—			109,800	—			241,560		241,560	—	109,800
Insured disability plan	—			—	—			—		—	13,764	—
	7,470			137,104	8,605			2,202,839		1,462,927	21,234	137,104
Glenn R. Jennings
Accrued vacation benefits	—			50,461	—			50,461		50,461	—	50,461
Defined benefit retirement plan	10,401	(3)		—	12,005	(4)		—		1,646,942	10,401	—
Employment agreement	72,433	(7)		—	—			3,838,945	(8)	—	—	—
Excise taxes (grossed-up)	20,000			—	—			1,150,000		—	—	—
Performance award shares (6)	—			329,400	—			658,800		658,800	—	329,400
Insured disability plan	—			—	—			—		—	27,850	—
Term life insurance policy	—			—	—			—		200,000	—	—
Supplemental retirement trust	8,333	(9)		—	8,333	(9)		—		907,048	—	907,048
	111,167			379,861	20,338			5,698,206		3,463,251	38,251	1,286,909
Brian S. Ramsey
Accrued vacation benefits	—			24,443	—			24,443		24,443	—	24,443
Defined benefit retirement plan	—	(3)		—	—	(4)		—		694,469	945	—
Change of control agreement	—			—	—			1,146,690	(5)	—	—	—
Excise taxes (grossed-up)	—			—	—			340,000		—	—	—
Performance award shares (6)	—			—	—			241,560		241,560	—	109,800
Insured disability plan	—			—	—			—		—	11,196	—
	—			24,443	—			1,752,693		960,472	12,141	132,243
Matthew D. Wesolosky
Accrued vacation benefits	—			17,527	—			17,527		17,527	—	17,527
Defined benefit retirement plan	—	(3)		—	—	(4)		—		652,693	123	—
Change of control agreement	—			—	—			862,854	(5)	—	—	—
Excise taxes (grossed-up)	—			—	—			270,000		—	—	—
Performance award shares (6)	—			—	—			241,560		241,560	—	109,800
Insured disability plan	—			—	—			—		—	8,658	—
	—			17,527	—			1,391,941		911,780	8,781	127,327


(1)	Paid to the executive officer in the event of voluntary termination by the executive officer or involuntary termination by us, subject to notes (6) and (7) below.

(2)

In the event of disability, payments under our defined benefit retirement plan are assumed to be made monthly as 10-year certain and life annuities. Under our retirement plan, all five of the executive officers may, at their discretion, select other annuity and lump sum payment options, as illustrated in note (3) below. Payments under our insured disability plan are assumed to be made monthly until the executive officer reaches the age of 65.

(3)

Monthly amounts payable under our defined benefit retirement plan. The amounts are payable as a result of any termination of employment, including, for example, the termination of the executive officer's employment by us for cause. These monthly payments would begin immediately for Mr. Caudill and Mr. Jennings. Payments to Mr. Brown would begin when he reaches the age of 65 in the amount of $3,588 per month, or at age 55 in the amount of $1,794 per month. Payments to Mr. Ramsey would begin when he reaches the age of 65 in the amount of $3,399 per month, or at age 55 in the amount of $1,700 per month. Payments to Mr. Wesolosky would begin when he reaches the age of 65 in the amount of $1,390 per month, or at age 55 in the amount of $695 per month. Payments assume monthly payments as a 10-year certain and life annuity option. Under our retirement plan, all five of the executive officers may, at their discretion, select other annuity and lump sum payment options. See "Retirement Benefits". For example, Mr. Brown could receive an immediate lump sum of $41,113 along with an annuity of $2,873 per month beginning at age 65 (or $1,437 per month beginning at age 55), Mr. Caudill could receive an immediate lump sum of $715,616 along with an immediate annuity of $3,010 per month, Mr. Jennings could receive an immediate lump sum of $1,060,778 along with an immediate annuity of $3,842 per month, Mr. Ramsey could receive an immediate lump sum of $79,613 along with an annuity of $2,329 per month beginning at age 65 (or $1,165 per month beginning at age 55) and Mr. Wesolosky could receive an immediate lump sum of $2,911 along with an annuity of $1,303 per month beginning at age 65 (or $652 per month beginning at age 55).

(4)

The amounts payable under the executive officer's change in control agreement if the executive officer is terminated following a change in control by us, without cause, or by the executive officer in good faith. For Mr. Brown, Mr. Caudill, Mr. Ramsey and Mr. Wesolosky, these amounts include an additional three years of vesting and benefit accrual at their current salary level. For Mr. Jennings, this amount includes benefit accruals for an additional three years or until the end of his current employment agreement, November 30, 2018, if later. These monthly payments would begin immediately for Mr. Caudill and Mr. Jennings. Payments to Mr. Brown would begin when he reaches the age of 65 in the amount of $4,783 per month, or at age 55 in the amount of $2,392 per month. Payments to Mr. Ramsey would begin when he reaches the age of 65 in the amount of $4,411 per month, or at age 55 in the amount of $2,206 per month. Payments to Mr. Wesolosky would begin when he reaches the age of 65 in the amount of $2,136 per month, or at age 55 in the amount of $1,068 per month. Payments assume monthly payments as a 10-year certain and life annuity option. Under our retirement plan, all five of the executive officers may, at their discretion, select other annuity and lump sum payment options. See "Retirement Benefits". For example, Mr. Brown could receive an immediate lump sum of $41,113 along with an annuity of $4,068 per month beginning at age 65 (or $2,034 per month beginning at age 55), Mr. Caudill could receive an immediate lump sum of $715,616 along with an immediate annuity of $4,145 per month, Mr. Jennings could receive an immediate lump sum of $1,060,778 along with an immediate annuity of $5,445 per month, Mr. Ramsey could receive an immediate lump sum of $79,613 along with an annuity of $3,341 per month beginning at age 65 (or $1,671 per month beginning at age 55), and Mr. Wesolosky could receive an immediate lump sum of $2,911 along with an annuity of $2,049 per month beginning at age 65 (or $1,025 per month beginning at age 55).


(5)	The amounts reflect estimated lump sum payments under the executive officer's change in control agreement if the executive officer is terminated following a change in control (i) by us, without cause, or (ii) by the executive officer in good faith.

(6)

The amounts were calculated based on the fair market value of a share of the Company's common stock on June 30, 2014 at $21.96 per share. Only Mr. Jennings and Mr. Caudill were eligible for retirement as of June 30, 2014. As a result, the payments in Column II reflect the amount Mr. Jennings and Mr. Caudill would be entitled to receive if they had retired as of June 30, 2014 prior to a change in control.

(7)

This amount reflects estimated monthly payments and benefits that we must make to Mr. Jennings if, before any change in control, we terminate his employment in violation of his employment agreement. No payments would be made if Mr. Jennings breaches his contract or if we terminate his employment for cause. The monthly payments and benefits continue for the term remaining on his employment agreement, but in no event for less than three years. Estimated payments include perquisites, changes in pension value, salary and bonus amounts based on 2014 amounts. See "Potential Payments Upon Termination Or Change In Control".


(8)	Lump sum payment to Mr. Jennings under his employment agreement if he is terminated following a change in control (i) by us, in violation of his employment agreement, or (ii) by Mr. Jennings in good faith.


(9)	The supplemental retirement trust will pay Mr. Jennings $100,000 per year upon his retirement until the trust balance is extinguished.

Security Ownership of Certain Beneficial Owners (1)

The only persons known by us to beneficially own more than five percent of our common stock as of August 31, 2014, are as follow:



Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership (2)		Percent of Stock (3)
Anita G. Zucker c/o The Inter Tech Group, Inc. 4838 Jenkins Avenue
North Charleston, SC 29405	506,978	(4)	7.2%

GAMCO Investors, Inc. One Corporate Center Rye, NY 10580
Gabelli Funds, LLC	269,000	(5)
Teton Advisors, Inc.	98,000	(5)
	367,000		5.2%



(1)		The only class of stock issued and outstanding is common stock.
(2)		The persons listed, unless otherwise indicated in this column, are the sole beneficial owners of the reported securities and accordingly exercise both sole voting and sole investment power over the securities.
(3)		Based on 7,039,877 shares of our common stock outstanding as of August 31, 2014.
(4)		The figures are based on the Schedule 13D filed by Anita G. Zucker on September 7, 2010.
(5)		The figures are based on the June 30, 2014 Schedule 13F filed by GAMCO Investors, Inc. on August 6, 2014.



Security Ownership of Management (1)

The following information with respect to beneficial ownership, as of August 31, 2014, of shares of common stock is furnished with respect to (i) each of Delta's directors and nominees, (ii) each executive officer named in the Summary Compensation Table appearing in this proxy statement, and (iii) all current directors, nominees and executive officers as a group.




Name of Beneficial Owner	Amount and Nature of Beneficial Ownership (2)(3)	Percent of Stock (4)



John B. Brown (5)	26,595	(6)(7)	*
Johnny L. Caudill (5)	36,120	(6)	*
Jacob P. Cline, III (8)	—		*
Sandra C. Gray (9)	2,806		*
Edward J. Holmes (9)	3,409		*
Glenn R. Jennings (5)(9)	107,978	(6)	1.5%
Michael J. Kistner (9)	7,832		*
Lewis N. Melton (9)	34,746		*
Fred N. Parker (8)	2,419		*
Brian S. Ramsey (5)	24,438	(6)	*
Arthur E. Walker, Jr. (9)	44,093		*
Matthew D. Wesolosky (5)	19,325	(6)(10)	*
Michael R. Whitley (9)	33,400		*
All directors, nominees and officers as a group (13 persons)	343,161		4.9%



*	Less than 1%.
(1)	The only class of stock issued and outstanding is common stock.
(2)	The persons listed, unless otherwise indicated in this column, are the sole beneficial owners of the reported securities and accordingly exercise both sole voting and sole investment power over the securities.
(3)	The figures, which are as of August 31, 2014, are based on information supplied to us by our directors, nominees and executive officers.
(4)	Based on 7,039,877 shares of our common stock outstanding as of August 31, 2014.
(5)	Executive Officer.
(6)	The amounts disclosed include unvested shares awarded to executive officers under the Incentive Compensation Plan. Mr. Jennings has 15,000 unvested shares and Mr. Brown, Mr. Caudill, Mr. Ramsey and Mr. Wesolosky each have 6,000 unvested shares.
(7)	Includes 7,478 shares held jointly with Mr. Brown's spouse.
(8)	Nominee.
(9)	Director.
(10)	Includes 318 shares held jointly with Mr. Wesolosky's spouse and children.

Certain Relationships and Related Transactions

Transactions between us and related persons or parties are approved, similar to all our transactions, by our properly authorized officers or agents or, if required, by our Board of Directors. We additionally review all such related party transactions pursuant to the following policies and procedures.

Quarterly, we report a summary of all known related party transactions to our management and internal audit for review. Each year in anticipation of our Annual Meeting of Shareholders, we request from each of our Officers and Directors information about transactions that they or parties related to them may have had with us. The information we request is designed to enable us to comply with our obligation to report related party transactions.

Each year our Audit Committee reviews the summary report to our management of known related party transactions for the year and the information that is supplied to us by each Officer and Director. Neither we nor the Audit Committee has written standards for review of this information, although in reviewing the propriety of any reported related party transactions, the Audit Committee considers the provisions of our Business Code of Conduct and Ethics, which our Directors and Officers also commit to observe. The Audit Committee is authorized under its charter to retain legal counsel as necessary in connection with its fulfilling of its duties and obligations. Our written Audit Committee Charter states expressly that the Committee's "oversight responsibilities" includes "reviewing and considering related party transactions".

The Audit Committee concluded from its review in 2014 that transactions with Directors and Officers were appropriate and on an arms-length basis. During 2014, we entered into transactions described below.

Sandra C. Gray, a member of our Board of Directors, is the President of Asbury University. Delta Resources supplied Asbury University with approximately $201,000 of natural gas during fiscal 2014. The price charged Asbury University by Delta Resources contains a gas transportation component, which is based on our regulated tariffs, and also includes a negotiated market-based component for the natural gas commodity. In addition, we sold natural gas at tariff rates to Asbury University totaling approximately $131,000 during fiscal 2014.

Glenn R. Jennings, our Chairman of the Board, President and Chief Executive Officer, serves as a member of the Board of Trustees of Berea College. Delta Resources supplied Berea College with approximately $565,000 of natural gas during fiscal 2014. The price charged Berea College by Delta Resources contains a gas transportation component, which is based on our regulated tariffs, and also includes a negotiated market-based component for the natural gas commodity. In addition, we sold natural gas at tariff rates to Berea College totaling approximately $95,000 during fiscal 2014.

Under the listing standards for the NASDAQ OMX Group, none of the series of transactions with Dr. Gray were of the magnitude which would impair her status as an independent member of the Board of Directors or the committee on which she serves. Since he is an employee, Mr. Jennings is not an independent member of the Board of Directors.

Shareholders' Communications with Board

The Board of Directors provides a process for our shareholders to send communications to our Board of Directors or any member of our Board of Directors. The board policy encourages a shareholder to communicate in any manner convenient to the shareholder. As one such method of communication, our

Board of Directors adopted a policy whereby any shareholder may communicate with the Board of Directors or any member of the Board of Directors by a written communication sent to our principal corporate offices. Our Corporate Secretary will forward such written communication to the Chairman of our Board of Directors or to the particular director, as indicated by the shareholder.

PROPOSAL 3

Non-binding, Advisory Vote to Approve the

Compensation the Company Paid our Named Executive Officers for Fiscal 2014

Federal legislation embodied in Section 14A of the Securities and Exchange Act of 1934, as amended, requires that we hold a shareholder vote on the compensation paid to our Named Executive Officers as described in "Compensation Discussion and Analysis" and the "Summary Compensation Table" in this proxy statement (commonly referred to as "Say-on-Pay"). At our 2011 Annual Meeting of Shareholders, we submitted a non-binding advisory vote to our shareholders to determine the frequency of our future say on pay votes. A majority of our shareholders approved an annual say on pay vote. The Board of Directors had recommended holding an annual vote and decided that it would submit a say on pay vote to our stockholders annually. As is required by SEC rules, we will hold an advisory vote on frequency of say on pay votes every six years, which means the next such vote will be held at our Annual Meeting of Shareholders in 2017.

The compensation paid to our Named Executive Officers is disclosed in this proxy statement in the section entitled "Compensation Discussion and Analysis" and the related "Summary Compensation Table". We believe that our compensation policies and decisions are focused on pay-for-performance principles and are strongly aligned with the long-term interests of our shareholders. Compensation of our Named Executive Officers is designed to enable us to attract and retain talented and experienced senior executives to lead the Company successfully in a competitive environment.

Shareholders are being asked to cast a non-binding, advisory vote on the following resolution:

RESOLVED, that the compensation the Company paid its Named Executive Officers, as disclosed in the "Compensation Discussion and Analysis" section and the related "Summary Compensation Table" of this proxy statement, is APPROVED.

Your vote on this Proposal 3 is advisory and therefore not binding on the Company, the Corporate Governance and Compensation Committee or the Board of Directors. The Board of Directors and our Corporate Governance and Compensation Committee will, however, take into account the outcome of the vote when considering future executive compensation arrangements.

Recommendation of the Board of Directors

The Company's Board of Directors recommends voting "FOR" the proposal to approve the compensation paid to the Company's Named Executive Officers disclosed in "Compensation Discussion and Analysis" and related "Summary Compensation Table" appearing in this proxy statement.

Submission of Shareholders' Proposals

Our Bylaws do not contain any requirement for shareholders to provide advance notice of proposals or nominations they intend to present at our Annual Meeting of Shareholders.

Any proposal by a shareholder to be submitted for possible inclusion in our proxy soliciting materials for our 2015 Annual Meeting of Shareholders must be received by us no later than June 12, 2015.

Voting

General

As of the close of business on October 2, 2014, the record date fixed for determination of voting rights, we had outstanding 7,045,175 shares of common stock, each share having one vote.

Once a share is represented for any purpose at the meeting, it will be deemed present for quorum purposes for the remainder of the meeting and any adjournment of the meeting unless a new record date is set.

If your shares are held in a stock brokerage account by a bank, broker, trustee, or other nominee, you are considered the beneficial owner of shares held in "street name." Brokers holding shares in "street name" generally are not entitled to vote on certain matters unless they receive voting instructions from their customers. When brokers do not receive voting instructions from their customers, they notify us on the proxy form that they lack voting authority. The votes that could have been cast on the matter in question by brokers who did not receive voting instructions are called "broker non-votes."

If you are a beneficial owner and do not provide voting instructions, your bank, broker, or other nominee of record is permitted to vote your shares for the ratification of auditors but is not permitted to vote your shares for the election of directors or the "say on pay" proposal. Shares of our common stock present at our annual meeting that abstain from voting or that are the subject of broker non-votes will be counted as present for purposes of determining a quorum.

Election of Directors

Our directors are elected by a plurality of votes cast at a meeting at which a quorum is present. Under plurality voting, the nominees with the largest number of votes are elected as directors, up to the maximum number of directors to be chosen at the election.

Matters Other than Election of Directors

Generally under Kentucky law, shareholder approval of a matter other than the election of directors requires the presence in person or by proxy of a quorum of shares and more votes cast favoring the action than cast opposing the action.

How Your Shares Will Be Voted

By signing and returning a proxy card or by voting by internet or by telephone in accordance with the instructions on your proxy card, your shares will be voted in accordance with the instructions you provide. If you vote without providing contrary instructions, your proxy will be voted in the following manner:


•	"FOR" the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending 2014;


•	"FOR" the nominees for director as described in this proxy statement;


•	"FOR" the non-binding, advisory approval of executive compensation; and

in accordance with the judgment of the persons appointed as proxies on any other business as may properly come before the Annual Meeting.

Discretionary Voting Authority

We are not aware of any other matters to be presented at the Annual Meeting of Shareholders to be held on November 20, 2014. However, if any other matters come before the meeting, it is intended that the holders of proxies solicited hereby will vote such shares in their discretion to the full extent permitted by Rule 14a-4 of the SEC's proxy rules.

Rule 14a-4 of the SEC's proxy rules allows us to use discretionary authority to vote on a matter coming before our Annual Meeting of Shareholders and not included in our proxy statement. This discretionary voting authority is limited to matters about which we do not have notice at least 45 days before the date in that year corresponding to the date on which our prior year's proxy materials were first mailed to shareholders in connection with the prior year's Annual Meeting of Shareholders. Accordingly, for our 2015 Annual Meeting of Shareholders, any such notice must be submitted to our Corporate Secretary on or before August 27, 2014.

In addition we may also use discretionary voting authority if we receive timely notice of such matters as described in the preceding sentence and if, in the proxy statement, we describe the nature of such matter and how we intend to exercise our discretion to vote on the matter.

This requirement is separate from the SEC's requirements that a shareholder must meet in order to have a shareholder proposal included in our proxy statement, as described above in the section entitled "Submission of Shareholders' Proposals".

Revoking a Proxy

You may revoke or change your proxy at any time before it is exercised by (i) filing written notice of revocation with our corporate Secretary; (ii) submitting to our corporate Secretary a duly-executed proxy bearing a later date; or (iii) appearing at the Annual Meeting and (after having given our corporate Secretary notice of your intention to vote in person) voting your shares of our common stock in person. Our corporate Secretary is Mr. John B. Brown and may be reached at Delta Natural Gas Company, Inc., 3617 Lexington Road, Winchester, Kentucky 40391, (859) 744-6171 ext. 1109. If your shares are held through a broker, please contact the broker to revoke or change your proxy or obtain a proxy in order to vote in person at the Annual Meeting.

Section 16(a) Beneficial Ownership Reporting Compliance

In accordance with Section 16(a) of the Securities Exchange Act of 1934 and Securities and Exchange Commission regulations, persons who own greater than 10 percent of the Company's equity securities, our directors and executive officers are required to file reports of ownership and changes in ownership of such equity securities with the Securities and Exchange Commission and to furnish us with copies of all such reports they file.

Based solely on our review of copies of such reports received or written representations from certain reporting persons, we believe that all required reports were timely filed with the following exceptions. Our directors Sandra Gray and Edward Holmes have each chosen to have a portion of their monthly director fees used to purchase our common stock. We send the money monthly to our registrar, Computershare Investor Services, LLC who handles the mechanics of the purchase in a manner that is similar to how it handles the reinvestment of dividends through the purchase of our common stock for our shareholders who participate in our Dividend Reinvestment Plan. We understood that these purchases for Dr. Gray and Mr. Holmes could be reported once a year on a Form 5. Subsequent to the fiscal year ending June 30, 2014, we were advised that a Form 4 reflecting one purchase transaction for each of Dr. Gray and Mr. Holmes should have been filed on or around the 15th day of each month during the past fiscal year. We began following this reporting practice in July, 2014.

Directions to Annual Meeting of Shareholders

Our annual meeting of shareholders will be held at our corporate headquarters at 10:00 a.m. on November 20, 2014. If you plan to attend this meeting, you can obtain directions by contacting Emily P. Bennett at Delta at 3617 Lexington Road, Winchester, Kentucky 40391, (859) 744-6171 ext. 1116.

Other Matters

Under Kentucky law, there are no appraisal or similar rights of dissenters with respect to any matter to be acted upon at the 2014 Annual Meeting of Shareholders.

Important Notice Regarding the Availability of Proxy Materials for the

Shareholder Meeting to be Held on November 20, 2014

Any stockholder may obtain without charge a copy of our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the year ended June 30, 2014, our Annual Report to Shareholders for the year ended June 30, 2014, including financial statements, the form of proxy or this Notice and Proxy Statement


•	by submitting a request in writing to: John B. Brown, Chief Financial Officer, Treasurer and Secretary, Delta Natural Gas Company, Inc., 3617 Lexington Road, Winchester, KY 40391,


•	by contacting Mr. Brown by e-mail at jbrown@deltagas.com,


•	by calling the Company at (859) 744-6171 ext. 1116 or


•	on our website at http://www.deltagas.com. Please be sure to specify which document(s) you are requesting.

The above Notice and Proxy Statement are sent by order of the Board of Directors.

/s/John B. Brown

John B. Brown

Chief Financial Officer, Treasurer

and Secretary

October 10, 2014

Delta Natural Gas Company, Inc.

Notice of Performance Shares Award

To:

At its meeting on August XX, XXX1, the Corporate Governance and Compensation Committee (the “Committee”) of Delta Natural Gas Company, Inc. (the “Company”), authorized and directed the Company, on the Date of Award set forth below, to issue and make an award to you of Performance Shares entitling you to receive shares of the Company’s common stock under the terms and conditions of the Incentive Compensation Plan (the “Plan”) of the Company and this Notice of Performance Shares Award. A copy of the Plan was filed with the Securities and Exchange Commission on March 4, 2010 as an exhibit to Form S-8 and is available on the Company’s website (deltagas.com). A hard copy is also available upon request. Contact John B. Brown, Chief Financial Officer, Treasurer and Secretary. Capitalized terms that are not defined have the meanings given them in the Plan.

Date of Award: August 31, XXX1

Award: Subject to the Performance Period, Performance Criteria and other restrictions set forth herein, you may receive between XX,XXX to XX,XXX Performance Shares which will entitle you to receive one share of the Company’s common stock (“Share”) for each Performance Share.

Performance Period: The period from July 1, XXX1 – June 30, XXX2.

Restriction Period(s):

Restriction Period 1 (covers 1/3 of Performance Shares paid): July 1, XXX2 - August 31, XXX2

Restriction Period 2 (covers 1/3 of Performance Shares paid): July 1, XXX2 - August 31, XXX3

Restriction Period 3 (covers 1/3 of Performance Shares paid): July 1, XXX2 - August 31, XXX4

Performance Criteria: The performance objective of this award is based upon on the Company’s XXX2 audited earnings per share as reported in the Company’s Annual Report on Form 10-K, before any cash bonuses or stock awards, for the year ending June 30, XXX2 (“XXX2 Audited EPS”).

Minimum Performance Objective: $ X.XX per share

Targeted Performance Objective: $ X.XX per share

Maximum Performance Objective: $ X.XX per share

Minimum Performance Objective Not Met. If the Minimum Performance Objective is not met, i.e., if the Company does not achieve a XXX2 Audited EPS of at least $X.XX, the number of Performance Shares will not be determined and none will vest and you will not be entitled to any Performance Shares hereunder.

Minimum Performance Objective Met or Exceeded. If the Minimum Performance Objective and all other conditions, including the Conditions to Payment set out below, are met or exceeded,

then you shall receive the following number of Performance Shares based upon the actual XXX2 Audited EPS:



$X.XX – $X.XX XXX2 Audited EPS	$X.XX – $X.XX XXX2 Audited EPS	$X.XX and over XXX2 Audited EPS
XX,XXX shares	XX,XXX shares	XX,XXX shares

Restrictions and Vesting: Except as provided in Paragraph 2 under Conditions to Payment, all Performance Shares paid hereunder shall be in the form of Restricted Stock, which shall vest in 1/3 increments as described below under Conditions on Restrictions.

