RGC Resources, Inc. Reports Second Quarter Earnings

Rhea-AI Summary

RGC Resources (NASDAQ: RGCO) reported a net loss of $24.5 million, or $2.89 per share, for Q2 2022, primarily due to a $29.6 million impairment charge from an investment in the Mountain Valley Pipeline. Excluding this charge, underlying net income was $5.1 million, or $0.60 per share, reflecting a 6.5% increase year-over-year. The company achieved a 5% increase in operating income, driven by improvements in utility margins, infrastructure investments, and customer growth. The twelve-month net loss was $20.3 million, impacting the prior year's underlying net income of $1.11 per share.

Positive

• Underlying net income grew 6.5% year-over-year for Q2 2022.
• Operating income improved by 5% due to infrastructure investments and customer growth.
• Utility margins benefitted from infrastructure replacement revenue and favorable weather-adjusted revenues.

Negative

• Consolidated net loss of $24.5 million attributed to a major impairment charge.
• Decline in twelve-month underlying net income from $1.27 to $1.11 per share.

ROANOKE, Va., May 05, 2022 (GLOBE NEWSWIRE) -- RGC Resources, Inc. (NASDAQ: RGCO) announced consolidated Company net loss of $24,494,429 or $2.89 per share for the quarter ended March 31, 2022. The net loss reflects an after-tax impairment charge of approximately $29,600,000 related to RGC Midstream, LLC’s investment in the Mountain Valley Pipeline, LLC. Underlying net income, a non-GAAP measure that excludes the impairment, was $5,077,546 or $0.60 per share, which compares to consolidated earnings of $4,767,478 or $0.58 per share for the quarter ended March 31, 2021. CEO Paul Nester stated, “The 6.5% underlying net income growth in the second quarter was driven by the strength of our core Roanoke Gas utility business. Operating income improved 5% in the quarter due to investment in infrastructure replacement programs, customer growth, and a large customer that has significantly increased their natural gas usage.” 

Net loss for the twelve months ending March 31, 2022 was $20,298,579 or $2.42 per share. Underlying net income for the same period was $9,273,396 or $1.11 compared to $10,368,023 or $1.27 per share for the twelve months ended March 31, 2021. The decline in underlying net income is due to the $3.5 million non-cash MVP AFUDC decline, net of a 14% increase in operating income. Nester attributed the operating income growth to strong utility margins. “The utility margin increase was favorably impacted by infrastructure replacement revenue, weather adjusted revenues and customer growth.”

RGC Resources, Inc. provides energy and related products and services to customers in Virginia through its operating subsidiaries Roanoke Gas Company and RGC Midstream, LLC.

Utility margins is a non-GAAP measure defined as utility revenues less cost of gas. Underlying net income removes the effect of the after-tax impairment charge from the results of operations to enhance the comparability of financial results between periods. Management considers these non-GAAP measures to provide useful information to both management and investors for purpose of such comparability and in evaluating operating performance, but they should be considered in addition to results prepared in accordance with GAAP and should not be considered a substitute for, or superior to, GAAP results.

Net income and underlying net income for the three months ended March 31, 2022 is not indicative of the results to be expected for the fiscal year ending September 30, 2022 as quarterly earnings are affected by the highly seasonal nature of the business and weather conditions generally result in greater earnings during the winter months.

The statements in this release that are not historical facts constitute “forward-looking statements” made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company’s actual results and experience to differ materially from any expectations expressed in the Company’s forward-looking statements, including regarding customer growth, infrastructure investment and margins. These risks and uncertainties include gas prices and supply, geopolitical considerations and regulatory and legal challenges and those set forth in the Company’s Form 10-Q for the quarter ended March 31, 2022. Forward-looking statements reflect the Company’s current expectations only as of the date they are made. The Company assumes no duty to update these statements should expectations change or actual results differ from current expectations except as required by applicable laws and regulations.

Past performance is not necessarily a predictor of future results.

Summary financial statements for the second quarter and twelve months are as follows:

RGC Resources, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
		Three Months Ended									Twelve Months Ended
		March 31,									March 31,
			2022					2021				2022					2021
Operating revenues		$	29,529,683				$	28,253,662			$	80,196,863				$	68,622,886
Operating expenses			22,086,295					21,154,236				65,277,556					55,505,486
Operating income			7,443,388					7,099,426				14,919,307					13,117,400
Equity in earnings (loss) of unconsolidated affiliate			(445	)				(3,797	)			386,350					3,885,081
Impairment of unconsolidated affiliates			(39,822,213	)				-				(39,822,213	)				-
Other income, net			344,510					287,548				961,521					778,335
Interest expense			1,103,844					1,007,764				4,232,992					4,003,273
Income (loss) before income taxes			(33,138,604	)				6,375,413				(27,788,027	)				13,777,543
Income tax expense (benefit)			(8,644,175	)				1,607,935				(7,489,448	)				3,409,520
Net income (loss)		$	(24,494,429	)			$	4,767,478			$	(20,298,579	