Conditions to Payment:

1. Payment of Shares. Except as provided in Paragraph 2, your Performance Shares will be paid in Shares of Restricted Stock, subject to the restrictions and vesting set forth below, as soon as administratively feasible after the end of the Performance Period, but no earlier than the filing date of the Company’s annual report on Form 10-K and no later than September 14 of the same year. Payment will be made in the form of whole shares of Restricted Stock in a lump sum payment. You will only receive such number of Shares as are established under the Performance Criteria.

2. Death, Disability or Retirement before end of Performance Period and Payment. For purposes of this Paragraph 2 only, the Performance Shares awarded as provided in subsections 2(a), (b), (c) or (d) shall be in the form of shares of the Company’s common stock and will not be subject to the Conditions on Restrictions in this Notice of Performance Shares Award.

(a) In the event of your Disability or Retirement before the Performance Period has ended, the number of Performance Shares to which you shall be entitled to, if any, shall equal (i) the number of Performance Shares, if any, you would otherwise be entitled to had you been an active Employee at the end of the Performance Period (i.e., as adjusted or forfeited based on the actual Performance Criteria) multiplied by (ii) the portion of the Performance Period during which you were an active Employee multiplied by (iii) one-third, and such Performance Shares shall be distributed as soon as administratively feasible after the end of the Performance Period, but no later than September 13 of the same year; or

(b) In the event of your death while an Employee before the Performance Period has ended, the Company will be assumed to have achieved a Targeted Performance Objective for the Performance Period in which death occurs, and the number of Shares your beneficiary shall be entitled to, if any, shall equal the number of Shares you would otherwise be entitled to had you been an active Employee at the end of the Performance Period without any further adjustment, and such Performance Shares shall be distributed within a reasonable period following death; or

(c) In the event of your Disability or Retirement after the end of the Performance Period, but before the date the Performance Shares are distributed, the number of Performance Shares you

shall be entitled to, if any, shall be (i) based on the actual Performance Criteria for the entire Performance Period multiplied by (ii) one-third; or

(d) In the event of your death after the end of the Performance Period, but before the date the Performance Shares are distributed, the number of Performance Shares you shall be entitled to, if any, shall be based on the actual Performance Criteria for the entire Performance Period without any further adjustment.

3. Other Termination.

(a) You shall have no right to receive payment in respect of Performance Shares if you resign or are otherwise terminated from the Company before the end of the Performance Period for reasons other than your death, Disability, or Retirement or following a Change in Control.

(b) You shall have no right to receive payment in respect of Performance Shares if you resign or are otherwise terminated from the Company after the end of the Performance Period but before any Performance Shares have vested if you resign or are otherwise terminated from the Company for reasons other than your death, Disability, or Retirement or following a Change in Control.

4. Short-Term Disability; Other Authorized Leaves of Absence. If you are absent from employment during a Performance Period and you are entitled to (a) reemployment rights following military service under the Uniformed Services Employment and Reemployment Rights Act (USERRA) (or any other similar applicable federal or state law) or (b) sickness allowance and/or short-term disability benefits under the Company’s employee benefit plans, then your absence shall not affect your award of Performance Shares, if any. In the event you are absent from employment during a Performance Period due to an authorized leave of absence not described in the immediately preceding sentence, the amount or number of Performance Shares to which you shall be entitled to, if any, shall equal (i) the amount or number of Performance Shares, if any, to which you would otherwise be entitled had you been an active Employee during the entire Performance Period (i.e., as adjusted or forfeited based on the Performance Criteria) multiplied by (ii) the portion of the Performance Period during which you were an active Employee (i.e., excluding the period of the authorized leave of absence) and such Performance Shares shall be distributed and vest following the end of the Performance Period as set forth in Section 1 above.

5. Adjustment of Award Due to Demotion or Promotion. The Committee, in its discretion, may reduce the number of Performance Shares (if the Performance Criteria are met) in the event you are demoted during a Performance Period, or grant additional Performance Shares (if the Performance Criteria are met) in the event you are promoted during a Performance Period.

6. Restriction on Payment of Awards. No distributions in respect of Performance Shares shall be made, and such distribution shall be forfeited, if at the time a distribution would otherwise have been made:

(a) The regular quarterly dividend on any outstanding common or preferred shares of the Company has been omitted and not subsequently paid prior to or on September 15, XXX2; or

(b) The consolidated net income of the Company for the fiscal year ending June 30, XXX2 is less than the sum of (i) the aggregate amount to be distributed plus (ii) dividends on all outstanding preferred and common shares of the Company applicable to such twelve-month period (either paid, declared or accrued at the most recently paid rate).

Conditions on Restrictions:

7. Restricted Stock. Except as provided in Paragraph 2 under Conditions to Payment, Performance Shares paid hereunder shall be in the form of Restricted Stock which will vest and the restrictions thereon will lapse in 1/3 increments each year beginning on August 31, XXX2, and annually each August 31 thereafter until fully vested as long as the Recipient is an Employee throughout each such Restriction Period. If the Performance Criteria is not met, you will not receive any Restricted Stock.

8. Restrictions. Except as otherwise provided in this Agreement, the Shares of Restricted Stock granted hereunder may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the termination of the applicable Restriction Period. Except as otherwise provided herein and subject to the Plan, if you resign, are otherwise terminated from the Company, prior to the end of the Restriction Period, you will forfeit all interests in the applicable Restricted Stock. All rights with respect to the Restricted Stock granted to you shall be exercisable during your lifetime only by you or your guardian or legal representative.

9. Removal of Restrictions. Restricted Stock paid hereunder shall become freely transferable by you after the last day of the applicable Restriction Period.

10. Voting Rights. During the Restriction Period, you may exercise full voting rights with respect to the Restricted Stock subject thereto.

11. Dividends and Other Distributions. During the Restriction Period, you shall be entitled to receive all dividends and other distributions paid with respect to the applicable Restricted Stock. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Restricted Stock with respect to which they were distributed.

12. Death, Disability or Retirement after Payment but before end of Restriction Period. Except as otherwise provided in this Notice, in the event of your death, Disability, or Retirement while an Employee, the following shall apply:

(a) Disability and Retirement. In the event of your Disability or Retirement (except in certain limited situations described in Section 12(c) below) before the Restriction Period has ended, the restrictions on the Shares shall be removed upon expiration of the Restriction Period, and the number of Shares you shall be entitled to, if any, shall equal (i) the number of Shares, if any, you

would otherwise be entitled to had you been an active Employee at the end of the Restriction Period multiplied by (ii) the portion of the Restriction Period you were an active Employee; or

(b) Death. In the event of your death before the Restriction Period has ended, the restrictions on the Shares shall be removed upon your date of death, and the number of Shares you shall be entitled to, if any, shall equal the number of Shares contingently granted to you, without any further adjustment.

(c) Retirement – Limited Situations. In the event of your Retirement before the Restriction Period has ended and provided you meet all of the requirements in the next sentence, then the restrictions on the Shares shall be removed upon the date of your Retirement, and the number of Shares you shall be entitled to, if any, shall equal the number of Shares contingently granted to you, without any further adjustment. In order for you to have the restrictions removed from your Shares as provided in the immediately preceding sentence, you must (i) retire after having met the “normal retirement age” as defined under the defined benefit pension plan sponsored by the Company and (ii) have attained the age of 67 at the time of termination of employment.

Change of Control:

13. Change in Control. Upon a Change in Control Performance Shares previously granted shall be immediately vested and not subject to forfeiture due to any subsequent termination from employment. Upon a change in Control, Restrictions on Restricted Stock shall be eliminated as of such event. If the Change in Control occurs before the end of the Performance Period, the amount of the Performance Shares shall be determined assuming the Company has achieved the Targeted Performance Objective and, the amount shall then be multiplied by the portion of the Performance Period for which you were an active Employee hereunder. If the Change in Control occurs after the end of the Performance Period but before the Performance Shares are paid, the amount payable shall be determined based on the actual performance objective achieved. In either case payment of the Performance Shares shall be made as soon as practicable following the Change in Control but no later than the close of the seventy five (75) day period following the earlier of the end of the Performance Period or the Change in Control.

Recovery of Stock:

14. If you are or become subject to the terms of the Company’s Compensation Recovery Policy (the “Policy”), as such Policy may be amended from time to time, including amendments adopted in order to conform to the requirements of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and any resulting rules issued by the SEC or national securities exchanges thereunder, then the Performance Shares and Restricted Stock granted hereunder shall also be subject to such Policy. Accordingly, if the Committee determines that recovery of compensation under such Policy is due, then the Committee will determine the percentage of your total Performance Shares and Restricted Stock that is recoverable (the “Recoverable Percentage”) and the following shall occur:


•	the Performance Shares and Restricted Stock equal to the Recoverable Percentage granted hereunder shall automatically terminate and be forfeited effective on the date of such determination; and

•

all shares of Common Stock equal to the Recoverable Percentage that you acquired pursuant to this Agreement (or other securities into which such shares have been converted or exchanged) shall be returned to the Company or, if no longer held by you, then you shall pay to the Company, without interest, all cash, securities or other assets received by you from the sale or transfer of such stock or securities. If you received nominal or no consideration on transfer of the Common Stock (e.g. a gift) then in connection with such recovery, you shall pay to the Company the market value of the Common Stock at the time of the transfer.

Definitions:

14. Definitions. The following terms used in this Notice of Performance Shares Award will have the meanings indicated:

(a) “Change in Control” shall have the same meaning as such term or similar term is defined by your individual agreement with the Company which relates to your compensation and benefits upon the occurrence of a change in ownership of the Participating Company or similar event.

In the event there is no such agreement, “Change in Control” shall mean:

(i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of twenty percent (20%) or more of either (A) the then outstanding shares of Common Stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that the following acquisitions shall not constitute an acquisition of control: any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), any acquisition by the Company, any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or any acquisition by any corporation pursuant to a reorganization, merger, share exchange or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (A), (B) and (C) of subsection (iii) of this section are satisfied; or

(ii) Individuals who, as of the Effective Date, constitute the Board of Directors (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though

such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(iii) Consummation of a reorganization, merger, share exchange or consolidation, in each case, unless, following such reorganization, merger, share exchange or consolidation, (A) more than fifty percent (50%) of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger, share exchange or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such reorganization, merger, share exchange or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger, share exchange or consolidation, of the Outstanding Company Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Company, any employee benefit plan or related trust of the Company, or such corporation resulting from such reorganization, merger, share exchange or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger, share exchange or consolidation, directly or indirectly, twenty percent (20%) or more of the Outstanding Company Common Stock or Outstanding Voting Securities, as the case may be) beneficially owns, directly or indirectly, twenty percent (20%) or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger, share exchange or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger, share exchange or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger, share exchange or consolidation; or

(iv) Approval by the shareholders of the Company and consummation of (A) a complete liquidation or dissolution of the Company or (B) the sale or other disposition of all or substantially all of the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition (1) more than fifty percent (50%) of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding the Company and any employee benefit plan or related trust of the Company, or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, twenty percent (20%) or

more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, twenty percent (20%) or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (3) at least a majority of the members of the board of directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board providing for such sale or other disposition of assets of the Company; or

(v) The closing, as defined in the documents relating to, or as evidenced by a certificate of any state or federal governmental authority in connection with, a transaction approval of which by the shareholders of the Company would constitute a “Change in Control” under subsection (iii) or (iv) of this Section.

Notwithstanding (a) above, if your employment is terminated before a Change in Control as defined in this Section and you reasonably demonstrate that such termination (i) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a “Change in Control” and who effectuates a “Change in Control” or (ii) otherwise occurred in connection with, or in anticipation of, a “Change in Control” which actually occurs, then for all purposes of this Notice of Performance Shares Award, the date of a “Change in Control” with respect to you shall mean the date immediately prior to the date of such termination of your employment.

(b) “Disability” shall mean (a) your mental or physical disability that is defined as “Disability” under the terms of the long-term disability plan sponsored by the Company and in which you are covered, as amended from time to time in accordance with the provisions of such plan; or (b) a determination by the Committee, in its sole discretion, of total disability (based on medical evidence) that precludes you from engaging in a full-time position at the Company for wage or profit for at least twelve months and appears to be permanent. All decisions by the Committee relating to your Disability (including a decision that you are not disabled), shall be final and binding on all parties.

(c) “Retirement” shall mean the termination of your employment consistent with the provisions for early or normal retirement under the defined benefit pension plan sponsored by the Company. Notwithstanding the foregoing, “Retirement” before you are eligible for normal retirement under such plan shall require prior approval by the Committee.

15. Conflicts. If there is a conflict between the terms of this Notice of Performance Shares Award and the Plan, the Plan shall control.

DELTA NATURAL GAS COMPANY, INC.

By:

Its:

________________________________________

[Signature of Participant]

005522.135297/4133863.4

EXHIBIT 12

DELTA NATURAL GAS COMPANY, INC.

COMPUTATION OF THE CONSOLIDATED RATIO OF EARNINGS

TO FIXED CHARGES



	2014		2013		2012		2011		2010

Earnings
Net income	$	8,275,128	$	7,200,776	$	5,783,998	$	6,364,895	$	5,651,817
Provisions for income taxes (a)	4,858,586		4,268,784		3,258,144		3,759,607		3,192,285
Fixed charges	2,694,187		2,770,935		4,321,256		4,112,798		4,194,192

Total	$	15,827,901	$	14,240,495	$	13,363,398	$	14,237,300	$	13,038,294

Fixed Charges
Interest on debt (a)	$	2,424,587	$	2,493,135	$	3,969,025	$	3,701,535	$	3,781,929
Amortization of debt	246,600		253,800		329,231		387,263		387,263
One third of rental expense	23,000		24,000		23,000		24,000		25,000

Total	$	2,694,187	$	2,770,935	$	4,321,256	$	4,112,798	$	4,194,192

Ratio of earnings to fixed charges	5.87x		5.14x		3.09x		3.46x		3.11x


(a)	Interest accrued on uncertain tax positions, in accordance with Accounting Standards Codification Topic 740 - Income Taxes, is presented in income taxes on the Consolidated Statements of Income. This interest has been excluded from the determination of fixed charges.

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 REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Post-Effective Amendment No. 1 to Registration Statement No. 333-130301 on Form S-3 of our reports dated August 26, 2014, relating to the consolidated financial statements and financial statement schedule of Delta Natural Gas Company, Inc. and subsidiaries (the “Company”), and the effectiveness of the Company's internal control over financial reporting, appearing in the Annual Report on Form 10-K of Delta Natural Gas Company, Inc. for the year ended June 30, 2014.

/s/ DELOITTE & TOUCHE LLP

Indianapolis, Indiana

August 26, 2014

EXHIBIT 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Glenn R. Jennings, certify that:


1.	I have reviewed this annual report on Form 10-K of Delta Natural Gas Company, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



DATE: August 26, 2014		/s/Glenn R. Jennings
		Glenn R. Jennings
		Chairman of the Board, President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, John B. Brown, certify that:


1.	I have reviewed this annual report on Form 10-K of Delta Natural Gas Company, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and


5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's Board of Directors (or persons performing the equivalent functions):


a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and


b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.



DATE: August 26, 2014		/s/John B. Brown
		John B. Brown
		Chief Financial Officer, Treasurer and Secretary

Exhibit 32.1

CERTIFICATION OF THE

CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Delta Natural Gas Company, Inc. on Form 10-K for the period ending June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Glenn R. Jennings, Chairman of the Board, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:


(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Delta Natural Gas Company, Inc.



DATE: August 26, 2014		/s/Glenn R. Jennings
		Glenn R. Jennings
		Chairman of the Board, President and Chief Executive Officer

Exhibit 32.2

CERTIFICATION OF THE

CHIEF FINANCIAL OFFICER PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Delta Natural Gas Company, Inc. on Form 10-K for the period ending June 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, John B. Brown, Chief Financial Officer, Treasurer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:


(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Delta Natural Gas Company, Inc.



DATE: August 26, 2014		/s/John B. Brown
		John B. Brown
		Chief Financial Officer, Treasurer and Secretary

Directions to Annual Meeting of Shareholders

Our annual meeting of shareholders will be held at our corporate headquarters on November 20, 2014. If you plan to attend this meeting, you can obtain directions by contacting Emily P. Bennett at Delta at 3617 Lexington Road, Winchester, Kentucky 40391 (859) 744-6171 ext. 1116.

Important Notice Regarding the Availability of Proxy Materials for the

Shareholder Meeting to be Held on November 20, 2014

Any shareholder may obtain without charge a copy of our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission for the year ended June 30, 2014, our Annual Report to Shareholders for the year ended June 30, 2014, including financial statements, the form of proxy or the Notice and Proxy Statement

•by submitting a request in writing to: John B. Brown, Chief Financial Officer, Treasurer and Secretary, Delta Natural Gas Company, Inc., 3617 Lexington Road, Winchester, KY 40391,

•by contacting Mr. Brown by e-mail at jbrown@deltagas.com

•by calling the Company at 859-744-6171 ext. 1116 or

•on our website at http://www.deltagas.com

Please be sure to specify which document(s) you are requesting.

uIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.u

PROXY - DELTA NATURAL GAS COMPANY, INC.

Holders of Common Stock

Appointment of Proxy

For the Annual Meeting of Shareholders

To Be Held November 20, 2014 at 10:00 a.m.

at the Principal Office of the Company at

3617 Lexington Road, Winchester, KY 40391

The undersigned hereby appoints Glenn R. Jennings and John B. Brown, and either of them with power of substitution, as proxies to vote the shares of Common Stock of the undersigned in Delta Natural Gas Company, Inc. at the Annual Meeting of its Shareholders to be held at 10:00 a.m. on November 20, 2014 and at any adjournments thereof, upon matters that may properly come before the meeting, including the matters identified (and in the manner indicated) on the reverse side of this proxy and described in the proxy statement furnished herewith.

This proxy is solicited on behalf of the Board of Directors. It will be voted as specified. If not specified, the shares represented by this proxy will be voted FOR proposals 1 and 3 and FOR all of the nominees listed in proposal 2. In their discretion, the proxy holders are authorized to vote upon such other business as may properly come before the meeting, and at any adjournment or postponement thereof, to the extent authorized by Rule 14a-4(c) promulgated by the Securities and Exchange Commission, and by applicable state laws (including matters that the proxy holders do not know, a reasonable time before this solicitation is to be presented).

Please sign and date this proxy on the reverse side, and return it promptly in the enclosed envelope.

DELTA NATURAL GAS COMPANY, INC.

IMPORTANT ANNUAL MEETING INFORMATION

Using a black ink pen, mark your votes with

an X as shown in this example. Please do not x

write outside the designated areas.

Electronic Voting Instructions

Available 24 hours a day, 7 days a week!

Instead of mailing your proxy, you may choose one of the voting methods outlined below to vote your proxy.

VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.

Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Eastern Time, November 20, 2014.

Vote by Internet

Go to www.investorvote.com/DGAS

Or scan the QR code with your smartphone

Follow the steps outlined on the secure website

Vote by Telephone

Call toll free 1-800-652VOTE (8683) within the USA, US territories & Canada on a touch tone telephone

Follow the instructions provided by the recorded message

Annual Meeting Proxy Card

If you have not voted via the internet or telephone, fold along the perforation, detach and return the bottom portion in the enclosed envelope.

-------------------------------------------------------------------------------------------------------------------------------------------------------

A. Proposals

The Board of Directors recommends a vote FOR proposals 1 and 3 and FOR all of the nominees listed in proposal 2.



1.	Ratification of the appointment by the Audit Committee of Deloitte & Touche LLP as Delta's Independent Registered Public Accounting Firm for the fiscal year ending June 30, 2015:	For	Against	Abstain
		o	o	o



2.	Election of directors for three-year terms expiring in 2017.



	For	Withhold
Glenn R. Jennings	o	o

	For	Withhold
Fred N. Parker	o	o

	For	Withhold
Arthur E. Walker, Jr.	o	o

Election of director for a one-year term expiring in 2015.



	For	Withhold
Jacob P. Cline, III	o	o



3.	Non-binding, advisory vote to approve the compensation paid our named executive officers for fiscal 2014.	For	Against	Abstain
		o	o	o

B. Non-Voting Items

Change of Address — Please print new address below.

C. Authorized Signatures — This section must be completed for your vote to be counted - Date and Sign Below.

Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title.



Date (mm/dd/yyyy) — Please	Signature 1 — Please keep	Signature 2 — Please keep
print date below	signature within the box.	signature within the box.


____________________________	____________________________	____________________________

____________________________	____________________________	____________________________

Delta Natural Gas Company, Inc.

2014 Annual Report

1949 - 2014

65 years

Our Mission …

Delta will provide premier natural gas services while having a positive impact on customers, employees and shareholders.

To Our Shareholders …

This is Delta’s 65^th year, and it has certainly been another very good year for the Company. With weather that was 7% colder than the 30 year average, our total throughput was almost 20 billion cubic feet for fiscal 2014. Our regulated distribution and transmission operations performed well, as did our unregulated businesses. As a result, Delta had very strong financial performance in 2014, with net income of $8.3 million, or $1.19 per share, compared with $7.2 million, or $1.05 per share, the prior year.

This past winter was one of the coldest we have experienced in the past few decades. Our employees did a great job of maintaining excellent reliability and providing outstanding service throughout the year. They all deserve special thanks for a job well done. Their commitment to serving our customers in the best possible fashion is certainly reflected in the Company’s performance.

The timeline below highlights some key events for Delta since its inception. Founded in 1949 by Harrison D. Peet, Delta has grown and prospered over the years with internal growth and strategic acquisitions. Mr. Peet’s memory and legacy continue to inspire everyone at the Company to provide excellent service to our customers and the best possible value to you, our owners.

Our Board of Directors, at its August 15, 2014 meeting, increased our quarterly stock dividend to $.20 per share for shareholders of record as of September 1, 2014 to be paid September 15, 2014. This is an annualized dividend of $.80 per share and represents an annual increase of 5.3%, reflecting Delta’s strong performance in 2014 and our Board’s confidence for the future of Delta and the natural gas industry.

Lewis N. (Nick) Melton is retiring from Delta’s Board of Directors in 2014 after 15 years of outstanding service. We greatly appreciate Nick’s guidance, dedication and wise counsel over the years, and we wish him the very best. His good humor, business experience and judgment will be missed.

The future for natural gas continues to be bright. We at Delta will continue to do our very best to pursue growth for the Company as we actively participate in the industry in 2015 and beyond.

Thank you for your support.

Sincerely,

Glenn R. Jennings

Chairman of the Board,

President and Chief Executive Officer

August 18, 2014

Selected Financial Information …



For the Years Ended June 30	2014	2013	2012	2011	2010

Summary of Operations ($)

Operating revenues (a)	95,845,871	80,664,837	74,078,322	83,040,251	76,422,068

Operating income (a)	15,603,439	13,188,679	13,265,228	14,061,794	12,904,494

Net income (a)(b)	8,275,128	7,200,776	5,783,998	6,364,895	5,651,817

Basic and diluted earnings per common share (a)(b)	1.19	1.05	.85	.95	.85

Cash dividends declared per common share	.76	.72	.70	.68	.65

Total Assets ($)	186,025,161	183,930,015	182,895,363	174,896,239	168,632,420

Capitalization ($)

Common shareholders' equity	74,728,352	70,005,415	66,220,407	63,767,184	60,760,170

Long-term debt	53,500,000	55,000,000	56,500,000	56,751,006	57,112,000

Total capitalization	128,228,352	125,005,415	122,720,407	120,518,190	117,872,170

Short-Term Debt ($)(c)	1,500,000	1,500,000	1,500,000	1,200,000	1,200,000

Capital Expenditures	8,077,641	7,179,473	7,337,115	8,123,479	5,275,194


(a)	We implemented new regulated base rates as approved by the Kentucky Public Service Commission in October, 2010 and the rates were designed to generate additional annual revenue of $3,513,000, with a $1,770,000 increase in annual depreciation expense.


(b)	In 2012, $877,000 of interest expense was accrued relating to a tax assessment. In 2013, the assessment was resolved and the previously accrued interest was reversed.


(c)	Includes current portion of long-term debt.

Board of Directors ...

Left:

Sandra C. Gray (a)

President, Asbury University,

Wilmore, Kentucky

Right:

Edward J. Holmes (b)

President, EHI Consultants

(planning and design services),

Lexington, Kentucky

Left:

Glenn R. Jennings (c)*

Chairman of the Board, President and Chief Executive Officer

Right:

Michael J. Kistner (b)* (c)

Consultant, MJK Consulting (financial consulting),

Louisville, Kentucky

Left:

Lewis N. Melton (a)* (c)

Civil Engineer, Vaughn &Melton Consulting Engineers, Inc.

(consulting engineering), Middlesboro, Kentucky

Right:

Arthur E. Walker, Jr. (a)

President, The Walker Company (general and highway construction),

Mount Sterling, Kentucky

Michael R. Whitley (a) (b) (c)

Lead Director; Retired Vice Chairman of

the Board, President and Chief

Operating Officer, LG & E

Energy Corp. (diversified utility),

Louisville, Kentucky

(a) Member of Corporate Governance and Compensation Committee

(b) Member of Audit Committee

* Committee Chair

Officers …

John B. Brown Chief Financial Officer, Treasurer and Secretary

Johnny L. Caudill Vice President – Distribution

Glenn R. Jennings Chairman of the Board, President and Chief Executive Officer

Brian S. Ramsey Vice President – Transmission and Gas Supply

Matthew D. Wesolosky Vice President – Controller

Corporate Information…

Shareholders’ Inquiries

Communications regarding stock transfer requirements, lost certificates, changes of address or other items may be directed to Computershare Investor Services, LLC, the Transfer Agent and Registrar. Communications regarding dividends, the above items or any other shareholder inquiries may be directed to: Emily P. Bennett, Director - Corporate Services, Delta Natural Gas Company, Inc., 3617 Lexington Road, Winchester, Kentucky 40391, email: ebennett@deltagas.com.

Independent Registered Public Accounting Firm

Deloitte & Touche LLP

Suite 2000

111 Monument Circle

Indianapolis, Indiana 46204

Disbursement Agent, Transfer Agent and Registrar for Common Shares; Dividend Reinvestment and Stock Purchase Plan Administrator and Agent

Computershare Investor Services, LLC

P.O. Box 43036

Providence, RI 02940-3036

1-888-294-8217

2014 Annual Report

This annual report and the financial statements contained herein are submitted to the shareholders of the Company for their general information and not in connection with any sale or offer to sell, or solicitation of any offer to buy, any securities.

2014 Annual Meeting

The annual meeting of shareholders of the Company will be held at the General Office of the Company in Winchester, Kentucky on November 20, 2014 at 10:00 a.m. Proxies for the annual meeting will be requested from shareholders when notice of meeting, proxy statement and form of proxy are mailed on or about October 10, 2014.

Dividend Reinvestment and Stock Purchase Plan

This plan provides shareholders of record with a convenient way to acquire additional shares of the Company’s common stock without paying brokerage fees. Participants may reinvest their dividends and make optional cash payments to acquire additional shares. Computershare Investor Services, LLC administers the Plan and is the agent for the participants. For more information, inquiries may be directed to Emily P. Bennett, Director - Corporate Services, Delta Natural Gas Company, Inc., 3617 Lexington Road, Winchester, Kentucky 40391, e-mail: ebennett@deltagas.com.

Delta Natural Gas Company, Inc.

3617 Lexington Road

Winchester, Kentucky 40391

Phone: 859.744.6171

Fax: 859.744.6552

www.deltagas.com

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

______________

FORM 10-K

______________

(Mark one)


x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2014


o	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)

______________



Kentucky	61-0458329
(State or other jurisdiction of incorporation or organization)	(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, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Name of each exchange on which registered
Common Stock $1 Par Value	NASDAQ

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Act. Yes o No x

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 o No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) 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. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer", "accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer o	Accelerated filer x
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recent completed second fiscal quarter. $155,037,002.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. As of August 15, 2014, Delta Natural Gas Company, Inc. had outstanding 6,943,547 shares of common stock $1 par value.

DOCUMENTS INCORPORATED BY REFERENCE

The Registrant's definitive proxy statement, to be filed with the Commission not later than 120 days after June 30, 2014, is incorporated by reference in Part III of this Report.

TABLE OF CONTENTS



PART I			Page Number

	Item 1.	Business	2

	Item 1A.	Risk Factors	9

	Item 1B.	Unresolved Staff Comments	12

	Item 2.	Properties	12

	Item 3.	Legal Proceedings	13

	Item 4.	Mine Safety Disclosures	13

PART II
	Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	13

	Item 6.	Selected Financial Data	16

	Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	17

	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	26

	Item 8.	Financial Statements and Supplementary Data	26

	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	28

	Item 9A.	Controls and Procedures	28

	Item 9B.	Other Information	30

PART III
	Item 10.	Directors, Executive Officers and Corporate Governance	30

	Item 11.	Executive Compensation	30

	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	31

	Item 13.	Certain Relationships and Related Transactions, and Director Independence	31

	Item 14.	Principal Accountant Fees and Services	31

PART IV
	Item 15.	Exhibits and Financial Statement Schedule	32

Signatures			35

PART I

Item 1. Business

References to “Delta”, “the Company”, “we”, “us” and “our” refer to Delta Natural Gas Company, Inc. and its consolidated subsidiaries, except as otherwise stated. We were incorporated under the laws of the Commonwealth of Kentucky on October 7, 1949. Unless otherwise stated, “2014”, “2013” and “2012” refers to the respective twelve month periods ending June 30.

General

Delta Natural Gas Company, Inc. (“Delta” or “the Company”) (Nasdaq: DGAS) distributes or transports natural gas to approximately 36,000 customers. Our distribution and transmission systems are located in central and southeastern Kentucky, and we own and operate an underground natural gas storage field in southeastern Kentucky. We transport natural gas to our industrial customers who purchase their natural gas in the open market. We also transport natural gas on behalf of local producers and customers not on our distribution system and sell liquids extracted from natural gas in our storage field and on our pipeline systems. We have three wholly-owned subsidiaries. Delta Resources, Inc. (“Delta Resources”) buys natural gas and resells it to industrial or large use customers on Delta's system. Delgasco, Inc. (“Delgasco”) buys natural gas and resells it to Delta Resources and to customers not on Delta's system. Enpro, Inc. (“Enpro”) owns and operates natural gas production properties and undeveloped acreage.

We seek to provide dependable, high-quality service to our customers while steadily enhancing value for our shareholders. Our efforts have been focused on developing a balance of regulated and non-regulated businesses to contribute to our earnings by profitably selling, transporting, producing and processing natural gas in our service territory.

We strive to achieve operational excellence through economical, reliable service with an emphasis on responsiveness to customers. We continue to invest in facilities for the distribution, transportation and storage of natural gas. We believe that our responsiveness to customers and the dependability of the service we provide afford us additional opportunities for growth. While we seek those opportunities, we will continue a conservative strategy of minimizing our exposure to market risk arising from fluctuations in the prices of natural gas.

We operate through two segments, a regulated segment and a non-regulated segment.

Our executive offices are located at 3617 Lexington Road, Winchester, Kentucky 40391. Our telephone number is (859) 744-6171. Our website is www.deltagas.com.

Regulated Operations

Distribution and Transportation

Through our regulated segment, we distribute natural gas to our retail customers in 23 predominantly rural counties. In addition, our regulated segment transports natural gas to industrial customers on our system who purchase their natural gas in the open market. Our regulated segment also transports natural gas on behalf of local producers and other customers not on our distribution system.

The economy of our service area is based principally on coal mining, farming and light industry. The communities we serve typically contain populations of less than 20,000. Our three largest service areas are Nicholasville, Corbin and Berea, Kentucky. In Nicholasville we serve approximately 8,000 customers, in Corbin we serve approximately 6,000 customers and in Berea we serve approximately 4,000 customers. Some of the communities we serve continue to expand, resulting in growth opportunities for us. Industrial parks have been developed in our service areas, which could result in additional growth in industrial customers.

Factors that affect our regulated revenues include the rates we charge our customers, economic conditions in our service areas, competition, the cost of natural gas and weather. Our current rate design lessens the impact weather has on our regulated revenues as our rates include both a fixed monthly customer charge and a volumetric rate which has a weather normalization provision that adjusts rates due to variations in weather. Market risk arising from fluctuations in the price of natural gas is mitigated through the natural gas cost recovery rate mechanism which permits us to pass through to our regulated customers changes in the price we must pay for our natural gas supply. However, increases in our rates may cause our customers to conserve or to use alternative energy sources.

Our regulated sales are seasonal and temperature-sensitive, since the majority of the natural gas we sell is used for heating. During 2014, 76% of the regulated volumes were sold during the heating season (December through April). Variations in the average temperature during the winter impact our volumes sold. The Kentucky Public Service Commission, through a weather normalization provision in our tariff, permits us to adjust the rates we charge our customers in response to winter weather that is warmer or colder than normal temperatures.

We compete with alternate sources of energy for our regulated distribution customers. These alternate sources include electricity, geo-thermal, coal, oil, propane, wood and solar.

Our larger regulated customers can obtain their natural gas supply by purchasing directly from interstate suppliers, local producers or marketers. Customers for whom we transport natural gas could by-pass our transportation system to directly connect to interstate pipelines or other transportation providers. Customers may undertake such a by-pass in order to seek lower prices for their natural gas and/or transportation services. Our larger customers who are in close proximity to alternative supply would be most likely to consider taking this action. Additionally, some of our industrial customers are able to switch to alternative sources of energy. These are competitive concerns that we continue to address by utilizing our non-regulated segment to offer these customers natural gas supply at competitive market-based rates.

Some natural gas producers in our service area can access pipeline delivery systems other than ours, which generates competition for our transportation services. We continue our efforts to purchase or transport natural gas that is produced in reasonable proximity to our transportation facilities through our regulated segment.

As an active participant in many areas of the natural gas industry, we plan to continue efforts to expand our natural gas transmission and distribution system and customer base. We continue to consider acquisitions of other natural gas systems, some of which are contiguous to our existing service areas, as well as expansion within our existing service areas.

Gas Supply

We maintain an active gas supply management program that emphasizes long-term reliability and the pursuit of cost-effective sources of natural gas for our customers. We purchase our natural gas from a combination of interstate and Kentucky sources. In our fiscal year ended June 30, 2014, we purchased approximately 99% of our natural gas from interstate sources.

Interstate Natural Gas Supply

Our regulated segment acquires its interstate natural gas supply from gas marketers. We currently have commodity requirements agreements with Atmos Energy Marketing (“Atmos”) for our Columbia Gas Transmission Corporation (“Columbia Gas”), Columbia Gulf Transmission Corporation (“Columbia Gulf”), Tennessee Gas Pipeline (“Tennessee”) and Texas Eastern Transmission Corporation (“Texas Eastern”) supplied areas. Under these commodity requirements agreements, Atmos is obligated to supply the volumes consumed by our regulated customers in defined sections of our service areas. We are not obligated to purchase any minimum quantities from Atmos or purchase natural gas from them for any period longer than one month at a time. The natural gas we purchase under these agreements is priced at index-based prices, NYMEX or at mutually agreed-to fixed prices based on forward market prices. The index-based market prices are determined based on the prices published on the first of each month in Platts' Inside FERC's Gas Market Report for the indices that relate to the pipelines through which the natural gas will be transported, plus or minus an agreed-to fixed price adjustment per million British Thermal Units of natural gas purchased. Consequently, the price we pay for interstate natural gas is based on current market prices.

Our agreements with Atmos for the Columbia Gas, Columbia Gulf, Tennessee and Texas Eastern supplied service areas continue year to year unless canceled by either party by written notice at least sixty days prior to the annual anniversary date (April 30) of the agreement. In our fiscal year ended June 30, 2014, approximately 37% of our regulated natural gas supply was purchased under our agreements with Atmos.

Our regulated segment purchases natural gas from Midwest Energy Services, LLC (“Midwest”) for injection into our underground natural gas storage field and to supply a portion of our system. We are not obligated to purchase any minimum quantities from Midwest, nor are we required to purchase natural gas for any periods longer than one month at a time. The natural gas is priced at index-based market prices or at mutually agreed-to fixed prices based on forward market prices. Our agreement with Midwest may be terminated upon 30 days prior written notice by either party. In our fiscal year ended June 30, 2014, approximately 61% of our regulated natural gas supply was purchased under our agreement with Midwest.

We also purchase interstate natural gas from other natural gas marketers as needed at either current market prices, determined by industry publications, or at forward market prices.

Transportation of Interstate Natural Gas Supply

Our interstate natural gas supply is transported to us from market hubs, production fields and storage fields by Tennessee, Columbia Gas, Columbia Gulf and Texas Eastern.

Our agreements with Tennessee currently extend through October, 2019 and thereafter automatically renew for subsequent five-year terms unless Delta notifies Tennessee of its intent not to renew the agreements at least one year prior to the expiration of any renewal terms. We intend to renew our agreements with Tennessee. Subject to the terms of Tennessee's Federal Energy Regulatory Commission natural gas tariff, Tennessee is obligated under these agreements to transport up to 19,600 thousand cubic feet (“Mcf”) per day for us. During fiscal 2014, Tennessee transported for us a total of 1,100,000 Mcf, or approximately 23% of our regulated supply requirements, under these agreements. We have natural gas storage agreements with Tennessee under the terms of which we reserve a defined storage space in Tennessee's storage fields, which we have assigned to Atmos, and we reserve the right to withdraw daily natural gas volumes up to certain specified fixed quantities. These natural gas storage agreements renew on the same schedule as our transportation agreements with Tennessee.

Under our agreements with Columbia Gas and Columbia Gulf, Columbia Gas is obligated to transport, including utilization of our defined storage space as required, up to 12,600 Mcf per day for us, and Columbia Gulf is obligated to transport up to a total of 4,300 Mcf per day for us. During fiscal 2014, Columbia Gas and Columbia Gulf transported for us a total of 675,000 Mcf, or approximately 14% of our regulated natural gas supply requirements, under all of our agreements with them. Our transportation agreements with Columbia Gas and Columbia Gulf extend through 2015. After 2015, our agreement with Columbia Gas continues on a year-to-year basis unless terminated by one of the parties, but may be extended by mutual agreement.

Columbia Gulf also transported additional volumes under agreements it has with Midwest to a point of interconnection between Columbia Gulf and us where we purchase the natural gas to inject into our storage field. The amounts transported and sold to us under the agreements Columbia Gulf has with Midwest for fiscal 2014 constituted approximately 61% of our regulated gas supply. We are not a party to any of these separate transportation agreements on Columbia Gulf.

We have no direct agreement with Texas Eastern. However, Atmos has an arrangement with Texas Eastern to transport the natural gas to us that we purchase from Atmos to supply our customers' requirements in specific geographic areas. In our fiscal year ended June 30, 2014, Texas Eastern transported approximately 18,000 Mcf of natural gas to our system, which constituted less than 1% of our natural gas supply.

Kentucky Natural Gas Supply

We have an agreement with Vinland Energy Operations LLC (“Vinland”) to purchase natural gas on a year-to-year basis unless terminated by one of the parties. We purchased 45,000 Mcf from Vinland during fiscal 2014. The price for the natural gas we purchase from Vinland is based on the index price of spot gas delivered to Columbia Gas in the relevant region as reported in Platts' Inside FERC's Gas Market Report. Vinland delivers this natural gas to our customer meters directly from its own pipelines. In fiscal 2014, the natural gas we purchased from Vinland constituted less than 1% of our regulated natural gas supply.

Natural Gas in Storage

We own and operate an underground natural gas storage field that we use to store a significant portion of our natural gas supply needs. This storage capability permits us to purchase and store natural gas during the non-heating months and then withdraw and sell the natural gas during the peak usage months. We have a legal obligation to retire wells located at this underground natural gas storage facility. However, since we expect to utilize the storage facility as long as we provide natural gas to our customers, we have determined the wells have an indeterminate life and have therefore not recorded a liability associated with the cost to retire the wells.

Regulatory Matters

The Kentucky Public Service Commission exercises regulatory authority over our retail natural gas distribution and transportation services. Their regulation of our business includes approving the rates we are permitted to charge our regulated customers. We monitor our need to file requests with them for a general rate increase for our natural gas and transportation services. They have historically utilized cost-of-service ratemaking where our base rates are established to recover normal operating expenses, exclusive of gas costs, and a reasonable rate of return. We do not have any matters pending before the Kentucky Public Service Commission which would have a material impact on our results of operations, financial positions or cash flows.

We have a pipe replacement program which allows us to adjust our regulated rates annually to earn a return on capital expenditures incurred subsequent to our last rate case which are associated with the replacement of pipe and related facilities. The pipe replacement program is designed to additionally recover the costs associated with the mandatory retirement or relocation of facilities.

The Kentucky Public Service Commission allows us a natural gas cost recovery clause, which permits us to adjust the rates charged to our customers to reflect changes in our natural gas supply costs and any bad debt expense related to natural gas cost. Although we are not required to file a general rate case to adjust rates pursuant to the natural gas cost recovery clause, we are required to make quarterly filings with the Kentucky Public Service Commission. Under and over-recovered natural gas costs are collected or refunded through adjustments to customer bills beginning three months after the end of the quarter in which the actual natural gas costs were incurred.

Additionally, we have a weather normalization provision in our tariffs, approved by the Kentucky Public Service Commission, which provides for the adjustment of our rates to residential and small non-residential customers to reflect variations from thirty year average weather for our December through April billing cycles. These adjustments to customer bills are made on a real time basis such that there is no lag in collecting from or refunding to customers the related dollar amounts.

The Kentucky Public Service Commission also allows us a conservation and efficiency program for our residential customers. Through this program, we perform energy audits, promote conservation awareness and provide rebates on the purchase of certain high efficiency appliances. The program helps to align our interests with our residential customers' interests by reimbursing us for the margins on lost sales due to the program and providing incentives for us to promote customer conservation. Our rates are adjusted annually to recover the costs incurred under these programs, the reimbursement of margins on lost sales and the incentives provided to us.

In addition to regulation by the Kentucky Public Service Commission, we may obtain non-exclusive franchises from the cities in which we operate authorizing us to place our facilities in the streets and public grounds. No utility may obtain a franchise until it has obtained approval from the Kentucky Public Service Commission to bid on such franchise. We hold franchises in five of the cities we serve, and we continue to operate under the conditions of expired franchises in four other cities we serve. In the other cities and areas we serve, there are no governmental organizations authorized to grant franchises or the city governments do not require a franchise. We attempt to acquire or reacquire franchises whenever feasible. Without a franchise, a city could require us to cease our occupation of the streets and public grounds or prohibit us from extending our facilities into any new area of that city. To date, the absence of a franchise has not adversely affected our operations.

Non-Regulated Operations

Natural Gas Marketing

Our non-regulated segment includes three wholly-owned subsidiaries. Two of these subsidiaries, Delta Resources and Delgasco, purchase natural gas in the open market, including natural gas from Kentucky producers. We resell this natural gas to industrial customers on our distribution system and to others not on our system.

Factors that affect our non-regulated revenues include the rates we charge our customers, our supply cost for the natural gas we purchase for resale, economic conditions in our service areas, weather and competition.

Our larger non-regulated customers can obtain their natural gas supply by purchasing directly from interstate suppliers, local producers or marketers and arranging for alternate transportation of the natural gas to their plants or facilities. Additionally, some of our industrial customers are able to switch economically to alternative sources of energy. We continue to address these competitive concerns by offering these customers natural gas supply at competitive market based rates.

In our fiscal year ended June 30, 2014, approximately 94% of our non-regulated revenue was derived from our natural gas marketing activities. In our non-regulated segment, three customers each provided more than 5% of our operating revenues for 2014 and two customers each provided more than 5% for 2013 and 2012. Seminole Energy provided approximately $9,494,000, $17,866,000 and $12,450,000 of non-regulated revenues during 2014, 2013 and 2012, respectively. Atmos provided approximately $5,206,000, $5,390,000 and $6,815,000 of non-regulated revenues during 2014, 2013 and 2012, respectively. Greystone, LLC provided approximately $12,569,000 of non-regulated revenues during 2014. There is no assurance that revenues from these customers will continue at these levels.

Natural Gas Production

Our subsidiary, Enpro, produces natural gas that is sold to Delgasco for resale in the open market. Item 2. Properties further describes Enpro's oil and natural gas leases and production properties. Enpro produced a total of 80,000 Mcf of natural gas during 2014 which was approximately 1% of our non-regulated volumes sold.

Natural Gas Liquids

To improve the operations of our distribution, transmission and storage system, we operate a facility that is designed to extract liquids from the natural gas in our system. We sell these natural gas liquids at a price determined by a national unregulated market. In our fiscal year ended June 30, 2014, approximately 5% of our non-regulated revenue was derived from the sale of natural gas liquids.

Natural Gas Supply

Our non-regulated segment purchases natural gas from M & B Gas Services (“M&B”) and Midwest. Our underlying agreements with M&B and Midwest do not obligate us to purchase any minimum quantities from M&B or Midwest, nor to purchase natural gas from either company for any periods longer than one month at a time. The natural gas is priced at index-based market prices or at mutually agreed-to fixed prices based on forward market prices. Our agreements with both M&B and Midwest may be terminated upon 30 days prior written notice by either party. Any purchase agreements to supply our unregulated sales activities may have longer terms or multiple month purchase commitments. In our fiscal year ended June 30, 2014, 1% and 90% of our non-regulated natural gas supply was purchased under our agreements with M&B and Midwest, respectively.

Additionally, our non-regulated segment purchases natural gas from Atmos as needed. This spot gas purchasing arrangement is pursuant to an agreement with Atmos containing an “evergreen” clause which permits either party to terminate the agreement by providing not less than sixty days written notice. Our purchases from Atmos under this spot purchase agreement are generally month-to-month. However, we have the option of forward-pricing natural gas for one or more months. The price of natural gas under this agreement is based on current market prices. In our fiscal year ended June 30, 2014, approximately 9% of our non-regulated natural gas supply was purchased under our agreement with Atmos.

We also purchase intrastate natural gas from Kentucky producers as needed at either current market prices, determined by industry publications, or at forward market prices.

We anticipate continuing our non-regulated activities and intend to pursue and increase these activities wherever practicable.

Capital Expenditures

Capital expenditures during 2014 were $8.1 million and for 2015 are estimated to be $10.8 million. Our expenditures include system extensions as well as the replacement and improvement of existing transmission, distribution, gathering, storage and general facilities.

Financing

Our capital expenditures and operating cash requirements are met through the use of internally generated funds and a short-term bank line of credit. The current available line of credit is $40 million, all of which was available at June 30, 2014.

Our current bank line of credit extends through June 30, 2015 and will be utilized to meet capital expenditure and operating cash requirements. The amounts and types of future long-term debt and equity financings will depend upon our capital needs and market conditions.

We currently have long-term debt of $55,000,000 in the form of our Series A Notes. The Series A Notes are unsecured, bear interest at 4.26% per annum and mature on December 20, 2031. Accrued interest on the Series A Notes is payable quarterly and we are required to make a $1,500,000 principal reduction payment on the Series A Notes each December.

Employees

On June 30, 2014, we had 150 full-time employees. We consider our relationship with our employees to be satisfactory. Our employees are not represented by unions nor are they subject to any collective bargaining agreements.

Available Information

We make available free of charge on our Internet website http://www.deltagas.com under our “Investor Relations” tab, our Business Code of Conduct and Ethics, annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (“SEC”). The SEC also maintains an Internet site http://www.sec.gov that contains reports, proxy and information statements and other information regarding Delta. The public may read and copy any materials the Company files with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, DC 20549. The SEC's phone number is 1-800-732-0330.



Consolidated Statistics

For the Years Ended June 30,	2014		2013		2012		2011		2010

Average Regulated Customers Served

Residential	29,588		29,755		29,929		30,420		30,575
Commercial	4,861		4,906		4,890		4,949		4,957
Industrial	41		40		41		44		46

Total	34,490		34,701		34,860		35,413		35,578

Operating Revenues ($000) (a)
Regulated (b)
Residential sales	29,867		24,342		22,720		25,800		23,783
Commercial sales	20,294		15,849		14,026		16,672		15,894
Industrial sales	1,381		1,011		914		1,199		1,075
On-system transportation	5,416		5,237		4,780		4,830		4,421
Off-system transportation	3,747		3,800		3,595		3,670		3,650
Other	390		333		324		303		294
Total regulated revenues	61,095		50,572		46,359		52,474		49,117

Non-regulated sales	38,792		34,238		31,423		34,343		30,746
Intersegment eliminations (c)	(4,041	)	(4,145	)	(3,704	)	(3,777	)	(3,441	)

Total	95,846		80,665		74,078		83,040		76,422

System Throughput (Million Cu. Ft.) (a)
Regulated
Residential sales	1,814		1,659		1,331		1,737		1,756
Commercial sales	1,420		1,291		1,027		1,310		1,331
Industrial sales	117		107		90		120		111
On-system transportation	4,807		4,988		4,724		4,830		4,533
Off-system transportation	11,616		11,795		11,225		11,531		11,039
Total regulated throughput	19,774		19,840		18,397		19,528		18,770

Non-regulated sales	7,241		7,650		6,455		6,010		4,787
Intersegment eliminations (c)	(7,096	)	(7,497	)	(6,326	)	(5,890	)	(4,692	)

Total	19,919		19,993		18,526		19,648		18,865

Average Annual Consumption Per
Average Residential Customer
(Thousand Cu. Ft.)	61		56		44		57		57

Lexington, Kentucky Degree Days
Actual	4,855		4,667		3,797		4,725		4,782
Percent of 30 year average	107		104		83		103		104

(a) Additional financial information related to our segments can be found in Management's Discussion and Analysis of Financial Condition and Results of Operations and Note 15 of the Notes to Consolidated Financial Statements.

(b) We implemented new regulated base rates, as approved by the Kentucky Public Service Commission in October, 2010, which were designed to generate additional annual revenue of $3,513,000.

(c) Intersegment eliminations represent the natural gas transportation costs from the regulated segment to the non-regulated segment at our tariff rates.

Item 1A. Risk Factors

The risk factors below should be carefully considered.

WEATHER CONDITIONS MAY CAUSE OUR REVENUES TO VARY FROM YEAR TO YEAR.

Our revenues vary from year to year, depending on weather conditions. We estimate that approximately 76% of our annual natural gas sales are temperature sensitive. As a result, mild winter temperatures can cause a decrease in the amount of natural gas we sell in any year, which would reduce our revenues and profits. The weather normalization provision in our tariff, approved by the Kentucky Public Service Commission, only partially mitigates this risk. Under our weather normalization provision in our tariff, we adjust our rates for our residential and small non-residential customers to reflect variations from thirty year average weather for our December through April billing cycles.

OUR ABILITY TO MEET CUSTOMERS' NATURAL GAS REQUIREMENTS MAY BE IMPAIRED IF CONTRACTED NATURAL GAS SUPPLIES AND INTERSTATE PIPELINE SERVICES ARE NOT AVAILABLE, ARE NOT DELIVERED IN A TIMELY MANNER OR IF FEDERAL REGULATIONS DECREASE OUR AVAILABLE CAPACITY.

We are responsible for acquiring sufficient natural gas supplies, interstate pipeline capacity and storage capacity to meet

current and future customers' annual and seasonal natural gas requirements. We purchase almost all of our natural gas supply from interstate sources and rely on interstate pipelines to transport natural gas to our system. The Federal Energy Regulatory Commission regulates the transportation of the natural gas we receive from interstate sources, and it could increase our transportation costs or decrease our available pipeline capacity by changing its regulatory policies. Additionally, federal legislation could restrict or limit drilling which could decrease the supply of available natural gas. A decrease in interstate pipeline capacity available to us or an increase in competition for interstate pipeline transportation service could reduce our normal interstate supply of natural gas. If we are not able to maintain a reliable and adequate natural gas supply and sufficient pipeline capacity to deliver that supply, we may be unable to meet our customers' requirements resulting in a loss of customers and decrease in profits.

OUR CUSTOMERS ARE ABLE TO BY-PASS OUR DISTRIBUTION AND TRANSMISSION SYSTEMS.

Our larger customers can obtain their natural gas supply by purchasing directly from interstate suppliers, local producers or marketers. Customers for whom we transport natural gas could by-pass our transportation system to directly connect to interstate pipelines or other transportation providers. Customers may undertake such by-passes in order to achieve lower prices for their natural gas and/or transportation services. Our larger customers who are in close proximity to alternative supply would be most likely to consider taking this action. This potential to by-pass our distribution and transportation systems creates a risk of the loss of large customers and thus could result in lower revenues and profits.

ACTIONS BY OUR REGULATORS COULD DECREASE FUTURE PROFITABILITY.

We are regulated by the Kentucky Public Service Commission. Our regulated segment generates a significant portion of our operating revenues. We face the risk that the Kentucky Public Service Commission may fail to grant us adequate and timely rate increases, may decrease our rates or may take other actions that would cause a reduction in our income from operations, such as limiting our ability to pass on to our customers our increased costs of natural gas. Such regulatory actions would decrease our revenues and our profitability. Additionally, our consolidated financial statements reflect the application of regulatory accounting standards by our regulated segment. Our regulated segment has recognized regulatory assets representing costs incurred in prior periods that are probable of recovery from customers in future rates. Disallowance of such costs in future proceedings before the Kentucky Public Service Commission could require us to write-off regulatory assets, which could have a material impact on our income and consolidated financial statements.

VOLATILITY IN PRICES COULD REDUCE OUR PROFITS.

Significant increases or lack of stability in the price of natural gas will likely cause our regulated retail customers to increase conservation or switch to alternate sources of energy. Any decrease in the volume of natural gas we sell that is caused by such actions will reduce our revenues and profits. Higher prices also make it more difficult to add new customers. Significant decreases in the price of natural gas will likely cause our non-regulated segment's gross margins to decrease. The price of natural gas liquids is determined by a national unregulated market, and decreases in the price could result in a decrease in our non-regulated gross margins.

DERIVATIVES LEGISLATION COULD ADVERSELY AFFECT OUR ABILITY TO HEDGE RISKS ASSOCIATED WITH OUR BUSINESS OR OTHERWISE HAVE A MATERIAL AND ADVERSE EFFECT ON OUR FINANCIAL POSITION, RESULTS OF OPERATIONS OR CASH FLOWS.

We currently use, and historically have used, forward commodity contracts, which meet the criteria of a derivative. The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”) adopted a comprehensive framework for the regulation of over-the-counter swaps (“OTC swaps”). The Dodd-Frank Act divides regulatory authority over swap agreements between the SEC and the Commodity Futures Trading Commission (“CFTC”) and requires that most OTC swaps be cleared through a registered clearing facility and traded on a designated exchange or swap execution facility. While the SEC and CFTC have adopted numerous regulations relating to OTC swaps, they are still in the process of rulemaking to address all of the requirements regarding OTC swaps under the Dodd-Frank Act. Current and future legal and regulatory requirements, restrictions and regulations imposed under the Dodd-Frank Act could increase the operational and transactional cost of derivatives contracts and could affect the number and/or creditworthiness of available counterparties, which could affect our ability to hedge our business risk.

INTERSTATE AND OTHER PIPELINES DELTA INTERCONNECTS WITH CAN IMPOSE RESTRICTIONS ON THEIR PIPELINE.

The pipelines interconnected to Delta's system are owned and operated by third parties who can impose restrictions on the quantity and quality of natural gas they will accept into their pipelines. To the extent natural gas on Delta's system does not conform to these restrictions, Delta could experience a decrease in volumes sold or transported to these pipelines.

FUTURE PROFITABILITY OF THE NON-REGULATED SEGMENT IS DEPENDENT ON A FEW INDUSTRIAL AND OTHER LARGE-VOLUME CUSTOMERS.

Our larger non-regulated customers are primarily industrial and other large-volume customers. Fluctuations in the natural gas requirements of these customers can have a significant impact on the profitability of the non-regulated segment.

A DECLINE IN THE LIQUIDS PRESENT IN OUR NATURAL GAS SUPPLY, OR LIQUIDS SALES PRICES, COULD REDUCE OUR NON-REGULATED REVENUES.

To improve the operations of our distribution, transmission and storage system, we operate a facility that is designed to extract liquids from the natural gas in our system. We are able to sell these liquids at a price determined by a national unregulated market. A reduction in the quantity of liquids present in our natural gas supply, or reductions in the prices we receive for such liquids sales, could result in a reduction of the earnings of our non-regulated segment.

WE RELY ON ACCESS TO CAPITAL TO MAINTAIN LIQUIDITY.

To the extent that internally generated cash coupled with short-term borrowings under our bank line of credit is not sufficient for our operating cash requirements and normal capital expenditures, we may need to obtain additional financing. Additionally, market disruptions may increase our cost of borrowing or adversely affect our access to capital markets. Such disruptions could include: economic downturns, the bankruptcy of an unrelated energy company, general capital market conditions, market prices for natural gas, terrorist attacks or the overall financial health of the energy industry. There is no guarantee we could obtain needed capital in the future.

POOR INVESTMENT PERFORMANCE OF PENSION PLAN HOLDINGS AND OTHER FACTORS IMPACTING PENSION PLAN COSTS COULD UNFAVORABLY IMPACT OUR LIQUIDITY AND RESULTS OF OPERATIONS.

Our cost of providing a non-contributory defined benefit pension plan is dependent upon a number of factors, such as the rates of return on plan assets, discount rates, the level of interest rates used to measure the required minimum funding level of the plan, future government regulation and our required or voluntary contributions made to the plan. Without sustained growth in the pension investments over time to increase the value of the plan assets and depending upon the other factors impacting our costs as listed above, we could be required to fund our plan with additional significant amounts of cash. Such cash funding obligations could have a material impact on our financial position, results of operations or cash flows.

WE ARE EXPOSED TO CREDIT RISKS OF CUSTOMERS AND OTHERS WITH WHOM WE DO BUSINESS.

Adverse economic conditions affecting, or financial difficulties of, customers and others with whom we do business could impair the ability of these customers and others to pay for our services or fulfill their contractual obligations or cause them to delay such payments or obligations. We depend on these customers and others to remit payments on a timely basis. Any delay or default in payment could adversely affect our cash flows, financial position or results of operations.

SUBSTANTIAL OPERATIONAL RISKS ARE INVOLVED IN OPERATING A NATURAL GAS DISTRIBUTION, TRANSPORTATION, LIQUIDS EXTRACTION AND STORAGE SYSTEM AND SUCH OPERATIONAL EVENTS COULD REDUCE OUR REVENUES AND INCREASE EXPENSES.

There are substantial risks associated with the operation of a natural gas distribution, transportation, liquids extraction and storage system, such as operational hazards and unforeseen interruptions caused by events beyond our control. These include adverse weather conditions, accidents, the breakdown or failure of equipment or processes, the performance of pipeline and storage facilities below expected levels of capacity and efficiency and catastrophic events such as explosions, fires, earthquakes, floods, landslides or other similar events beyond our control. These risks could result in injury or loss of life, extensive property damage or environmental pollution, which in turn could lead to substantial financial losses to us. In accordance with customary industry practice, we maintain insurance against some, but not all, of these risks. Liabilities incurred that are not fully covered by insurance could adversely affect our results of operations and financial condition. Additionally, interruptions to the operation of our natural gas distribution, transmission, liquids extraction or storage system caused by such events could reduce our revenues and increase our expenses.

WE MAY FACE CERTAIN REGULATORY AND FINANCIAL RISKS RELATED TO PIPELINE SAFETY LEGISLATION.

Increased regulatory oversight over pipeline operations and increased investment to inspect pipeline facilities, upgrade pipeline facilities, or control the impact of a breach of such facilities at the federal level could require additional operating expenses and capital expenditures to remain in compliance with any increased federal oversight. While we cannot predict with certainty the extent of these expenses and expenditures or when they might become effective, this could result in significant additional compliance costs to us and we may be unable to recover from our customers, through the regulatory process, all or some of these costs and an authorized rate of return on these costs.

HURRICANES, EXTREME WEATHER OR WELL-HEAD DISASTERS COULD DISRUPT OUR NATURAL GAS SUPPLY AND INCREASE NATURAL GAS PRICES.

Hurricanes, extreme weather or well-head disasters could damage production or transportation facilities, which could result in decreased supplies of natural gas, increased supply costs for us and higher prices for our customers. Such events could also result in new governmental regulations or rules that limit production or raise production costs.

OUR BORROWING ARRANGEMENTS INCLUDE VARIOUS FINANCIAL AND NEGATIVE COVENANTS AND A PREPAYMENT PENALTY THAT COULD RESTRICT OUR ACTIVITIES.

Our bank line of credit and Series A Notes contain financial covenants. A default on the performance of any single obligation incurred in connection with our borrowings, or a default on other indebtedness that exceeds $2,500,000, simultaneously creates an event of default with the bank line of credit and the Series A Notes. If we breach any of the financial covenants under these agreements, our debt repayment obligations under the bank line of credit and Series A Notes could be accelerated. For example, if we default we may not be able to refinance, repay all our indebtedness, pay dividends or have sufficient liquidity to meet our operating and capital expenditure requirements, all of which could result in a material adverse effect on our business, results of operations and financial condition.

OUR LONG-TERM DEBT ARRANGEMENTS LIMIT THE AMOUNT OF DIVIDENDS WE MAY PAY AND OUR ABILITY TO REPURCHASE OUR STOCK.

Under the terms of our 4.26% Series A Notes, the aggregate amount we may pay in dividends on our common stock and to repurchase our common stock is limited based on our cumulative net income and dividends paid. Consequently, as of June 30, 2014 our Series A Notes permit us to pay up to $22,778,000 in dividends and for the repurchase of our common stock. However, if we fail to generate sufficient net income in the future, our ability to continue to pay our regular quarterly dividend may be impaired and the value of our common stock would likely decline.

A SECURITY BREACH COULD DISRUPT OUR INFORMATION TECHNOLOGY SYSTEMS, INTERRUPT THE NATURAL GAS SERVICE WE PROVIDE TO OUR CUSTOMERS, COMPROMISE THE SAFETY OF OUR NATURAL GAS DISTRIBUTION, TRANSMISSION, LIQUIDS EXTRACTION AND STORAGE SYSTEMS OR EXPOSE CONFIDENTIAL PERSONAL INFORMATION.

Security breaches of our information technology infrastructure, including cyber-attacks and cyber-terrorism, could lead to information system disruptions or shutdowns, result in the interruption of our ability to provide natural gas to our customers or compromise the safety of our distribution, transmission, liquids extraction and storage systems. If such an attack or security breach were to occur, our business, results of operations and financial condition could be materially adversely affected. In addition, such an attack could affect our ability to service our indebtedness, our ability to raise capital and our future growth opportunities.

Additionally, a breakdown or a breach in our systems that results in the unauthorized release of individually identifiable customer, employee, vendor, investor or other sensitive data could have a material adverse effect on our reputation, operating results and financial condition. We could also be exposed to claims by persons harmed by such a breakdown or breach. Such a breakdown or breach could also materially increase the costs we incur to protect against such risks. There is no guarantee that the procedures that we have implemented to protect against unauthorized access to secured data are adequate to safeguard against all data security breaches.

FAILURE TO ATTRACT AND RETAIN AN APPROPRIATELY QUALIFIED WORKFORCE COULD UNFAVORABLY IMPACT OUR RESULTS OF OPERATIONS.

Certain situations, such as an aging workforce, mismatch of skill sets to complement future needs, or unavailability of a qualified workforce, may lead to increased operational risks and costs. As a result, we may be unable to hire enough individuals who are knowledgeable about the natural gas industry and/or face a lengthy time period associated with skill development and knowledge transfer. Failure to address this risk may result in increased operational and safety risks as well as increased costs. Even if we have reasonable plans in place to address succession planning and workforce training, we cannot control the future availability of qualified labor. If we are unable to successfully attract and retain an appropriately qualified workforce, our financial position or results of operations could be negatively affected.

NEW LAWS OR REGULATIONS COULD HAVE A NEGATIVE IMPACT ON OUR FINANCIAL POSITION, RESULTS OF OPERATIONS OR CASH FLOWS.

Changes in laws and regulations, including new accounting standards and tax laws, could change the way in which we are required to record revenues, expenses, assets and liabilities. Additionally, governing bodies may choose to re-interpret laws and regulations. These changes could have a negative impact on our financial position, cash flows, results of operations or access to capital.

WE MAY FACE CERTAIN REGULATORY AND FINANCIAL RISKS RELATED TO CLIMATE CHANGE LEGISLATION.

Future proposals to limit greenhouse gas emissions, measured in carbon dioxide equivalent units, could adversely affect our operating and service costs and demand for our product. In the past, the United States Congress has considered legislative proposals to limit greenhouse gas emissions and the United States Environmental Protection Agency has adopted regulations to limit carbon emissions. Future legislation and the implementation of existing regulations could increase utility costs and prices charged to utility customers. Unless we are able to timely recover the costs of such impacts from customers through the regulatory process, costs associated with any such regulatory or legislative changes could adversely affect our results of operations, financial condition and cash flows.

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We own our corporate headquarters in Winchester, Kentucky. We own eleven buildings used for field operations in the cities we serve.

We own approximately 2,500 miles of natural gas gathering, transmission, distribution and storage lines. These lines range in size up to twelve inches in diameter.

We hold leases for the storage of natural gas under 8,000 acres located in Bell County, Kentucky. We developed this property for the underground storage of natural gas.

We use all the properties described in the three paragraphs immediately above principally in connection with our regulated segment, as further discussed in Item 1. Business.

Through our wholly-owned subsidiary, Enpro, we produce natural gas as part of the non-regulated segment of our business. Enpro owns interests in oil and natural gas leases on 10,300 acres located in Bell, Knox and Whitley Counties. Thirty-five gas wells are producing from these properties. The remaining proved, developed natural gas reserves on these properties are estimated at 2.5 million Mcf. Also, Enpro owns the natural gas underlying 15,400 additional acres in Bell, Clay and Knox Counties. These properties have been leased to others for further drilling and development. We have performed no reserve studies on these properties. Enpro produced a total of 80,000 Mcf of natural gas during fiscal 2014 from all the properties described in this paragraph.

A producer plans to conduct further exploration activities on part of Enpro's developed holdings. Enpro reserves the option to participate in wells drilled by this producer and also retains certain working and royalty interests in any production from future wells.

Our assets have no significant encumbrances.

Item 3. Legal Proceedings

We are not currently a party to any legal proceedings that are expected to have a materially adverse impact on our liquidity, financial position or results of operations.

Item 4. Mine Safety Disclosures

None.

PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

We have paid cash dividends on our common stock each year since 1964. The frequency and amount of future dividends will depend upon our earnings, financial requirements and other relevant factors, including limitations imposed by our Series A Notes as described in Note 10 of the Notes to Consolidated Financial Statements.

Our common stock is listed on NASDAQ and trades under the symbol “DGAS”. There were 1,482 record holders of our common stock as of August 26, 2014. The accompanying table sets forth, for the periods indicated, the high and low sales prices for the common stock on the NASDAQ stock market and the cash dividends declared per share.



	Range of Stock Prices ($)		Dividends
	High	Low	Per Share ($)

Quarter

Fiscal 2014
First	25.02	18.50	.19
Second	22.90	19.98	.19
Third	22.29	18.44	.19
Fourth	22.13	18.43	.19

Fiscal 2013
First	24.82	18.41	.18
Second	22.16	17.08	.18
Third	22.08	18.88	.18
Fourth	24.18	19.99	.18

The sales prices shown above reflect prices between dealers and do not include markups or markdowns or commissions and may not necessarily represent actual transactions.

Comparison of Five-Year Cumulative Total Shareholder Return

The following graph sets forth a comparison of five year cumulative total shareholder returns (equal to dividends plus stock price appreciation) among our common shares, the Dow Jones Utilities Index and the Russell 3000 Stock Index during the past five fiscal years. Information reflected on the graph assumes an investment of $100 on June 30, 2009 in each of our common shares, the Dow Jones Utilities Index and the Russell 3000 Stock Index. Cumulative total return assumes quarterly reinvestment of dividends. The total shareholder returns shown are not necessarily indicative of future returns.



	2009	2010	2011	2012	2013	2014

Delta	100	141	163	232	235	264

Dow Jones Utilities Index	100	105	132	153	161	199

Russell 3000 Stock Index	100	116	153	159	193	242

Item 6. Selected Financial Data

The following selected financial data is derived from the Company's audited consolidated financial statements and should be read in conjunction with those financial statements and notes thereto.



For the Years Ended June 30,	2014	2013	2012	2011	2010

Summary of Operations ($)

Operating revenues (a)	95,845,871	80,664,837	74,078,322	83,040,251	76,422,068

Operating income (a)	15,603,439	13,188,679	13,265,228	14,061,794	12,904,494

Net income (a)(b)	8,275,128	7,200,776	5,783,998	6,364,895	5,651,817

Earnings per common share (a)(b)
Basic and diluted	1.19	1.05	.85	.95	.85

Cash dividends declared per common share	.76	.72	.70	.68	.65

Weighted Average Number of Common Shares
Basic	6,918,725	6,843,455	6,777,186	6,707,224	6,652,320
Diluted	6,918,725	6,843,455	6,777,186	6,712,804	6,652,320

Total Assets ($)	186,025,161	183,930,015	182,895,363	174,896,239	168,632,420

Capitalization ($)

Common shareholders' equity	74,728,352	70,005,415	66,220,407	63,767,184	60,760,170

Long-term debt	53,500,000	55,000,000	56,500,000	56,751,006	57,112,000

Total capitalization	128,228,352	125,005,415	122,720,407	120,518,190	117,872,170

Short-Term Debt ($) (c)	1,500,000	1,500,000	1,500,000	1,200,000	1,200,000

Other Items ($)

Capital expenditures	8,077,642	7,179,473	7,337,115	8,123,479	5,275,194

Total property, plant and equipment	229,367,319	223,545,925	217,172,542	211,409,336	204,248,520


(a)	We implemented new regulated base rates as approved by the Kentucky Public Service Commission in October, 2010 and the rates were designed to generate additional annual revenue of $3,513,000, with a $1,770,000 increase in annual depreciation expense.


(b)	In 2012, $877,000 of interest expense was accrued relating to a tax assessment. In 2013, the assessment was resolved and the previously accrued interest was reversed.


(c)	Includes current portion of long-term debt.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview of 2014 and Future Outlook

Overview

The following is a discussion of the segments we operate, our corporate strategy for the conduct of our business within these segments and significant events that have occurred during 2014. Our Company has two segments: (i) a regulated natural gas distribution and transmission segment, and (ii) a non-regulated segment which participates in related activities, consisting of natural gas marketing, natural gas production and the sale of liquids extracted from natural gas.

Earnings from the regulated segment are primarily influenced by sales and transportation volumes, the rates we charge our customers and the expenses we incur. In order for us to achieve our strategy of maintaining reasonable long-term earnings, cash flow and stock value, we must successfully manage each of these factors. Regulated sales volumes are temperature-sensitive. Our regulated sales volumes in any period reflect the impact of weather, with colder temperatures generally resulting in increased sales volumes. The impact of winter temperatures on our revenues is partially reduced by our ability to adjust our winter rates for residential and small non-residential customers based on the degree to which actual winter temperatures deviate from historical average temperatures.

Our non-regulated segment markets natural gas to large-volume customers. We endeavor to enter sales agreements matching supply with estimated demand while providing an acceptable gross margin. The non-regulated segment also produces natural gas and sells liquids extracted from natural gas.

Consolidated earnings per common share for 2014 increased $0.14 per common share as compared to 2013. We experienced a winter that was colder than the preceding year resulting in increased volumes of natural gas sold. Additionally, sales of natural gas liquids increased, as compared to the prior year. Other factors which influenced our 2014 consolidated earnings per common share are further discussed in the Results of Operations.

Future Outlook

Future profitability of the regulated segment is contingent on the adequate and timely adjustment of the rates we charge our regulated customers. The Kentucky Public Service Commission sets these rates, and we monitor our need to file rate cases with the Kentucky Public Service Commission for a general rate increase for our regulated services. The regulated segment's largest expense is natural gas supply, which we are permitted to pass through to our customers. We manage remaining expenses through budgeting, approval and review.

Future profitability of the non-regulated segment is dependent on the business plans of some of our industrial and other large-volume customers and the market prices of natural gas and natural gas liquids, all of which are out of our control. We anticipate our non-regulated segment will continue to contribute to our consolidated net income in fiscal 2015. If natural gas prices increase, we would expect to experience a corresponding increase in our non-regulated segment gross margins related to our natural gas production and marketing activities. However, if natural gas prices decrease, we would expect a decrease in our non-regulated gross margins related to our natural gas production and marketing activities. The profitability of selling natural gas liquids is dependent on the amount of liquids extracted and the pricing for any such liquids, which is determined by a national unregulated market.

Liquidity and Capital Resources

Sources and Uses of Cash

Operating activities provide our primary source of cash. Cash provided by operating activities consists of net income adjusted for non-cash items, including depreciation, amortization, deferred income taxes, share-based compensation and changes in working capital. Our sales and cash requirements are seasonal. The largest portion of our sales occurs during the heating months (December - April), whereas significant cash requirements for the purchase of natural gas for injection into our storage field and capital expenditures occur during non-heating months. Therefore, when cash provided by operating activities is not sufficient to meet our capital requirements, our ability to maintain liquidity depends on our bank line of credit. The current bank line of credit with Branch Banking and Trust Company extends through June 30, 2015 and permits borrowings up to $40,000,000. There were no borrowings outstanding on the bank line of credit as of June 30, 2014 or June 30, 2013.

Cash and cash equivalents were $13,676,000 at June 30, 2014 compared with $10,360,000 at June 30, 2013 and $9,741,000 at June 30, 2012. These changes in cash and cash equivalents are summarized in the following table:



$(000)	2014		2013		2012

Provided by operating activities	17,340		13,557		13,514
Used in investing activities	(7,870	)	(7,108	)	(7,012	)
Used in financing activities	(6,155	)	(5,829	)	(4,102	)

Increase in cash and cash equivalents	3,315		620		2,400

In 2014, cash provided by operating activities increased $3,783,000 (28%), as compared to 2013, due to increased cash received from customers as a result of increased sales, partially offset by increased amounts paid for natural gas.

In 2013, there was not a significant change in cash provided by operating activities as compared to 2012.

Changes in cash used in investing activities result primarily from changes in the level of capital expenditures between years.

In 2014, there was not a significant change in cash used in financing activities, as compared to 2013.

In 2013, cash used in financing activities increased $1,727,000 (42%) , as compared to 2012, due to the first annual $1,500,000 repayment on our 4.26% Series A Notes.

Cash Requirements

Our capital expenditures result in a continued need for cash. These capital expenditures are being made for system extensions and for the replacement and improvement of existing transmission, distribution, gathering, storage and general facilities. We expect our capital expenditures for fiscal 2015 to be approximately $10.8 million.

The following is provided to summarize our contractual cash obligations for indicated periods after June 30, 2014:



	Payments Due by Fiscal Year
$(000)	2015	2016 - 2017	2018 - 2019	After 2019	Total
Interest payments (a)	2,360	4,427	4,171	20,249	31,207
Long-term debt (b)	1,500	3,000	3,000	47,500	55,000
Pension contributions (c)	500	1,000	1,000	4,500	7,000
Natural gas purchases (d)	140	—	—	—	140
Total contractual obligations (e)	4,500	8,427	8,171	72,249	93,347

(a)

Our long-term debt, notes payable, customers' deposits and unrecognized tax positions all require interest payments. Interest payments are projected based on fiscal 2014 interest payments until the underlying obligation is satisfied. As of June 30, 2014, we have also accrued $5,000 of interest related to uncertain tax positions. These amounts have been excluded from the above table of contractual obligations as the timing of such payments is uncertain.


(b)	See Note 10 of the Notes to Consolidated Financial Statements for a description of this debt.


(c)	This represents currently projected contributions to the defined benefit plan through 2028, as recommended by our actuary.


(d)	As of June 30, 2014, we had a contract which had a minimum purchase obligation. The contract term expires December, 2014. The remainder of our natural gas purchase contracts are either requirements-based contracts, or contracts with a minimum purchase obligation extending for a time period not exceeding one month.


(e)	We have other long-term liabilities which include deferred income taxes ($40,538,000), regulatory liabilities ($1,165,000), asset retirement obligations ($3,261,000) and deferred compensation ($907,000). Based on the nature of these items their expected settlement dates cannot be estimated.

All of our operating leases are year-to-year and cancelable at our option.

See Note 13 of the Notes to Consolidated Financial Statements for other commitments and contingencies.

Sufficiency of Future Cash Flows

Our ability to maintain liquidity, finance capital expenditures and pay dividends is contingent on the adequate and timely adjustment of the regulated rates we charge our customers. The Kentucky Public Service Commission sets these rates and we monitor our need to file for rate increases for our regulated segment. Our regulated base rates were most recently adjusted in our 2010 rate case and became effective in October, 2010. We expect that cash provided by operations will be sufficient to satisfy our operating and normal capital expenditure requirements and to pay dividends for the next twelve months and the foreseeable future. To the extent that internally generated cash is not sufficient to satisfy seasonal operating and capital expenditure requirements and to pay dividends, we rely on our bank line of credit.

In December, 2011, we refinanced our 5.75% Insured Quarterly Notes and 7% Debentures from the proceeds of a private debt financing. Under the Note Purchase and Private Shelf Agreement, we issued $58,000,000 of Series A Notes, for which the purchasers paid 100% of the face principal amount. The proceeds from the sale of the Series A Notes were used to fund the redemption of our 5.75% Insured Quarterly Notes Due April 1, 2021, which had an outstanding principal balance of $38,450,000, and our 7% Debentures Due February 1, 2023, which had an outstanding principal balance of $19,410,000.

Our Series A Notes are unsecured, bear interest at a rate of 4.26% per annum, which is payable quarterly, and mature on December 20, 2031. We are required to make an annual $1,500,000 principal payment on the Series A Notes each December. Any refinance of the Series A Notes, or any additional prepayments of principal, may be subject to a prepayment penalty.

With our bank line of credit agreement and Series A Notes, we have agreed to certain financial covenants. Noncompliance with these covenants can make the obligations immediately due and payable. We have agreed to the following financial covenants:


•	The Company must at all times maintain a tangible net worth of at least $25,800,000.


•	The Company must at the end of each fiscal quarter maintain a total debt to capitalization ratio of no more than 70%. The total debt to capitalization ratio is calculated as the ratio of (i) the Company's total debt to (ii) the sum of the Company's shareholders' equity plus total debt.


•	The Company must maintain a fixed charge coverage ratio for the twelve months ending each quarter of not less than 1.20x. The fixed charge coverage ratio is calculated as the ratio of (i) the Company's earnings adjusted for certain unusual or non-recurring items, before interest, taxes, depreciation and amortization plus rental expense to (ii) the Company's interest and rental expense.


•	The Company may not pay aggregate dividends on its capital stock (plus amounts paid in redemption of its capital stock) in excess of the sum of $15,000,000 plus the Company's cumulative earnings after September 30, 2011 adjusted for certain unusual or non-recurring items.

The following table shows the required and actual financial covenants under our Series A Notes as of June 30, 2014:



Requirement		Actual

Tangible net worth	no less than $25,800,000	$	73,961,000
Debt to capitalization ratio	no more than 70%	42		%
Fixed charge coverage ratio	no less than 1.20x	8.79			x
Dividends paid	no more than $36,594,000	$	13,816,000

Our 4.26% Series A Notes restrict us from:


•	with limited exceptions, granting or permitting liens on or security interests in our properties,


•	selling a subsidiary, except in limited circumstances,


•	incurring secured debt, or permitting a subsidiary to incur debt or issue preferred stock to any third party, in an aggregate amount that exceeds 10% of our tangible net worth,


•	changing the general nature of our business,


•	merging with another company, unless (i) we are the survivor of the merger or the survivor of the merger is another domestic company that assumes the 4.26% Series A Notes, (ii) there is no event of default under the 4.26% Series A Notes and (iii) the continuing company has a tangible net worth at least as high as our tangible net worth immediately prior to such merger, or

•

selling or transferring assets, other than (i) the sale of inventory in the ordinary course of business, (ii) the transfer of obsolete equipment and (iii) the transfer of other assets in any 12 month period where such assets constitute no more than 5% of the value of our tangible assets and, over any period of time, the cumulative value of all assets transferred may not exceed 15% of our tangible assets.

Without the consent of the bank that has extended to us our bank line of credit or terminating our bank line of credit, we may not:


•	merge with another entity;


•	sell a material portion of our assets other than in the ordinary course of business,


•	issue stock which in the aggregate exceeds thirty-five percent (35%) of our outstanding shares of common stock, or


•	permit any person or group of related persons to hold more than twenty percent (20%) of the Company's outstanding shares of stock.

Furthermore, the agreement governing our 4.26% Series A Notes contains a cross-default provision which provides that we will be in default under the 4.26% Series A Notes if we are in default on any other outstanding indebtedness that exceeds $2,500,000. Similarly, the loan agreement governing the bank line of credit contains a cross-default provision which provides that we will be in default under the bank line of credit if we are in default under our 4.26% Series A Notes and fail to cure the default within ten days of notice from the bank. We were in compliance with the covenants under our bank line of credit and 4.26% Series A Notes for all periods presented in the Consolidated Financial Statements.

Critical Accounting Policies and Estimates

Preparation of financial statements and related disclosures in compliance with generally accepted accounting principles requires the use of assumptions and estimates regarding future events, including the likelihood of success of particular investments or initiatives, estimates of future prices or rates, legal and regulatory challenges and anticipated recovery of costs. Therefore, the possibility exists for materially different reported amounts under different conditions or assumptions. We consider an accounting

estimate to be critical if (i) the accounting estimate requires us to make assumptions about matters that were reasonably uncertain at the time the accounting estimate was made and (ii) changes in the estimate are reasonably likely to occur from period to period.

These critical accounting estimates should be read in conjunction with the Notes to Consolidated Financial Statements. We have other accounting policies that we consider to be significant; however, these policies do not meet the definition of critical accounting estimates, because they generally do not require us to make estimates or judgments that are particularly difficult or subjective.

Regulatory Accounting

Our accounting policies reflect the effects of the rate-making process in accordance with regulatory accounting standards. Our regulated segment continues to be cost-of-service rate regulated, and we believe the application of regulatory accounting standards to that segment is appropriate. If, as a result of a change in circumstances, it is determined that the regulated segment no longer meets the criteria of regulatory accounting, that segment will have to discontinue regulatory accounting and write-off the respective regulatory assets and liabilities. Such a write-off could have a material impact on our consolidated financial statements.

The application of regulatory accounting standards results in recording regulatory assets and liabilities. Regulatory assets represent the deferral of incurred costs that are probable of future recovery in customer rates. In some cases, we record regulatory assets before approval for recovery has been received from the Kentucky Public Service Commission. We must use judgment to conclude that costs deferred as regulatory assets are probable of future recovery. We base this conclusion on certain factors, including changes in the regulatory environment, recent rate orders issued by the Kentucky Public Service Commission and the status of any potential new legislation. Regulatory liabilities represent revenues received from customers to fund expected costs that have not yet been incurred, or they represent probable future refunds to customers.

We use our best judgment when recording regulatory assets and liabilities; however, regulatory commissions can reach different conclusions about the recovery of costs, and those conclusions could have a material impact on our consolidated financial statements. We believe it is probable that we will recover the regulatory assets that have been recorded.

Pension

We have a non-contributory, defined benefit retirement plan covering all eligible employees hired prior to May 9, 2008. The net periodic benefit costs (“pension costs”) for our defined benefit plan as described in Note 6 of the Notes to Consolidated Financial Statements are dependent upon numerous factors resulting from actual plan experience and assumptions concerning future experience. These costs, for example, are impacted by employee demographics (including age, compensation levels and employment periods), the level of contributions we make to the plan and earnings on plan assets. Additionally, changes made to the provisions of the plan may impact current and future pension costs. Pension costs may also be significantly affected by changes in key actuarial assumptions, including anticipated rates of return on plan assets and the discount rates used in determining the projected benefit obligation and pension costs. For the years ended June 30, 2014, 2013 and 2012, we recorded pension costs for our defined benefit pension plan of $750,000, $980,000 and $481,000, respectively.

Changes in pension obligations associated with the above factors may not be immediately recognized as pension costs in the Consolidated Statements of Income, but may be deferred and amortized in the future over the average remaining service period of active plan participants. As of June 30, 2014, $5,824,000 of net losses have been deferred for amortization as pension costs into future periods.

Our pension plan assets are principally comprised of equity and fixed income investments. Differences between actual portfolio returns and expected returns will result in increased or decreased pension costs in future periods. Likewise, changes in assumptions regarding current discount rates and expected rates of return on plan assets could also increase or decrease pension costs in future periods.

In selecting our discount rate assumption we considered rates of return on high-quality fixed-income investments that are expected to be available through the maturity dates of the pension benefits. Our expected long-term rate of return on pension plan assets was 6% for 2014 and was based on our targeted asset allocation assumption for 2014 of approximately 70% equity investments and approximately 30% fixed income investments. Our targeted investment allocation for equity investments includes allocations to domestic, global and real estate markets. For additional diversification, we also invest in absolute return strategy mutual funds, which include both equity and fixed income securities. Our asset allocation is designed to achieve a moderate level of overall portfolio risk in keeping with our desired risk objective. We regularly review our asset allocation and periodically rebalance our investments to our targeted allocation as appropriate.

The funded status of our plan reflects investment gains or losses in the year in which they occur based on the market value of assets at the measurement date.

Based on an assumed long-term rate of return of 6%, discount rate of 4.25%, and various other assumptions, we estimate that our pension costs associated with our defined benefit pension plan will decrease from $750,000 in 2014 to $493,000 in 2015. Modifying the expected long-term rate of return on our pension plan assets by .25% would change pension costs for 2015 by approximately $71,000. Increasing the discount rate assumption by .25% would decrease pension costs by approximately $100,000. Decreasing the discount rate assumption by .25% would increase pension costs by approximately $106,000.

Unbilled Revenues and Gas Costs

At each month-end, we estimate the natural gas service that has been rendered from the date the customer's meter was last read to month-end. This estimate of unbilled usage is based on projected base load usage for each day unbilled plus projected weather-sensitive usage for each degree day during the unbilled period. Unbilled revenues and natural gas costs are calculated from the estimate of unbilled usage multiplied by the rates in effect at month-end. Actual usage patterns may vary from these assumptions and may impact operating income.

Asset Retirement Obligations

We have accrued asset retirement obligations for gas well plugging and abandonment costs. Additionally, we have recorded asset retirement obligations required pursuant to regulations related to the retirement of our service lines and mains, although the timing of such retirements is uncertain. The fair value of our retirement obligations is recorded at the time the obligations are incurred. We do not recognize asset retirement obligations relating to assets with indeterminate useful lives. Upon initial recognition of an asset retirement obligation, we increase the carrying amount of the long-lived asset by the same amount as the liability. Over time the liabilities accrete for the change in their present value, and the initial capitalized costs depreciate over the useful lives of the related assets. For asset retirement obligations attributable to assets of our regulated operations, the accretion and depreciation are deferred as a regulatory asset. We must use judgment to identify all appropriate asset retirement obligations. The underlying assumptions used for the value of the retirement obligations and related capitalized costs can change from period to period. These assumptions include the estimated future retirement costs, the estimated retirement dates and the assumed credit-adjusted risk-free interest rates. Our asset retirement obligations are further discussed in Note 4 of the Notes to Consolidated Financial Statements.

New Accounting Pronouncements

Significant management judgment is generally required during the process of adopting new accounting pronouncements. See Note 2 of the Notes to Consolidated Financial Statements for a discussion of these pronouncements.

Forward-Looking Statements

Management's Discussion and Analysis of Financial Condition and Results of Operations and the other sections of this report contain forward-looking statements that relate to future events or our future performance. We have attempted to identify these statements by using words such as “estimates”, “attempts”, “expects”, “monitors”, “plans”, “anticipates”, “intends”, “continues”, “could”, “strives” ,”seeks”, “will rely”, “believes” and similar expressions.

These forward-looking statements include, but are not limited to, statements about:



·	operational plans,
·	the cost and availability of our natural gas supplies,
·	capital expenditures,
·	sources and availability of funding for our operations and expansion,
·	anticipated growth and growth opportunities through system expansion and acquisition,
·	competitive conditions that we face,
·	production, storage, gathering, transportation, marketing and natural gas liquids activities,
·	acquisition of service franchises from local governments,
·	pension plan costs and management,
·	contractual obligations and cash requirements,
·	management of our natural gas supply and risks due to potential fluctuation in the price of natural gas,
·	revenues, income, margins and profitability,
·	efforts to purchase and transport locally produced natural gas,
·	recovery of regulatory assets,
·	litigation and other contingencies,
·	regulatory and legislative matters, and
·	dividends.

Such statements are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Our forward-looking statements are not guarantees of future performance and are based upon currently available competitive, financial and economic data along with our operating plans.

Item 1A. Risk Factors lists factors that, among others, could cause future results to differ materially from those expressed in or implied by the forward-looking statements or historical results.

Results of Operations

Gross Margins

Our operating revenues are derived primarily from the sale of natural gas and natural gas liquids and the provision of natural gas transportation services. We define “gross margins” as natural gas sales less the corresponding purchased natural gas expenses, plus transportation, natural gas liquids and other revenues. We view gross margins as an important performance measure of the core profitability of our operations and believe investors benefit from having access to the same financial measures that our management uses. Gross margin can be derived directly from our Consolidated Statements of Income included in Item 8. Financial Statements and Supplemental Data, as follows:



($000)	2014		2013		2012

Operating revenues	95,846		80,665		74,078
Regulated purchased natural gas	(27,215	)	(17,825	)	(15,703	)
Non-regulated purchased natural gas	(29,059	)	(26,011	)	(23,380	)

Consolidated gross margins	39,572		36,829		34,995

Operating Income, as presented in the Consolidated Statements of Income, is the most directly comparable financial measure calculated and presented in accordance with accounting principles generally accepted in the United States ("GAAP"). Gross margin is a “non-GAAP financial measure”, as defined in accordance with SEC rules.

Natural gas prices are determined by an unregulated national market. Therefore, the price that we pay for natural gas fluctuates with national supply and demand. See Item 7A. Quantitative and Qualitative Disclosures About Market Risk for discussion of our forward contracts.

In the following table we set forth variations in our gross margins for the last two years compared with the same periods in the preceding year. The variation amounts and percentages presented in the following tables for regulated and non-regulated gross margins include intersegment transactions. These intersegment revenues and expenses are eliminated in the Consolidated Statements of Income.



($000)	2014 compared to 2013		2013 compared to 2012

Increase (decrease) in gross margins
Regulated segment
Natural gas sales	950		1,420
On-system transportation	179		457
Off-system transportation	(53	)	205
Other	57		9
Intersegment elimination (a)	104		(441	)

Total	1,237		1,650

Non-regulated segment
Natural gas sales	1,053		(256	)
Natural gas liquids	529		41
Other	28		(42	)
Intersegment elimination (a)	(104	)	441

Total	1,506		184

Increase in consolidated gross margins	2,743		1,834

Percentage increase (decrease) in volumes
Regulated segment
Natural gas sales (Mcf)	10		25
On-system transportation (Mcf)	(4	)	6
Off-system transportation (Mcf)	(2	)	5

Non-regulated segment
Natural gas sales (Mcf)	(5	)	19
Natural gas liquids (gallons)	39		34


(a)	Intersegment eliminations represent the natural gas transportation costs from the regulated segment to the non-regulated segment.

Heating degree days were 107% of the normal thirty year average temperatures for fiscal 2014, as compared with 104% and 83% of normal temperatures for 2013 and 2012, respectively. A heating degree day is the equivalent for each degree that the average of the high and the low temperatures for a day is below 65 degrees in a specific geographic location. Heating degree days are used in the natural gas industry to measure the relative coldness of weather and to estimate the demand for natural gas. Normal degree days are based on historical thirty-year average heating degree days, as calculated from data provided by the National Weather Service for the same geographic location.

In 2014, consolidated gross margins increased $2,743,000 (7%), as compared to 2013, due to increased non-regulated and regulated gross margins of $1,506,000 and $1,237,000, respectively. Non-regulated gross margins increased due to the increased sales of the non-regulated segment's natural gas production inventory and increased sales of natural gas liquids extracted from the natural gas in our system. Regulated gross margins increased due to a 10% increase in volumes sold to our regulated customers

as a result of colder weather and increased amounts billed through our pipe replacement program tariff. Partially offsetting these increases are decreased rates billed through our weather normalization tariff.

In 2013, consolidated gross margins increased $1,834,000 (5%), as compared to 2012, due to increased regulated and non-regulated gross margins of $1,650,000 and $184,000, respectively. Regulated gross margins increased due to a 25% increase in volumes sold to our regulated customers as a result of colder weather and an increase in volumes transported as a result of an increase in our transportation customers' gas requirements. Partially offsetting these increases are decreased rates billed through our weather normalization tariff.

Operation and Maintenance

In 2014 there were no significant changes in operation and maintenance as compared to 2013.

In 2013, operation and maintenance increased $1,556,000 (11%) due to a $1,230,000 increase in labor and employee benefits resulting from an increase in pension expense and share-based compensation and a $369,000 increase in uncollectible expense.

Depreciation and Amortization

In 2014 and 2013, there were no significant changes in depreciation and amortization, as compared to 2013 and 2012, respectively.

Taxes Other Than Income Taxes

In 2014 and 2013, there were no significant changes in taxes other than income taxes, as compared to 2013 and 2012, respectively.

Interest on Long-Term Debt

In 2014, there were no significant changes in interest on long-term debt, as compared to 2013.

In 2013, interest on long-term debt decreased $546,000 (18%) as a result of refinancing our 5.75% Insured Quarterly Notes and 7% Debentures (as further discussed in Note 10 of the Notes to Consolidated Financial Statements).

Other Interest (Income) Expense

In 2014, other interest (income) expense increased $874,000 (106%), as compared to 2013 due to a decrease in interest accrued in the prior year relating to a resolution of a tax assessment (as further discussed in Note 13 of the Notes to Consolidated Financial Statements).

In 2013, other interest (income) expense decreased $1,807,000 (183%) due to a decrease in interest accrued for a tax assessment issued to Delta Resources by the Kentucky Department of Revenue (as further discussed in Note 13 of the Notes to Consolidated Financial Statements).

Income Tax Expense

In 2014, income tax expense increased $590,000 (14%) due to an increase in net income before taxes. There were no significant changes in our effective tax rate for 2014, as compared to 2013.

In 2013, income tax expense increased $1,011,000 (31%) due to an increase in net income before income taxes. There were no significant changes in our effective tax rate for 2013, as compared to 2012.

Basic and Diluted Earnings Per Common Share

For 2014 and 2013, our basic and diluted earnings per common share changed as a result of changes in net income and an increase in the number of our common shares outstanding. We increased our number of common shares outstanding as a result of shares issued through our Dividend Reinvestment and Stock Purchase Plan as well as those awarded through our Incentive

Compensation Plan. Our computation of basic and diluted earnings per share is set forth in Note 11 of the Notes to Consolidated Financial Statements.

Under our Incentive Compensation Plan, recipients of performance share awards receive unvested non-participating shares, as further discussed in Note 17 of the Notes to Consolidated Financial Statements. Unvested non-participating shares become dilutive in the interim quarter-end in which the performance objective is met. If the performance objective continues to be met through the end of the performance period, these shares become unvested participating shares as of the fiscal year-end. The weighted average number of unvested non-participating shares outstanding during a period is included in the diluted earnings per common share calculation using the treasury stock method, unless the effect of including such shares would be antidilutive. There were no unvested non-participating shares outstanding as of June 30, 2014 and 2013.

Certain unvested awards under our shareholder approved incentive compensation plan, as further discussed in Note 17 of the Notes to Consolidated Financial Statements, provide the recipients of the awards all the rights of a shareholder of Delta Natural Gas Company, Inc. including the right to dividends declared on common shares. Any unvested shares which are participating in dividends are considered participating securities and are included in our computation of basic and diluted earnings per share using the two-class method unless the effect of including such shares would be antidilutive, as further discussed in Note 11 of the Notes to Consolidated Financial Statements. There were 74,000 and 68,000 unvested participating shares outstanding as of June 30, 2014 and 2013, respectively. There were no antidilutive shares as of June 30, 2014 and 2013.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

We purchase our natural gas supply primarily through forward natural gas contracts. The price we pay for our natural gas supply acquired under these purchase contracts is fixed prior to the delivery of the natural gas. Additionally, we inject some of our natural gas purchases into our underground natural gas storage facility in the non-heating months and withdraw this natural gas from storage for delivery to customers during the heating months. For our regulated segment, we have minimal price risk resulting from forward purchase and storage of natural gas because we are permitted to pass these natural gas costs on to our regulated customers through our natural gas cost recovery rate mechanism, approved quarterly by the Kentucky Public Service Commission.

Price risk for the non-regulated business is mitigated by efforts to balance supply and demand. However, there are greater risks in the non-regulated segment because of the practical limitations on the ability to perfectly predict demand. In addition, we are exposed to changes in the market price of natural gas on uncommitted natural gas inventory of our non-regulated segment. The pricing of the natural gas liquids sold by our non-regulated segment is determined in the national unregulated market.

None of our natural gas contracts are accounted for using the fair value method of accounting. While some of our natural gas purchase and natural gas sales contracts meet the definition of a derivative, we have designated these contracts as normal purchases and normal sales. As of June 30, 2014, we had a forward purchase contract totaling $140,000 that expires in December, 2014. The forward purchase contract is at a fixed price and not impacted by changes in the market price of natural gas.

When we have a balance outstanding on our variable rate bank line of credit, we are exposed to risk resulting from changes in interest rates. The interest rate on our bank line of credit with Branch Banking and Trust Company is benchmarked to the monthly London Interbank Offered Rate. There were no borrowings outstanding on our bank line of credit as of June 30, 2014 or June 30, 2013. The weighted average interest rate on our bank line of credit was 1.3% as of June 30, 2014 and June 30, 2013, respectively. During 2014, we borrowed and repaid $691,000 from the bank line of credit, having a weighted average interest rate of 1.4%. A one percent (one hundred basis point) increase in our average interest rate would not have had a significant impact on our annual pre-tax net income. We did not have any borrowings on our bank line of credit during 2013.

Item 8. Financial Statements and Supplementary Data



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE	PAGE

Report of Independent Registered Public Accounting Firm	36

Consolidated Statements of Income for the years ended June 30, 2014, 2013 and 2012	37

Consolidated Statements of Cash Flows for the years ended June 30, 2014, 2013 and 2012	38

Consolidated Balance Sheets as of June 30, 2014 and 2013	40

Consolidated Statements of Changes in Shareholders' Equity for the years ended June 30, 2014, 2013 and 2012	42

Notes to Consolidated Financial Statements	43

Schedule II - Valuation and Qualifying Accounts for the years ended June 30, 2014, 2013 and 2012	63

Schedules other than those listed above are omitted because they are not required, are 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.

Item 9A. Controls and Procedures

Disclosure Controls and Procedures

Disclosure controls and procedures are our controls and other procedures that are designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2014 and based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance of compliance.

Changes in Internal Control over Financial Reporting

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal year ended June 30, 2014 and found no change that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes, in accordance with generally accepted accounting principles.

Management's Annual Report on Internal Control over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2014 based on the framework in Internal Control - Integrated Framework issued in 1992 by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, management concluded that our internal control over financial reporting was effective as of June 30, 2014.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

Deloitte & Touche LLP, our independent registered public accounting firm, has issued an attestation report on our internal control over financial reporting. That report immediately follows:

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Delta Natural Gas Company, Inc.

Winchester, Kentucky:

We have audited the internal control over financial reporting of Delta Natural Gas Company, Inc. and subsidiaries (the "Company") as of June 30, 2014, based on criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of June 30, 2014, based on the criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended June 30, 2014 of the Company and our report dated August 26, 2014 expressed an unqualified opinion on those financial statements and financial statement schedule.

/s/ DELOITTE & TOUCHE LLP

Indianapolis, Indiana

August 26, 2014

Item 9B. Other Information

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

We have a Business Code of Conduct and Ethics that applies to all directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. Our Business Code of Conduct and Ethics can be found on our website by going to the following address: http://www.deltagas.com/investor_relations.html. We will post any amendments to the Business Code of Conduct and Ethics, as well as any waivers that are required to be disclosed by the rules of either the Securities and Exchange Commission or the NASDAQ OMX Group, on our website.

Our Board of Directors has adopted charters for the Audit, Corporate Governance and Compensation and Executive Committees of the Board of Directors as well as Corporate Governance Guidelines. These documents can be found on our website by going to the following address: http://www.deltagas.com/corporate_governance.html.

A printed copy of any of the materials referred to above can be obtained by contacting us at the following address:

Delta Natural Gas Company, Inc.

Attn: John B. Brown

3617 Lexington Road

Winchester, KY 40391

(859) 744-6171

The Audit Committee of our Board of Directors is an “audit committee” for purposes of Section 3(a)(58) of the Securities Exchange Act of 1934.

The other information required by this Item is contained under the captions “Election of Directors”, “Board Leadership, Committees and Meetings”, “Executive Officers”, “Certain Relationships and Related Transactions” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for the 2014 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission no later than 120 days after June 30, 2014. We incorporate that information in this document by reference.

Item 11. Executive Compensation

Information in response to this item is contained under the captions “Director Compensation”, “Corporate Governance and Compensation Committee Interlocks and Insider Participation”, “Compensation Discussion and Analysis”, “Compensation Risks”, “Corporate Governance and Compensation Committee Report”, “Summary Compensation Table”, “Grants of Plan Based Awards”, “Outstanding Equity Awards at Fiscal Year-End”, “Retirement Benefits”, “Potential Payments Upon Termination Or Change in Control” and “Termination Table” in our definitive Proxy Statement for the 2014 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission no later than 120 days after June 30, 2014. We incorporate that information in this document by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plans

Pursuant to our shareholder approved incentive compensation plan, we have the ability to grant stock, performance shares and restricted stock to employees, officers and directors. The plan does not provide for the awarding of options, warrants or rights. We do not have any equity compensation plans which have not been approved by our shareholders.

The following table sets forth certain information with respect to our equity compensation plan at June 30, 2014:



Column A	Column B	Column C

Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column A)

—	—	793,760

The other information required by this Item is contained under the captions “Security Ownership of Certain Beneficial Owners” and "Security Ownership of Management" in our definitive Proxy Statement for the 2014 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission no later than 120 days after June 30, 2014. We incorporate that information in this document by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is contained under the captions “Election of Directors”, “Board Leadership, Committees and Meetings” and “Certain Relationships and Related Transactions” in our definitive Proxy Statement for the 2014 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission no later than 120 days after June 30, 2014. We incorporate that information in this document by reference.

Item 14. Principal Accountant Fees and Services

The information required by this item is contained under the caption “Audit Committee Report” in our definitive Proxy Statement for the 2014 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission no later than 120 days after June 30, 2014. We incorporate that information in this document by reference.

PART IV

Item 15. Exhibits and Financial Statement Schedule



(a)		Financial Statements, Schedule and Exhibits

	(1)	Financial Statements See Index at Item 8

	(2)	Financial Statement Schedule See Index at Item 8

	(3)	Exhibits

	Exhibit No.



	3.1	Registrant's Amended and Restated Articles of Incorporation (dated November 16, 2006) are incorporated herein by reference to Exhibit 3(i) to Registrant's Form 10-K/A (File No. 000-08788) for the period ended June 30, 2007.
	3.2	Registrant's Amended and Restated By-Laws (dated August 15, 2014) are incorporated herein by reference to Exhibit 3.1 to Registrant's Form 8-K (File No. 000-8788) dated August 19, 2014.
	4	Note Purchase and Private Shelf Agreement dated December 8, 2011 in respect of 4.26% Senior Notes, Series A, due December 20, 2031, is incorporated herein by reference to Exhibit 10.01 to Registrant's Form 8-K (File No. 000-08788) dated December 13, 2011.
	10.01	Natural Gas Sales Agreement, dated May 1, 2000 by and between Atmos Energy Marketing, LLC and Registrant is incorporated herein by reference to Exhibit 10(c) to Registrant's Form S-2/A (Reg. No. 333-100852) dated December 13, 2002.
	10.02	Base Contract for Short-Term Sale and Purchase of Natural Gas, dated January 1, 2002, by and between M & B Gas Services, Inc. and Registrant, is incorporated herein by reference to Exhibit 10(n) to Registrant's Form S-2 (Reg. No. 333-104301) dated April 4, 2003.
	10.03	Natural Gas Sales Agreement, dated May 1, 2003, by and between Atmos Energy Marketing, LLC and Registrant is incorporated herein by reference to Exhibit 10(d) to Registrant's Form 10-K (File No. 000-08788) for the period ended June 30, 2003.
	10.04	Natural Gas Sales Agreement, dated May 1, 2010, by and between Atmos Energy Marketing, LLC and Registrant is incorporated herein by reference to Exhibit 10.04 to Registrant's Form 10-K (File No. 000-08788) for the period ended June 30, 2012.
	10.05	Base contracts for the Sale and Purchase of Natural Gas, dated May 1, 2013, by and between Midwest Energy L.L.C. and Registrant are incorporated herein by reference to Registrant's Form 10-K (File No. 000-08788) for the period ended June 30, 2013.
	10.06	Natural Gas Transportation Agreement (Service Package 9069), dated December 19, 1994, by and between Tennessee Gas Pipeline Company and Registrant is incorporated herein by reference to Exhibit 10(e) to Registrant's Form S-2/A (Reg. No. 333-100852) dated December 13, 2002.
	10.07	Agreement to transport natural gas between Nami Resources Company L.L.C. and Registrant, dated March 10, 2005, is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 8-K (File No. 000-08788) dated March 23, 2005.
	10.08	Amendment, dated July 22, 2010, of agreement to transport natural gas between Nami Resources Company, L.L.C. and Registrant incorporated herein by reference to Exhibit 10(f) to Registrant's Form 10-K (File No. 000-08788), for the period ended June 30, 2010.
	10.09	GTS Service Agreements, dated November 1, 1993 (Service Agreement Nos. 37,813, 37,814 and 37,815), and Appendix A to respective Service Agreements, effective November 1, 2010, by and between Columbia Gas Transmission Corporation and Registrant incorporated herein by reference to Exhibit 10(g) to Registrant's Form 10-K (File No. 000-08788), for the period ended June 30, 2010.
	10.10	FTS1 Service Agreements, dated October 4, 1994, (Service Agreement Nos. 43,827, 43,828 and 43,829), and Appendix A to respective Service Agreements, effective November 1, 2010, by and between Columbia Gulf Transmission Corporation and Registrant incorporated herein by reference to Exhibit 10(h) to Registrant's Form 10-K (File No. 000-08788), for the period ended June 30, 2010.
	10.11	Underground Natural Gas Storage Lease and Agreement, dated March 9, 1994, by and between Equitable Resources Exploration, a division of Equitable Resources Energy Company, and Lonnie D. Ferrin and Amendment No. 1 and Novation to Underground Natural Gas Storage Lease and Agreement, dated March 22, 1995, by and between Equitable Resources Exploration, Lonnie D. Ferrin and Registrant, is incorporated herein by reference to Exhibit 10(m) to Registrant's Form S-2 (Reg. No. 333-104301) dated April 4, 2003.



	10.12	Oil and Natural Gas Lease, dated July 19, 1995, by and between Meredith J. Evans and Helen Evans and Paddock Oil and Gas, Inc.; Assignment, dated June 15, 1995, by Paddock Oil and Gas, Inc., as assignor, to Lonnie D. Ferrin, as assignee; Assignment, dated August 31, 1995, by Paddock Oil and Gas, Inc., as assignor, to Lonnie D. Ferrin, as assignee; and Assignment and Assumption Agreement, dated November 10, 1995, by and between Lonnie D. Ferrin and Registrant, is incorporated herein by reference to Exhibit 10(o) to Registrant's Form S-2 (Reg. No. 333-104301) dated April 4, 2003.
	10.13	Natural Gas Storage Lease, dated October 4, 1995, by and between Judy L. Fuson, Guardian of Jamie Nicole Fuson, a minor, and Lonnie D. Ferrin and Assignment and Assumption Agreement, dated November 10, 1995, by and between Lonnie D. Ferrin and Registrant is incorporated herein by reference to Exhibit 10(j) to Registrant's Form S-2 (Reg. No. 333-104301) dated April 4, 2003.
	10.14	Natural Gas Storage Lease, dated November 6, 1995, by and between Thomas J. Carnes, individually and as Attorney-in-fact and Trustee for the individuals named therein, and Registrant, is incorporated herein by reference to Exhibit 10(k) to Registrant's Form S-2 (Reg. No. 333-104301) dated April 4, 2003.
	10.15	Deed and Perpetual Natural Gas Storage Easement, dated December 21, 1995, by and between Katherine M. Cornelius, William Cornelius, Frances Carolyn Fitzpatrick, Isabelle Fitzpatrick Smith and Kenneth W. Smith and Registrant is incorporated herein by reference to Exhibit 10(l) to Registrant's Form S-2 (Reg. No. 333-104301) dated April 4, 2003.
	10.16	Loan Agreement, dated October 31, 2002, by and between Branch Banking and Trust Company and Registrant is incorporated herein by reference to Exhibit 10(i) to Registrant's Form S-2/A (Reg. No. 333-100852) dated December 13, 2002.
	10.17	Promissory Note, in the original principal amount of $40,000,000, made by Registrant to the order of Branch Banking and Trust Company, is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 10-Q (File No. 000-08788) for the period ended September 30, 2002.
	10.18	Modification Agreement extending to October 31, 2004 the Promissory Note and Loan Agreement dated October 31, 2002 between Branch Banking and Trust Company and Registrant, is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 10-Q (File No. 000-08788) for the period ended September 30, 2003.
	10.19	Modification Agreement extending to October 31, 2005 the Promissory Note and Loan Agreement dated October 31, 2002 between Branch Banking and Trust Company and Registrant, is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 10-Q (File No. 000-08788) for the period ended September 30, 2004.
	10.20	Modification Agreement extending to October 31, 2007 the Promissory Note and Loan Agreement dated October 31, 2002 between Branch Banking and Trust Company and Registrant, is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 8-K (File No. 000-08788) dated August 19, 2005.
	10.21	Modification Agreement extending to October 31, 2009 the Promissory Note and Loan Agreement dated October 31, 2002 between Branch Banking and Trust Company and Registrant, is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 10-Q (File No. 000-08788) for the period ended September 30, 2007.
	10.22	Modification Agreement extending to June 30, 2011 the Promissory Note and Loan Agreement dated October 31, 2002 between Branch Banking and Trust Company and Registrant, is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 8-K (File No. 000-08788) dated June 30, 2009.
	10.23	Modification Agreement extending to June 30, 2013 the Promissory Note and Loan Agreement dated October 31, 2002 between Branch Banking and Trust Company and Registrant, is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 8-K (File No. 000-08788) dated June 30, 2011.
	10.24	Modification Agreement extending to June 30, 2015 the Promissory Note and Loan Agreement dated October 31, 2002 between Branch Banking and Trust Company and Registrant, is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 8-K (File No. 000-08788) dated June 30, 2013.
	10.25	Employment agreement dated March 1, 2000, between Glenn R. Jennings, Registrant's Chairman of the Board, President and Chief Executive Officer, and Registrant, is incorporated herein by reference to Exhibit (k) to Registrant's Form 10-Q (File No. 000-08788) dated March 31, 2000.
	10.26	Officer agreements dated March 1, 2000, between two officers, those being John B. Brown and Johnny L. Caudill, and Registrant, are incorporated herein by reference to Exhibit 10(k) to Registrant's Form 10‑Q (File No. 000-08788) for the period ended March 31, 2000.
	10.27	Officer agreement dated November 20, 2008, between Brian S. Ramsey and Registrant is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 8-K (File No. 000-08788) dated November 21, 2008.
	10.28	Officer agreement dated November 19, 2010, between Matthew D. Wesolosky and Registrant is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 8-K (File No. 000-08788) dated November 24, 2010.



10.29	Supplemental retirement benefit agreement and trust agreement between Glenn R. Jennings and Registrant is incorporated herein by reference to Exhibit 10(a) to Registrant's Form 8-K (File No. 000-08788) dated February 25, 2005.
10.30	Registrant's Amended and Restated Dividend Reinvestment and Stock Purchase Plan, dated November 17, 2005, is incorporated herein by reference to Exhibit 99(b) to Registrant's S-3D (Reg. No. 333-130301) dated December 14, 2005 and Post-Effective Amendment No. 1 to Registrant's S-3 (Reg. No. 333-130301) dated August 29, 2012.
10.31	Registrant's Incentive Compensation Plan, dated January 1, 2008, is incorporated herein by reference to Exhibit 4.1 to Registrant's S-8 (Reg. No. 333-165210) dated March 4, 2010.
10.32	Notices of Performance Shares Award between five officers, those being John B. Brown, Johnny L. Caudill, Glenn R. Jennings, Brian S. Ramsey and Matthew D. Wesolosky and Registrant, are incorporated herein by reference to Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, of Registrant's Form 8-K (File No. 000-08788) dated August 16, 2011.
10.33	Notices of Performance Shares Award between five officers, those being John B. Brown, Johnny L. Caudill, Glenn R. Jennings, Brian S. Ramsey and Matthew D. Wesolosky and Registrant, are incorporated herein by reference to Exhibit 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, of Registrant's Form 8-K (File No. 000-08788) dated August 21, 2012.
10.34	Notices of Performance Shares Award between five officers, those being John B. Brown, Johnny L. Caudill, Glenn R. Jennings, Brian S. Ramsey and Matthew D. Wesolosky and Registrant, are incorporated herein by reference to Exhibit 10.1, 10.2, 10.3, 10.4 and 10.5, respectively, of Registrant's Form 8-K (File No. 000-08788) dated August 21, 2013.
10.35	Form of Notice of Performance Shares Award is filed herewith.
12	Computation of the Consolidated Ratio of Earnings to Fixed Charges.
21	Subsidiaries of the Registrant.
23	Consent of Independent Registered Public Accounting Firm.
31.1	Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Database
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
	Attached as Exhibit 101 to this Annual Report are the following documents formatted in extensible business reporting language (XBRL):
	(i)	Document and Entity Information;
	(ii)	Consolidated Statements of Income for the years ended June 30, 2014, 2013 and 2012;
	(iii)	Consolidated Statements of Cash Flows for the years ended June 30, 2014, 2013 and 2012;
	(iv)	Consolidated Balance Sheets as of June 30, 2014 and 2013;
	(v)	Consolidated Statements of Changes in Shareholders' Equity for the years ended June 30, 2014, 2013 and 2012;
	(vi)	Notes to Consolidated Financial Statements;
	(vii)	Schedule II – Valuation and Qualifying Accounts for the years ended June 30, 2014, 2013 and 2012.
	Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospects for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability. We also make available on our web site the Interactive Data Files submitted as Exhibit 101 to this Annual Report.

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 26th day of August, 2014.



	DELTA NATURAL GAS COMPANY, INC.

	By: /s/Glenn R. Jennings
	Glenn R. Jennings
	Chairman of the Board, 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	Chairman of the Board, President	August 26, 2014
(Glenn R. Jennings)	and Chief Executive Officer

(ii) Principal Financial Officer:

/s/John B. Brown	Chief Financial Officer,	August 26, 2014
(John B. Brown)	Treasurer and Secretary

(iii) Principal Accounting Officer:

/s/Matthew D. Wesolosky	Vice President - Controller	August 26, 2014
(Matthew D. Wesolosky)

(iv) A Majority of the Board of Directors:

/s/Glenn R. Jennings	Chairman of the Board, President	August 26, 2014
(Glenn R. Jennings)	and Chief Executive Officer

/s/Sandra C. Gray	Director	August 26, 2014
(Sandra C. Gray)

/s/Edward J. Holmes	Director	August 26, 2014
(Edward J. Holmes)

/s/Michael J. Kistner	Director	August 26, 2014
(Michael J. Kistner)

/s/Lewis N. Melton	Director	August 26, 2014
(Lewis N. Melton)

/s/Arthur E. Walker, Jr.	Director	August 26, 2014
(Arthur E. Walker, Jr.)

/s/Michael R. Whitley	Director	August 26, 2014
(Michael R. Whitley)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Delta Natural Gas Company, Inc.

Winchester, Kentucky:

We have audited the accompanying consolidated balance sheets of Delta Natural Gas Company, Inc. and subsidiaries (the "Company") as of June 30, 2014 and 2013, and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended June 30, 2014. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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, such consolidated financial statements present fairly, in all material respects, the financial position of Delta Natural Gas Company, Inc. and subsidiaries as of June 30, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 2014, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of June 30, 2014, based on the criteria established in Internal Control-Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated August 26, 2014 expressed an unqualified opinion on the Company's internal control over financial reporting.

/s/ DELOITTE & TOUCHE LLP

Indianapolis, Indiana

August 26, 2014

Delta Natural Gas Company, Inc.

Consolidated Statements of Income



For the Year Ended June 30,	2014		2013			2012

Operating Revenues
Regulated revenues	$	57,054,180	$	46,427,203		$	42,655,378
Non-regulated revenues	38,791,691		34,237,634			31,422,944
Total operating revenues	$	95,845,871	$	80,664,837		$	74,078,322

Operating Expenses
Regulated purchased natural gas	$	27,215,425	$	17,825,487		$	15,703,114
Non-regulated purchased natural gas	29,059,426		26,011,164			23,380,426
Operation and maintenance	15,495,537		15,208,162			13,651,689
Depreciation and amortization	6,147,618		6,092,651			5,923,775
Taxes other than income taxes	2,324,426		2,338,694			2,154,090
Total operating expenses	$	80,242,432	$	67,476,158		$	60,813,094

Operating Income	$	15,603,439	$	13,188,679		$	13,265,228

Other Income and Deductions, Net	$	201,462	$	150,816		$	75,170

Interest Charges
Interest on long-term debt	$	2,373,024	$	2,438,325		$	2,984,413
Other interest (income) expense	51,563		(822,190		)	984,612
Amortization of debt expense	246,600		253,800			329,231
Total interest charges	$	2,671,187	$	1,869,935		$	4,298,256


Net Income Before Income Taxes	$	13,133,714	$	11,469,560		$	9,042,142

Income Tax Expense	4,858,586		4,268,784			3,258,144

Net Income	$	8,275,128	$	7,200,776		$	5,783,998

Earnings Per Common Share (Note 11)
Basic and Diluted	$	1.19	$	1.05		$	.85

Dividends Declared Per Common Share	$	.76	$	.72		$	.70

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Delta Natural Gas Company, Inc.

Consolidated Statements of Cash Flows



For the Year Ended June 30,	2014			2013			2012

Cash Flows From Operating Activities
Net income	$	8,275,128		$	7,200,776		$	5,783,998

Adjustments to reconcile net income to net
cash from operating activities
Depreciation and amortization	6,420,525			6,428,051			6,334,647
Deferred income taxes and investment
tax credits	(515,492		)	1,959,741			2,513,400
Change in cash surrender value of officer's
life insurance	(67,722		)	(27,300		)	153
Share-based compensation	1,111,966			921,709			712,144
Excess tax deficiency from share-based compensation	(8,967		)	(8,946		)	—

(Increase) decrease in assets
Accounts receivable	2,216,925			(841,574		)	(1,407,711		)
Natural gas in storage	(1,644,186		)	1,451,494			(121,547		)
Deferred natural gas cost	3,197,921			(536,552		)	(7,581		)
Materials and supplies	(288,597		)	9,256			(51,724		)
Prepayments	(1,253,798		)	893,490			(2,606,809		)
Other assets	11,556			(177,919		)	(548,470		)

Increase (decrease) in liabilities
Accounts payable	169,226			2,725,470			(3,518,540		)
Accrued taxes	83,528			(2,757,561		)	2,695,526
Asset retirement obligations	(553,612		)	(493,946		)	1,085,920
Other liabilities	185,805			(3,189,770		)	2,650,640

Net cash provided by operating activities	$	17,340,206		$	13,556,419		$	13,514,046

Cash Flows From Investing Activities
Capital expenditures	$	(8,077,642	)	$	(7,179,473	)	$	(7,337,115	)
Proceeds from sale of property, plant and equipment	268,082			131,545			183,678
Other	(60,000		)	(60,000		)	141,530

Net cash used in investing activities	$	(7,869,560	)	$	(7,107,928	)	$	(7,011,907	)

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Delta Natural Gas Company, Inc.

Consolidated Statements of Cash Flows (continued)



For the Year Ended June 30,	2014			2013			2012

Cash Flows From Financing Activities
Dividends on common shares	$	(5,289,911	)	$	(4,951,002	)	$	(4,762,257	)
Issuance of common shares	595,249			587,359			697,775
Debt issuance costs	—			—			(107,904		)
Issuance of long-term debt	—			—			58,000,000
Excess tax benefit from share-based compensation	39,472			35,112			21,563
Repayment of long-term debt	(1,500,000		)	(1,500,000		)	(57,951,006		)
Borrowings on bank line of credit	691,157			—			17,697,829
Repayment of bank line of credit	(691,157		)	—			(17,697,829		)

Net cash used in financing activities	$	(6,155,190	)	$	(5,828,531	)	$	(4,101,829	)


Net Increase in Cash and Cash Equivalents	$	3,315,456		$	619,960		$	2,400,310


Cash and Cash Equivalents, Beginning of Year	10,360,462			9,740,502			7,340,192


Cash and Cash Equivalents, End of Year	$	13,675,918		$	10,360,462		$	9,740,502

Supplemental Disclosures of Cash Flow Information

Cash paid during the year for
Interest	$	2,436,435		$	2,509,962		$	3,795,590
Income taxes (net of refunds)	$	5,819,956		$	1,573,321		$	1,011,138

Significant non-cash transactions
Accrued capital expenditures	$	328,638		$	301,679		$	336,543
Loss on extinguishment of debt recognized as a regulatory asset (Note 10)	$	—		$	—		$	1,896,000

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Delta Natural Gas Company, Inc.

Consolidated Balance Sheets



As of June 30,	2014			2013

Assets

Current Assets
Cash and cash equivalents	$	13,675,918		$	10,360,462
Accounts receivable, less accumulated allowances for doubtful	6,681,964			8,700,982
accounts of $360,000 and $536,000 in 2014 and 2013,
respectively
Natural gas in storage, at average cost (Notes 1 and 16)	7,125,499			5,481,313
Deferred natural gas costs (Notes 1 and 14)	724,923			3,922,844
Materials and supplies, at average cost	574,699			561,270
Prepayments	3,491,257			1,987,855

Total current assets	$	32,274,260		$	31,014,726

Property, Plant and Equipment	$	229,367,319		$	223,545,925
Less - Accumulated provision for depreciation	(93,551,799		)	(88,429,625		)

Net property, plant and equipment	$	135,815,520		$	135,116,300

Other Assets
Cash surrender value of life insurance
(face amount of $948,000 and $945,000 in 2014 and 2013, respectively)	$	402,147		$	334,425
Prepaid pension (Note 6)	3,291,974			2,679,864
Regulatory assets (Note 1)	13,198,199			13,770,011
Unamortized debt expense (Notes 1 and 10)	90,304			97,104
Other non-current assets	952,757			917,585

Total other assets	$	17,935,381		$	17,798,989

Total assets	$	186,025,161		$	183,930,015

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Delta Natural Gas Company, Inc.

Consolidated Balance Sheets (continued)



As of June 30,	2014		2013

Liabilities and Shareholders' Equity

Current Liabilities
Accounts payable	$	6,706,021	$	7,417,789
Current portion of long-term debt (Note 10)	1,500,000		1,500,000
Accrued taxes	1,553,670		1,433,666
Customers' deposits	593,010		646,375
Accrued interest on debt	120,712		132,560
Accrued vacation	752,905		730,867
Deferred income taxes	39,718		1,339,287
Other liabilities	591,606		435,064

Total current liabilities	$	11,857,642	$	13,635,608

Long-Term Debt (Note 10)	$	53,500,000	$	55,000,000

Long-Term Liabilities
Deferred income taxes	$	40,537,879	$	39,623,563
Investment tax credits	24,600		40,600
Regulatory liabilities (Note 1)	1,165,260		1,252,629
Asset retirement obligations (Note 4)	3,260,721		3,547,441
Other long-term liabilities	950,707		824,759

Total long-term liabilities	$	45,939,167	$	45,288,992

Commitments and Contingencies (Note 13)

Total liabilities	$	111,296,809	$	113,924,600

Shareholders' Equity
Common shares ($1.00 par value), 20,000,000 shares authorized; 6,942,758 and 6,864,253 shares outstanding at June 30, 2014 and June 30, 2013, respectively	$	6,942,758	$	6,864,253
Premium on common shares	47,182,338		45,523,123
Retained earnings	20,603,256		17,618,039

Total shareholders' equity	$	74,728,352	$	70,005,415

Total liabilities and shareholders' equity	$	186,025,161	$	183,930,015

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

Delta Natural Gas Company, Inc.

Consolidated Statements of Changes in Shareholders' Equity



	Year Ended June 30, 2014
	Common Shares		Premium on Common Shares		Retained Earnings			Shareholders' Equity

Balance, beginning of year	$	6,864,253	$	45,523,123	$	17,618,039		$	70,005,415
Net income	—		—		8,275,128			8,275,128
Issuance of common shares	28,809		566,440		—			595,249
Issuance of common shares under the
incentive compensation plan	49,696		299,930		—			349,626
Share-based compensation expense	—		762,340		—			762,340
Tax benefit from share-based compensation	—		30,505		—			30,505
Dividends on common shares	—		—		(5,289,911		)	(5,289,911		)

Balance, end of year	$	6,942,758	$	47,182,338	$	20,603,256		$	74,728,352



	Year Ended June 30, 2013
	Common Shares		Premium on Common Shares		Retained Earnings			Shareholders' Equity

Balance, beginning of year	$	6,803,941	$	44,048,201	$	15,368,265		$	66,220,407
Net income	—		—		7,200,776			7,200,776
Issuance of common shares	28,436		558,923		—			587,359
Issuance of common shares under the
incentive compensation plan	31,876		232,226		—			264,102
Share-based compensation expense	—		657,607		—			657,607
Tax benefit from share-based compensation	—		26,166		—			26,166
Dividends on common shares	—		—		(4,951,002		)	(4,951,002		)

Balance, end of year	$	6,864,253	$	45,523,123	$	17,618,039		$	70,005,415



	Year Ended June 30, 2012
	Common Shares		Premium on Common Shares		Retained Earnings			Shareholders' Equity

Balance, beginning of year	$	6,732,344	$	42,688,316	$	14,346,524		$	63,767,184
Net income	—		—		5,783,998			5,783,998
Issuance of common shares	38,929		658,846		—			697,775
Issuance of common shares under the
incentive compensation plan	32,668		304,373		—			337,041
Share-based compensation expense	—		375,103		—			375,103
Tax benefit from share-based compensation	—		21,563		—			21,563
Dividends on common shares	—		—		(4,762,257		)	(4,762,257		)

Balance, end of year	$	6,803,941	$	44,048,201	$	15,368,265		$	66,220,407

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

DELTA NATURAL GAS COMPANY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Summary of Significant Accounting Policies

Principles of Consolidation

Delta Natural Gas Company, Inc. (“Delta” or “the Company”) distributes or transports natural gas to approximately 36,000 customers. Our distribution and transportation systems are located in central and southeastern Kentucky and we own and operate an underground storage field in southeastern Kentucky. We transport natural gas to our industrial customers who purchase their gas in the open market. We also transport natural gas on behalf of local producers and customers not on our distribution system and sell liquids extracted from natural gas in our storage field and our pipeline systems. We have three wholly-owned subsidiaries. Delta Resources, Inc. buys natural gas and resells it to industrial or other large use customers on Delta's system. Delgasco, Inc. buys natural gas and resells it to Delta Resources, Inc. and to customers not on Delta's system. Enpro, Inc. owns and operates natural gas production properties and undeveloped acreage. All subsidiaries of Delta are included in the consolidated financial statements. Intercompany balances and transactions have been eliminated.

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.

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.

Property, Plant and Equipment and Depreciation

Property, plant and equipment is stated at original cost, which includes materials, labor, labor related costs and an allocation of general and administrative costs. A betterment or replacement of a unit of property is accounted for as an addition of utility plant. Construction work in progress has been included in the rate base for determining customer rates, and therefore an allowance for funds used during construction has not been recorded. The cost of regulated plant retired or disposed of in the normal course of business is deducted from plant accounts and such cost, less salvage value, is charged to the accumulated provision for depreciation.

Property, plant and equipment is comprised of the following major classes of assets:



($000)	2014	2013

Regulated segment
Distribution, transmission and storage	203,969	197,251
General, miscellaneous and intangibles	22,421	22,009
Construction work in progress	381	1,711
Total regulated segment	226,771	220,971

Non-regulated segment	2,596	2,575
Total property, plant and equipment	229,367	223,546

All expenditures for maintenance and repairs of units of property are charged to the appropriate maintenance expense accounts in the month incurred.

We determine the 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 2.8%, 2.9% and 2.9% of average depreciable plant for 2014, 2013 and 2012, respectively.

As approved by the Kentucky Public Service Commission, we accrue asset removal costs for certain types of property through depreciation expense with a corresponding increase to regulatory liabilities on the Consolidated Balance Sheet. When depreciable utility plant and equipment is retired any related removal costs incurred are charged against the regulatory liability.

We have a pipe replacement program approved by the Kentucky Public Service Commission, which allows us to adjust rates annually to earn a return on capital expenditures for the replacement of pipe and related facilities incurred subsequent to the test year in our most recent rate case. The pipe replacement program is designed to additionally recover the costs associated with the mandatory retirement or relocation of facilities.

Impairment of Long-Lived Assets

We evaluate long-lived assets for impairment when events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The determination of whether an impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, as compared with the carrying value of the assets. If an impairment has occurred, the amount of the impairment recognized is determined by estimating the fair value of the assets and recording a provision for an impairment loss if the carrying value is greater than the fair value. In the opinion of management, our long-lived assets are appropriately valued in the accompanying consolidated financial statements. There were no impairments of long-lived assets during 2014, 2013 or 2012.

Natural Gas In Storage

We operate a natural gas underground storage field that we utilize to inject and store natural gas during the non-heating season, and we then withdraw natural gas during the heating season to meet our customers' needs. The potential exists for differences between actual volumes stored versus our perpetual records primarily due to differences in measurement of injections and withdrawals or the risks of gas escaping from the field. We periodically analyze the volumes, pressure and other data relating to the storage field in order to substantiate the natural gas inventory carried in our perpetual inventory records. The periodic analysis of the storage field data utilizes trends in the underlying data and can require multiple periods of observation to determine if differences exist. The analysis can result in adjustments to our perpetual inventory records. The natural gas in storage inventory is recorded at average cost.

Revenue and Accounts Receivable

Revenues and accounts receivable arise primarily from sales of natural gas to customers and from transportation services for others. We bill our customers on a monthly meter reading cycle. At the end of each month, natural gas service which has been rendered from the date the customer's meter was last read to the month-end is unbilled.

Unbilled revenues and gas costs include the following:



(000)	2014	2013

Unbilled revenues ($)	1,788	1,435
Unbilled gas costs ($)	622	390
Unbilled volumes (Mcf)	63	47

Unbilled revenues are included in accounts receivable and unbilled gas costs are included in deferred gas costs on the accompanying Consolidated Balance Sheets.

Provisions for doubtful accounts are recorded to reflect the expected net realizable value of accounts receivable. Accounts receivable are charged off when deemed to be uncollectible or when turned over to a collection agency to pursue.

Excise Taxes

Certain excise taxes levied by state or local governments are collected by Delta from our customers. These taxes are accounted for on a net basis and therefore are not included as revenues in the accompanying Consolidated Statements of Income.

Regulated Purchased Natural Gas Expense

Our regulated natural gas rates include a gas cost recovery clause approved by the Kentucky Public Service Commission which provides for a dollar-tracker that matches revenues and natural gas costs and provides eventual dollar-for-dollar recovery of all natural gas costs incurred by the regulated segment and recovery of the uncollectible natural gas cost portion of bad debt expense. We expense natural gas costs based on the amount of natural gas costs recovered through revenue. Any differences between actual natural gas costs and those natural gas costs billed are deferred and reflected in the computation of future billings to customers using the natural gas cost recovery mechanism.

Rate Regulated Basis of Accounting

We account for our regulated segment in accordance with applicable regulatory guidance. The economic effects of regulation can result in a regulated company recovering costs from customers in a period different from the period in which the costs would be charged to expense by an unregulated enterprise. When this results, costs are deferred as assets on the Consolidated Balance Sheets (“regulatory assets”) and recorded as expenses when such amounts are reflected in rates. Additionally, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for current collection in rates of costs that are expected to be incurred in the future (“regulatory liabilities”). The amounts recorded as regulatory assets and regulatory liabilities are as follows:



($000)	2014	2013

Regulatory assets
Current assets
Deferred natural gas costs	725	3,923

Other assets
Conservation/efficiency program expenses	164	198
Loss on extinguishment of debt	3,149	3,389
Asset retirement obligations	4,377	3,788
Accrued pension	5,508	6,369
Regulatory case expenses	—	26
Total other assets	13,198	13,770
Total regulatory assets	13,923	17,693

Regulatory liabilities
Long-term liabilities
Accrued cost of removal on long-lived assets	355	328
Regulatory liability for deferred income taxes	810	925
Total regulatory liabilities	1,165	1,253

All of our regulatory assets and liabilities have been approved for recovery by the Kentucky Public Service Commission and are currently being recovered or refunded through our regulated natural gas rates. In addition, the unrecovered balance of the loss on extinguishment of debt is included in rate base and, therefore, earns a return. The weighted average recovery period of the other regulatory assets which are not earning a return is 32 years.

Derivatives

Certain of our natural gas purchase and sale contracts qualify as derivatives. All such contracts have been designated as normal purchases and sales and as such are accounted for under the accrual basis and are not recorded at fair value in the accompanying consolidated financial statements.

Marketable Securities

We have a supplemental retirement benefit agreement with Glenn R. Jennings, our Chairman of the Board, President and Chief Executive Officer, that is a non-qualified deferred compensation plan. The agreement establishes an irrevocable rabbi trust,

in which the assets of the trust are earmarked to pay benefits under the agreement. We have recognized a liability related to the obligation to pay these benefits to Mr. Jennings. We make discretionary contributions to the trust in order to fully fund the related deferred compensation liability.

The assets of the trust consist of exchange traded securities and exchange traded mutual funds and are classified as trading securities. The assets are recorded at fair value on the Consolidated Balance Sheets based on observable market prices from active markets. Net realized and unrealized gains and losses are included in earnings each period to effectively offset the corresponding earnings impact associated with the change in the fair value of the deferred compensation liability to which the assets relate.

Fair Value

Fair value is defined as the exchange price in an orderly transaction between market participants to sell an asset or transfer a liability at the measurement date. Fair value focuses on an exit price, which is the price that would be received by us to sell an asset or paid to transfer a liability versus an entry price, which would be the price paid to acquire an asset or received to assume a liability.

We determine fair value based on the following fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three levels:


•	Level 1 - Observable inputs consisting of quoted prices in active markets for identical assets or liabilities;


•	Level 2 - Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and


•	Level 3 - Unobservable inputs which require the reporting entity to develop its own assumptions.

Although accounting standards permit entities to elect to measure many financial instruments and certain other items at fair value, we do not currently have any financial assets or financial liabilities for which this provision has been elected. However, in the future, we may elect to measure certain financial instruments at fair value in accordance with these standards.

(2) New Accounting Pronouncements

In December, 2011, the Financial Accounting Standards Board issued guidance requiring additional disclosure of the effect or potential effect of financial instruments and derivative instruments which have rights of setoff where an entity offsets the assets and liabilities of such instruments. The guidance, effective for our quarter ending December 31, 2013, did not require any additional disclosures with respect to our results of operations, financial position or cash flows, as we have no such financial instruments or derivative instruments.

In September, 2013, the Internal Revenue Service ("IRS") issued final regulations regarding the tax treatment of amounts paid to acquire, produce or improve tangible property, which update temporary regulations issued by the IRS in December, 2011. In 2014, the IRS plans to issue further guidance for specific industry sectors, including natural gas. The final regulations are effective for our tax year beginning July 1, 2014; however, we do not expect compliance with the final regulations and industry specific guidance to have a material impact on our results of operations, financial position or cash flows.

In May, 2014, the Financial Accounting Standards Board issued guidance revising the principles and standards for revenue recognition. The standard creates a framework for recognizing revenue to improve comparability of revenue recognition practices across entities and industries. The guidance is effective for our quarterly report ending September 30, 2017 and we are evaluating the methods of adoption allowed by the new standard and the effect the standard is expected to have on our results of operations, financial position and cash flow.

In June, 2014, the Financial Accounting Standards Board issued guidance on share-based payments where performance targets can be achieved subsequent to the requisite service period. The guidance, effective for our quarter ending September 30, 2015, is not expected to have a material impact on our results of operations, financial position or cash flows.

(3) Fair Value Measurements

Our financial assets and liabilities measured at fair value on a recurring basis consist of the assets of our supplemental retirement benefit trust, which are included in other non-current assets on the Consolidated Balance Sheets. Contributions to the trust are presented in other investing activities on the Consolidated Statements of Cash Flows. The assets of the trust are recorded

at fair value and consist of exchange traded securities and exchange traded mutual funds. The securities and mutual funds are recorded at fair value using observable market prices from active markets, which are categorized as Level 1 in the fair value hierarchy. In fiscal 2014, upon changing investment advisors for the supplemental retirement benefit trust, we adopted a new asset allocation model which resulted in the reallocation of assets in the trust. The fair value of the trust assets are as follows:



($000)	2014	2013

Trust assets
Money market	44	9
U.S. equity securities	379	486
Foreign equity funds	167	—
U.S. fixed income funds	121	244
Foreign fixed income funds	53	—
Absolute return strategy mutual funds	143	—
	907	739

The carrying amounts of our other financial instruments including cash equivalents, accounts receivable, notes receivable and accounts payable approximate their fair value. The fair value of the assets in our defined benefit retirement plan are disclosed in Note 6 of the Notes to Consolidated Financial Statements.

Our Series A Notes, presented as current portion of long-term debt and long-term debt on the Consolidated Balance Sheets, are stated at historical cost. Fair value of our long-term debt is based on the expected future cash flows of the debt discounted using a credit adjusted risk-free rate. The credit adjusted risk-free rate for our 4.26% Series A Notes is the estimated cost to borrow a debt instrument with the same terms from a private lender at the measurement date. The fair value of our long-term debt is categorized as Level 3 in the fair value hierarchy.



	2014		2013
	Carrying	Fair	Carrying	Fair
($000)	Amount	Value	Amount	Value

4.26% Series A Notes	55,000	55,576	56,500	55,150

(4) Asset Retirement Obligations

Legal obligations

As of June 30, 2014 and 2013, we have accrued liabilities and related assets, net of accumulated depreciation, relative to the legal obligation to retire certain natural gas wells, storage tanks, mains and services. For asset retirement obligations related to regulated assets, accretion of the liability and depreciation of the asset retirement costs are recorded as regulatory assets, pursuant to regulatory accounting standards, as we recover the cost of removing our regulated assets through our depreciation rates.

The following is a summary of our asset retirement obligations as shown as asset retirement obligations on the accompanying Consolidated Balance Sheets:



($000)	2014		2013

Balance, beginning of year	3,547		3,824
Liabilities incurred	138		20
Liabilities settled	(567	)	(616	)
Accretion	258		267
Revisions in estimated cash flows	(115	)	52
Balance, end of year	3,261		3,547

We have an additional asset retirement obligation related to the retirement of wells located at our underground natural gas storage facility. Since we expect to utilize the storage facility as long as we provide natural gas to our customers, we have determined the underlying asset has an indeterminate life. Therefore, we have not recorded a liability associated with the cost to retire the wells.

Non-legal obligations

In accordance with established regulatory practices, we accrue costs of removal on long-lived assets through depreciation expense to the extent recovery of such costs is granted by our regulator even though such costs do not represent legal obligations. In accordance with regulatory accounting standards, $355,000 and $328,000 of such accrued cost of removal was recorded as a regulatory liability on the accompanying Consolidated Balance Sheets as of June 30, 2014 and 2013, respectively.

(5) Income Taxes

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. 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. 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 current portion of the net accumulated deferred income tax liability is shown as current liabilities and the long-term portion is included in long-term liabilities 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:



($000)	2014		2013

Deferred Tax Liabilities
Current
Deferred natural gas cost	(275	)	(1,459	)
Prepaid expenses	(359	)	(304	)
	(634	)	(1,763	)

Non-Current
Accelerated depreciation	(36,903	)	(36,004	)
Pension	(1,240	)	(908	)
Regulatory assets - asset retirement obligations	(820	)	(736	)
Regulatory assets - loss on extinguishment of debt	(1,196	)	(1,287	)
Regulatory assets - unrecognized accrued pension	(2,091	)	(2,418	)
Regulatory liabilities	(1,268	)	(1,268	)
Other	(954	)	(1,040	)
	(44,472	)	(43,661	)
Total deferred tax liabilities	(45,106	)	(45,424	)

Deferred Tax Assets
Current
Accrued employee benefits	405		313
Bad debt reserve	99		58
Other	90		53
	594		424

Non-Current
Accrued employee benefits	992		855
Asset retirement obligations	1,176		1,284
Investment tax credits	15		25
Regulatory liabilities	1,570		1,610
Section 263(a) capitalized costs	105		182
Other	76		81
	3,934		4,037

Total deferred tax assets	4,528		4,461
Net accumulated deferred income tax liability	(40,578	)	(40,963	)

The components of the income tax provision are comprised of the following for the years ended June 30:



($000)	2014		2013	2012

Current
Federal	4,532		1,940	525
State	842		390	220
Total	5,374		2,330	745
Deferred	(515	)	1,939	2,513
Income tax expense	4,859		4,269	3,258

Reconciliation of the statutory federal income tax rate to the effective income tax rate is shown in the table below:



(%)	2014		2013		2012

Statutory federal income tax rate	34.0		34.0		34.0
State income taxes, net of federal benefit	4.0		4.0		4.0
Amortization of investment tax credits	(0.1	)	(0.2	)	(0.3	)
Other differences, net	(0.9	)	(0.6	)	(1.7	)
Effective income tax rate	37.0		37.2		36.0

We recognize the income tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. The liability for unrecognized tax benefits expected to be recognized within the next twelve months has partially offset our prepaid income taxes and been presented in prepayments on the Consolidated Balance Sheets. The liability for unrecognized tax benefits not expected to be recognized within the next twelve months has been presented in other long-term liabilities on the Consolidated Balance Sheets. Interest and penalties on tax uncertainties are classified in income tax expense in the Consolidated Statements of Income.

As of June 30, 2014, we did not have any unrecognized tax positions, which, if recognized, would impact the effective tax rate. As of June 30, 2013, the amount of unrecognized tax benefits, net of tax, which, if recognized, would impact the effective tax rate was $31,000. As of June 30, 2014, we have accrued interest of $5,000 on unrecognized tax positions. We recognized interest income of $4,000 and $1,000 on unrecognized tax positions on the Consolidated Statements of Income for 2014 and 2013, respectively.

The following is a reconciliation of our unrecognized tax benefits:



($000)	2014		2013

Balance, beginning of year	101		200
Gross decreases - tax positions in prior period	(37	)	(99	)
Balance, end of year	64		101

We file income tax returns in federal and Kentucky jurisdictions. Tax years previous to June 30, 2012 and June 30, 2011 are no longer subject to examination for federal and Kentucky income taxes, respectively.

(6) Employee Benefit Plans

Defined Benefit Retirement Plan

We have a trusteed, noncontributory, defined benefit retirement plan covering all eligible employees hired prior to May 9, 2008. Retirement income is based on the number of years of service and annual rates of compensation. The Company has historically made annual contributions to fund the plan adequately.

Generally accepted accounting principles (“GAAP”) require employers who sponsor defined benefit plans to recognize the funded status of a defined benefit pension plan on the balance sheet and to recognize through comprehensive income the changes in the funded status in the year in which the changes occur. However, regulatory accounting standards provide that regulated entities can defer recoverable costs that would otherwise be charged to expense or equity by non-regulated entities. Current cost-of-service ratemaking in Kentucky allows recovery of net periodic benefit cost as determined under GAAP. The Kentucky Public Service Commission has been clear and consistent with its historical treatment of such rate recovery; therefore, we have recorded a regulatory asset representing the probable recovery of the portion of the change in funded status of the defined benefit plan that is expected to be recognized in future net periodic benefit cost. The regulatory asset is adjusted annually as prior service cost and actuarial losses are recognized in net periodic benefit cost.

Our obligations and the funded status of our plan, measured at June 30, 2014 and June 30, 2013, respectively, are as follows:



($000)	2014		2013

Change in Benefit Obligation
Benefit obligation at beginning of year	23,521		23,278
Service cost	1,023		1,116
Interest cost	1,038		913
Actuarial (gain)/loss	1,810		(1,271	)
Benefits paid	(1,009	)	(515	)
Benefit obligation at end of year	26,383		23,521

Change in Plan Assets
Fair value of plan assets at beginning of year	26,201		20,971
Actual return on plan assets	3,983		2,945
Employer contributions	500		2,800
Benefits paid	(1,009	)	(515	)
Fair value of plan assets at end of year	29,675		26,201

Recognized Amounts
Projected benefit obligation	(26,383	)	(23,521	)
Plan assets at fair value	29,675		26,201
Funded status	3,292		2,680

Net amount recognized as prepaid pension on the Consolidated Balance Sheets	3,292		2,680



Items Not Yet Recognized as a Component of Net Periodic Benefit Cost
Prior service cost	(316	)	(403	)
Net loss	5,824		6,772
Amounts recognized as regulatory assets	5,508		6,369

The accumulated benefit obligation was $22,810,000 and $20,508,000 for 2014 and 2013, respectively.



($000)	2014		2013		2012

Components of Net Periodic Benefit Cost
Service cost	1,023		1,116		921
Interest cost	1,038		913		921
Expected return on plan assets	(1,567	)	(1,578	)	(1,474	)
Amortization of unrecognized net loss	342		615		200
Amortization of prior service cost	(86	)	(86	)	(87	)
Net periodic benefit cost	750		980		481

Weighted-Average % Assumptions Used to Determine Benefit Obligations
Discount rate	4.25		4.5		4.0
Rate of compensation increase	4.0		4.0		4.0

Weighted-Average % Assumptions Used to Determine Net Periodic Benefit Cost
Discount rate	4.5		4.0		5.25
Expected long-term return on plan assets	6.0		7.0		7.0
Rate of compensation increase	4.0		4.0		4.0

Plan Assets

Our target investment allocations have been developed using an asset allocation model which weighs risk versus return of various investment indices to create a target asset allocation to maximize return subject to a moderate amount of portfolio risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status and corporate financial condition. The investment portfolios contain a diversified blend of equity and fixed income investments. Our target investment allocations are approximately 70% equity investments and 30% fixed income investments. Our equity investment target allocations are heavily weighted toward domestic equity securities, with allocations to domestic real estate securities and foreign equity securities for the purposes of diversification. Fixed income securities primarily include U.S. government obligations and corporate debt securities. For additional diversification, we invest in absolute return strategy mutual funds, which include both equity and fixed income securities, with the objective of providing a return greater than inflation. We regularly review our asset allocation and periodically rebalance our investments to our targeted allocations as appropriate.

The assets of the plan are comprised of investments in individual securities and mutual funds. In June, 2013, upon changing investment advisors for our defined benefit plan, we adopted a new asset allocation model and in 2014 transitioned to our target allocations for plan assets and reallocated our investments from mutual funds to individual securities. Previously, each individual mutual fund had been selected based on its investment strategy, which approximates a specific asset class within our target allocations.



	Target	Actual Allocations
(%)	Allocations	2014	2013
Asset Class
Cash and cash equivalents	3	3	3

Equity Securities
U.S. equity securities	36	43	53
Foreign equity securities	20	19	11
Domestic real estate	5	5	6
	61	67	70

Fixed Income Securities
U. S. fixed income security	15	12	27
Foreign fixed income security	8	6	—
	23	18	27

Other Securities
Absolute return strategy mutual funds	13	12	—
	100	100	100

Individual exchange traded equity securities, exchange traded mutual funds and treasury securities are categorized as Level 1 in the fair value hierarchy as the fair value of the investments is determined based on the quoted market price of each investment. Mutual funds are categorized based on their primary investment strategy. The respective level within the fair value hierarchy is determined as described in Note 1 of the Notes to Consolidated Financial Statements. Corporate bonds, municipal bonds and U.S. agency securities are valued based on a calculation using interest rate curves and credit spreads applied to the terms of the debt (maturity and coupon rate) supported by observable transactions and are categorized as Level 2 in the fair value hierarchy. The following represents the fair value of plan assets:



($000)	2014	Level 1	Level 2	Level 3
Asset Class
Cash	1,026	1,026	—	—

Equity Securities
U.S. equity securities	13,828	13,828	—	—
Foreign equity securities	5,706	5,706	—	—
	19,534	19,534	—	—

Fixed Income Securities
U.S. treasury securities	593	593	—	—
High yield funds	1,773	1,773	—	—
Foreign bond funds	1,771	1,771	—	—
U.S. corporate bonds	714	—	714	—
Other	577	—	577	—
	5,428	4,137	1,291	—

Other Securities
Absolute return strategy mutual funds	3,687	3,687	—	—
Total	29,675	28,384	1,291	—


($000)	2013	Level 1	Level 2	Level 3
Asset Class
Cash	778	778	—	—

Exchange Traded Mutual Funds
U.S. equity securities	14,191	14,191	—	—
Fixed income securities	6,969	6,969	—	—
Foreign equity securities	2,756	2,756	—	—
Domestic real estate securities	1,507	1,507	—	—
	25,423	25,423	—	—
Total	26,201	26,201	—	—

We determined the expected long-term rate of return for plan assets with input from plan actuaries and investment consultants based upon many factors including asset allocations, historical asset returns and expected future market conditions. The discount rates used by the Company for valuing pension liabilities are based on a review of high quality corporate bond yields with maturities approximating the remaining life of the projected benefit obligations.

We made a $500,000 discretionary contribution to the defined benefit plan in fiscal 2014. We expect to contribute $500,000 to the defined benefit plan in fiscal 2015.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:



($000)

2015	3,099
2016	729
2017	735
2018	1,616
2019	1,503
2020 - 2024	7,384

Effective May 9, 2008, any employees hired on and after that date were not eligible to participate in our defined benefit plan. Freezing the defined benefit plan for new entrants did not impact the level of benefits for existing participants.

We do not provide postretirement or postemployment benefits other than the defined benefit retirement plan for retired employees and the supplemental retirement plan described below.

Employee Savings Plan

We have an Employee Savings Plan (“Savings Plan”) under which eligible employees may elect to contribute a portion of their annual compensation up to the maximum amount permitted by law. The Company matches 100% of the employee's contribution up to a maximum company contribution of 4% of the employee's annual compensation. Employees hired after May 9, 2008, who are not eligible to participate in the defined benefit retirement plan, annually receive an additional 4% non-elective contribution into their Savings Plan account. Company contributions are discretionary and subject to change with approval from our Board of Directors. For 2014, 2013 and 2012, our Savings Plan expense was $350,000, $313,000 and $325,000, respectively.

Supplemental Retirement Agreement

We sponsor a nonqualified defined contribution supplemental retirement agreement for Glenn R. Jennings, Delta's Chairman of the Board, President and Chief Executive Officer. Delta makes discretionary contributions into an irrevocable trust until Mr. Jennings' retirement. At retirement, the trustee will make annual payments of $100,000 to Mr. Jennings until the trust is depleted. For 2014, 2013 and 2012 Delta contributed $60,000 each year to the trust. As of June 30, 2014 and 2013, the irrevocable trust assets are $907,000 and $739,000, respectively. These amounts are included in other non-current assets on the accompanying Consolidated Balance Sheets. Liabilities, in corresponding amounts, are included in other long-term liabilities on the accompanying Consolidated Balance Sheets.

(7) Dividend Reinvestment and Stock Purchase Plan

Our 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 we issued 28,809, 28,436 and 38,929 shares in 2014, 2013 and 2012, respectively. We registered 400,000 shares for issuance under the Reinvestment Plan in 2006, and as of June 30, 2014 there were approximately 93,000 shares available for issuance.

(8) Risk Management and Derivative Instruments

To varying degrees, our regulated and non-regulated segments are exposed to commodity price risk. We purchase our natural gas supply primarily through forward purchase contracts. We mitigate price risk by efforts to balance supply and demand. For our regulated segment we have minimal price risk resulting from these forward natural gas purchases because we are permitted to pass these gas costs on to our regulated customers through the natural gas cost recovery rate mechanism, approved quarterly by the Kentucky Public Service Commission. None of our natural gas contracts are accounted for using the fair value method of accounting. While some of our natural gas purchase contracts and natural gas sales contracts meet the definition of a derivative, we have designated these contracts as normal purchases and normal sales.

(9) Notes Payable

The current bank line of credit with Branch Banking and Trust Company permits borrowings up to $40,000,000, all of which was available as of June 30, 2014 and June 30, 2013. The maximum amount borrowed during 2014 was $691,000. We did not borrow from the bank line of credit during 2013. The bank line of credit extends through June 30, 2015. The interest rate on the used line of credit is the London Interbank Offered Rate plus 1.15%. The annual cost of the unused bank line of credit is 0.125%. Our most restrictive covenants are discussed in Note 10 of the Notes to Consolidated Financial Statements.

(10) Long-Term Debt

In December, 2011, we refinanced and redeemed our 5.75% Insured Quarterly Notes ($38,450,000) and 7% Debentures ($19,410,000) from the proceeds of a private debt financing. Under the Note Purchase and Private Shelf Agreement we issued $58,000,000 of Series A Notes, for which the purchasers paid 100% of the face principal amount. Unamortized debt expense of $1,896,000 related to the 5.75% Insured Quarterly Notes and 7% Debentures was reclassified from unamortized debt expense to regulatory assets on the accompanying Consolidated Balance Sheet. The $1,896,000 regulatory asset representing the loss on extinguishment of the 5.75% Insured Quarterly Notes and 7% Debentures, combined with $1,872,000 of unamortized loss on extinguishment of debt recognized from prior refinancings, will be amortized over the life of the 4.26% Series A Notes consistent with treatment approved by the Kentucky Public Service Commission.

Our Series A Notes are unsecured, bear interest at a rate of 4.26% per annum, which is payable quarterly, and mature on December 20, 2031. We are required to make an annual $1,500,000 principal payment on the Series A Notes each December. The following table summarizes the contractual maturities of our Series A Notes by fiscal year:



($000)
2015	1,500
2016	1,500
2017	1,500
2018	1,500
Thereafter	49,000
Total long-term debt	55,000

Any additional prepayment of principal by the Company may be subject to a prepayment premium which varies depending on the yields of United States Treasury securities with a maturity equal to the remaining average life of the Series A Notes.

We amortize debt issuance expenses over the life of the related debt using the effective interest method. At June 30, 2014 and 2013, the unamortized balance was $3,240,000 and $3,486,000, respectively. Loss on extinguishment of debt of $3,149,000 and $3,389,000 included in the above has been deferred as a regulatory asset and is being amortized over the term of the related debt consistent with regulatory accounting as further discussed in Note 1 of the Notes to Consolidated Financial Statements.

With our bank line of credit and Series A Notes, we have agreed to certain financial and other covenants. Noncompliance with these covenants can make the obligations immediately due and payable. Our financial covenants include covenants related to our tangible net worth, total debt to capitalization ratio and fixed charge ratio. Additionally, the Company may not pay aggregate dividends on its capital stock (plus amounts paid in redemption of its capital stock) in excess of the sum of $15,000,000 plus the Company's cumulative earnings after September 30, 2011 adjusted for certain unusual or non-recurring items. We believe we were in compliance with the financial covenants under our bank line of credit and 4.26% Series A Notes for all periods presented in the Consolidated Financial Statements.

(11) Earnings per Share

The following table sets forth the computation of basic and diluted earnings per share:



	2014		2013		2012
Numerator - Basic and Diluted ($000)
Net income	8,275		7,201		5,784
Dividends paid	(5,290	)	(4,951	)	(4,762	)
Undistributed earnings	2,985		2,250		1,022


Allocated to common shares:
Percentage allocated to common shares (a)	99.4	%	99.4	%	99.6	%

Undistributed earnings	2,966		2,238		1,018
Dividends paid	5,263		4,930		4,747
Net income available to common shares	8,229		7,168		5,765

Denominator - Basic and Diluted
Weighted average common shares (b)	6,918,725		6,843,455		6,777,186

Net Income per Common Share - Basic and Diluted ($)	1.19		1.05		0.85

(a) Percentage allocated to weighted average common shares outstanding:




Common shares outstanding	6,918,725		6,843,455		6,777,186
Unvested participating shares outstanding (c)	44,750		38,417		28,082
Total	6,963,475		6,881,872		6,805,268
Percentage allocated to common shares	99.4	%	99.4	%	99.6	%

(b) Under our Incentive Compensation Plan, recipients of performance share awards receive unvested non-participating shares, as further discussed in Note 17 of the Notes to Consolidated Financial Statements. Unvested non-participating shares become dilutive in the interim quarter-end in which the performance objective is met. If the performance objective continues to be met through the end of the performance period, these shares become unvested participating shares as of the fiscal year-end, as further discussed in (c). The weighted average number of unvested non-participating shares outstanding during a period is included in the diluted earnings per common share calculation using the treasury stock method, unless the effect of including such shares would be antidilutive. There were no unvested non-participating shares outstanding as of June 30, 2014, 2013 and 2012.

(c) Certain awards under our shareholder approved incentive compensation plan, as further discussed in Note 17 of the Notes to Consolidated Financial Statements, provide the recipients of the awards all the rights of a shareholder of Delta including the right to dividends declared on common shares. Any unvested shares which are participating in dividends are considered participating securities and are included in our computation of basic and diluted earnings per share using the two-class method unless the effect of including such shares would be antidilutive. There were no antidilutive shares in 2014, 2013 and 2012. There were 74,000, 68,000 and 48,000 unvested participating shares outstanding as of June 30, 2014, 2013 and 2012, respectively.

(12) Operating Leases

We have no non-cancellable operating leases. Our operating leases relate primarily to well and compressor station site leases and are cancellable at our option. Rental expense under operating leases was $68,000, $71,000 and $70,000 for the years ended June 30, 2014, 2013 and 2012, respectively.

(13) Commitments and Contingencies

We have entered into an employment agreement with our Chairman of the Board, President and Chief Executive Officer and change in control agreements with our other four officers. The agreements expire or may be terminated at various times. The agreements provide for continuing monthly payments or lump sum payments and the continuation of specified benefits over varying periods in certain cases following defined changes in ownership of the Company. In the event all of these agreements were exercised in the form of lump sum payments, approximately $4.2 million would be paid in addition to continuation of specified benefits for up to five years. Additionally, upon a change in control, all unvested shares awarded under our Incentive Compensation Plan, as further discussed in Note 17 of the Notes to Consolidated Financial Statements, would immediately vest.

Our June 30, 2012 Consolidated Income Statement included the accrual of $877,000 of interest expense related to an assessment of a license tax. The assessment was resolved in 2013 and the previously accrued interest was reversed.

We are not a party to any material pending legal proceedings.

We have entered into a forward purchase agreement for natural gas beginning in July, 2014 and expiring in December, 2014. The agreement requires us to purchase minimum amounts of natural gas throughout the term of the agreements. The agreement is established in the normal course of business to ensure adequate natural gas supply to meet our customers' natural gas requirements. The agreement has an aggregate minimum purchase obligation of $140,000 for our fiscal year ending June 30, 2015.

(14) Regulatory Matters

The Kentucky Public Service Commission exercises regulatory authority over our retail natural gas distribution and transportation services. Their regulation of our business includes setting the rates we are permitted to charge our regulated customers. We monitor our need to file requests with them for a general rate increase for our natural gas and transportation services. They have historically utilized cost-of-service ratemaking where our base rates are established to recover normal operating expenses, exclusive of natural gas costs, and a reasonable rate of return. Our regulated rates were most recently adjusted in our 2010 rate case and became effective in October, 2010. We do not have any matters before the Kentucky Public Service Commission that would have a material impact on our results of operations, financial position or cash flows.

We have a pipe replacement program which allows us to adjust rates annually to earn a return on capital expenditures incurred subsequent to our last rate case which are associated with the replacement of pipe and related facilities. The pipe replacement program is designed to additionally recover the costs associated with the mandatory retirement or relocation of facilities.

Additionally, we have a weather normalization provision in our tariffs, approved by the Kentucky Public Service Commission, which allows us to adjust our rates to residential and small non-residential customers to reflect variations from thirty year average weather for our December through April billing cycles. These adjustments to customer bills are made on a real time basis such that there is no lag in collecting from or refunding to customers the related dollar amounts.

The Kentucky Public Service Commission allows us a conservation and efficiency program for our residential customers. The program provides for us to perform energy audits, promote conservation awareness and provide rebates on the purchase of

certain high-efficiency appliances. The program helps to align our interests with our residential customers' interests by reimbursing us for the margins on lost sales due to the program and providing incentives for us to promote customer conservation. Our rates are adjusted annually to recover the costs incurred under these programs, the reimbursement of margins on lost sales and the incentives provided to us.

In addition to regulation by the Kentucky Public Service Commission, we may obtain non-exclusive franchises from the cities in which we operate authorizing us to place our facilities in the streets and public grounds. No utility may obtain a franchise until it has obtained approval from the Kentucky Public Service Commission to bid on such franchise. We hold franchises in five of the cities we serve, and we continue to operate under the conditions of expired franchises in four other cities we serve. In the other cities and areas we serve, the areas served do not have governmental organizations authorized to grant franchises or the city governments do not require a franchise. We attempt to acquire or reacquire franchises whenever feasible. Without a franchise, a city could require us to cease our occupation of the streets and public grounds or prohibit us from extending our facilities into any new area of that city. To date, the absence of a franchise has not adversely affected our operations.

(15) Segment Information

Our Company has two reportable segments: (i) a regulated natural gas distribution and transmission segment and (ii) a non-regulated segment that participates in related ventures, consisting of natural gas marketing, natural gas production and sales of natural gas liquids. Virtually all of the revenues recorded under both segments come from the sale or transportation of natural gas, or related sales of natural gas liquids. The regulated segment serves residential, commercial and industrial customers in the single geographic area of central and southeastern Kentucky. Price risk for the regulated segment is mitigated through our natural gas cost recovery clause, approved quarterly by the Kentucky Public Service Commission. Price risk for the non-regulated segment is mitigated by efforts to balance supply and demand. However, there are greater risks in the non-regulated segment because of the practical limitations on the ability to perfectly predict our demand. In addition, we are exposed to price risk resulting from changes in the market price of natural gas, natural gas liquids and uncommitted natural gas inventory of our non-regulated companies.

In our non-regulated segment, three customers each provided more than 5% of our operating revenues. Our largest customer provided approximately $12,569,000 of nonregulated revenues during 2014. Our second largest customer provided approximately $9,494,000, $17,866,000 and $12,450,000 of non-regulated revenues during 2014, 2013 and 2012, respectively. Our third largest customer provided approximately $5,206,000, $5,390,000 and $6,815,000 of non-regulated revenues during 2014, 2013 and 2012, respectively. There is no assurance that revenues from these customers will continue at these levels.

We purchased approximately 96% and 98% of our natural gas from Atmos Energy Marketing, M & B Gas Services and Midwest Energy Services in 2014 and 2013, respectively. In 2012, we purchased approximately 99% of our natural gas from Atmos Energy Marketing and M & B Gas Services.

The reportable segments follow the accounting policies as described in the Summary of Significant Accounting Policies in Note 1 of the Notes to Consolidated Financial Statements. Intersegment revenues and expenses represent the natural gas transportation costs from the regulated segment to the non-regulated segment at our tariff rates. Operating expenses, taxes and interest are allocated to the non-regulated segment.

Segment information is shown in the following table:



($000)	2014		2013		2012
Operating Revenues
Regulated

External customers	57,054		46,427		42,655
Intersegment	4,041		4,145		3,704
Total Regulated	61,095		50,572		46,359
Non-regulated
External customers	38,792		34,238		31,423
Eliminations for intersegment	(4,041	)	(4,145	)	(3,704	)
Total operating revenues	95,846		80,665		74,078

Operating Expenses
Regulated
Purchased natural gas	27,215		17,825		15,703
Depreciation and amortization	6,068		6,023		5,871
Other	15,285		14,701		13,909
Total regulated	48,568		38,549		35,483
Non-regulated
Purchased natural gas	29,059		26,011		23,380
Depreciation and amortization	80		70		53
Other	6,576		6,990		5,601
Total non-regulated	35,715		33,071		29,034
Eliminations for intersegment	(4,041	)	(4,145	)	(3,704	)
Total operating expenses	80,242		67,476		60,813

Other Income and Deductions, Net
Regulated	183		151		77
Non-regulated	18		—		(2	)
Total other income and deductions, net	201		151		75

Interest Charges
Regulated	2,633		2,688		3,366
Non-regulated	38		(818	)	932
Total interest charges	2,671		1,870		4,298

Income Tax Expense
Regulated	3,907		3,676		2,772
Non-regulated	952		593		486
Total income tax expense	4,859		4,269		3,258

Net Income
Regulated	6,407		5,970		4,990
Non-regulated	1,868		1,231		794
Total net income	8,275		7,201		5,784

Assets
Regulated	181,530		177,662		174,454
Non-regulated	4,495		6,268		8,441
Total assets	186,025		183,930		182,895

Capital Expenditures
Regulated	8,078		6,983		7,163
Non-regulated	—		196		174
Total capital expenditures	8,078		7,179		7,337

(16) Insurance Proceeds

In September, 2011, we received $300,000 of insurance proceeds relating to a natural gas inventory adjustment recorded in fiscal 2009 for the Company's underground natural gas storage field. These proceeds are included in operation and maintenance in the 2012 Consolidated Statement of Income.

(17) Share-Based Compensation

We have a shareholder approved incentive compensation plan (the “Plan”) that provides for compensation payable in shares of our common stock. The Plan is administered by our Corporate Governance and Compensation Committee of our Board of Directors, which has complete discretion in determining our employees, officers and outside directors who shall be eligible to participate in the Plan, as well as the type, amount, terms and conditions of each award, subject to the limitations of the Plan.

The number of shares of our common stock which may be issued pursuant to the Plan may not exceed in the aggregate 1,000,000 shares. As of June 30, 2014, approximately 794,000 shares of common stock were available for issuance under the Plan. Shares of common stock may be issued from authorized but unissued shares, shares reacquired by us or shares that we purchase in the open market.

Compensation expense for share-based compensation is recorded in the non-regulated segment and included in operation and maintenance expense in the Consolidated Statements of Income based on the fair value of the awards at the grant date and is amortized over the requisite service period. Fair value is the closing price of our common shares at the grant date. The grant date is the date at which our commitment to issue the share-based awards arises, which is generally when the award is approved and the terms of the awards are communicated to the employee or director. We initially recognize expense for our performance shares when it is probable that any stipulated performance criteria will be met. Our share-based compensation expense was $1,112,000, $922,000 and $712,000 for 2014, 2013 and 2012, respectively.

Tax benefits of $31,000 and $26,000 were recognized as a premium on common shares on our 2014 and 2013 Consolidated Balance Sheets, respectively, which decreased our taxes payable as the deduction for income tax purposes exceeds the compensation expense recognized for financial reporting purposes. The excess tax benefits can be utilized to offset tax deficiencies related to share-based compensation in subsequent periods.

Stock Awards

In 2014, 2013 and 2012, common stock was awarded to virtually all Delta employees and directors having grant date fair values of $350,000 (17,000 shares), $264,000 (12,000 shares) and $337,000 (22,000 shares), respectively. The recipients vested in the awards shortly after the awards were granted, but during the time between the grant dates and the vesting dates the shares awarded were not transferable by the holders. Once the shares were vested, the shares received under the stock awards were immediately transferable.

Performance Shares

In 2014, 2013 and 2012, performance shares were awarded to the Company's executive officers having grant date fair values of $801,000 (39,000 shares) and $844,000 (39,000 shares) and $552,000 (36,000 shares), respectively. The performance share awards vest only if the performance objectives of the awards are met, which are based on the Company's earnings per common share for the fiscal year in which the performance shares are awarded, before any cash bonuses or share-based compensation. Upon satisfaction of the performance objectives, unvested shares are issued to the recipients and vest in one-third increments each August 31 subsequent to achieving the performance objectives as long as the recipients are employees throughout each such service period. The recipients of the awards also become vested as a result of certain events such as death or disability of the holders. The unvested shares have both dividend participation rights and voting rights during the remaining terms of the awards. Holders of performance shares may not sell, transfer or pledge their shares until the shares vest.

As of June 30, 2014 the performance objectives for the performance shares awarded in 2014 have been satisfied and subject to further limitations of the plan, up to 39,000 unvested shares will be issued to the recipients, subject to a service condition whereby a recipient of the award shall vest in one-third increments each year beginning August 31, 2013 and annually each August 31 thereafter until fully vested as long as the recipient is an employee throughout each such service period. The performance

objectives for the performance shares awarded in 2013 were met and 39,000 unvested shares were issued on August 31, 2013, of which 26,000 shares remain unvested as of June 30, 2014.

For 2014, 2013 and 2012, compensation expense related to the performance shares was $762,000, $658,000 and $375,000, respectively. Compensation expense of $469,000 is expected to be recognized between 2015 and 2017 for the unvested shares.

Our performance shares have graded vesting schedules, and each separate annual vesting tranche is treated as a separate award for expense recognition. Compensation expense is amortized over the vesting period of the individual awards based on the probable outcome of meeting the performance objectives.

Since the performance condition has been satisfied, the holder of performance shares will have both dividend participation rights and voting rights during the remaining term of the awards. The holder becomes vested as a result of certain events such as death or disability of the holder. Subject to the satisfaction of the performance condition, the weighted average expected remaining vesting period at June 30, 2014 is 1.6 years.

The following summarizes the activity for performance shares:



	Performance shares
	Number of shares		Weighted-average grant date fair value ($ per share)

Unvested shares at June 30, 2013	67,668		18.85
Granted (a)	39,000		20.53
Vested	(32,668	)	(17.62	)
Unvested shares at June 30, 2014	74,000		20.28


(a)	Represents the maximum number of shares which could be issued based on achieving the performance criteria.

(18) 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 Ended	Operating Revenues		Operating Income		Net Income (Loss)			Basic and Diluted Earnings (Loss) per Common Share
Fiscal 2014

September 30	$	13,041,272	$	692,098	$	79,409		$	0.01
December 31	25,810,664		5,624,971		3,134,729			0.45
March 31	40,435,516		8,886,123		5,173,624			0.74
June 30	16,558,419		400,247		(112,634		)	(0.01		)

Fiscal 2013

September 30	$	11,452,315	$	415,946	$	(158,903	)	$	(0.02	)
December 31	22,106,691		4,967,855		3,249,376			0.47
March 31	31,133,349		7,323,064		4,242,677			0.62
June 30	15,972,482		481,814		(132,374		)	(0.02		)

(19) Subsequent Events

In August, 2014, 22,000 shares of common stock were awarded to virtually all Delta employees and directors having a grant date fair value of $443,000. Additionally, in August, 2014, performance shares were awarded to the Company's executive officers. The performance share awards vest only if the performance objective of the awards is met, which is based on the Company's fiscal 2015 audited earnings per share, before any cash bonuses or share-based compensation. Subject to further limitations described in the Plan, all performance shares paid shall be in the form of unvested shares, which contain a service condition whereby recipients of the awards shall vest in one-third increments each year beginning on August 31, 2015, and annually each August 31 thereafter until fully vested as long as the recipient is an employee throughout each such service period. The maximum number of shares which could be issued under the performance awards is 39,000, having a grant date fair value of $772,980.

SCHEDULE II

DELTA NATURAL GAS COMPANY, INC.

VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED JUNE 30, 2014, 2013 and 2012



			Column C				Column D
Column A	Column B		Additions				Deductions		Column E

					Charged to
	Balance at		Charged to		Other		Amounts
	Beginning of		Costs and		Accounts -		Charged Off		Balance at
Description	Period		Expenses		Recoveries		Or Paid		End of Period

Deducted From the Asset to Which it Applies - Allowance for doubtful accounts for the years ended:

June 30, 2014	$	536,255	$	107,131	$	225,502	$	508,888	$	360,000
June 30, 2013	157,000		496,512		140,178		257,435		536,255
June 30, 2012	190,000		127,891		168,204		329,095		157,000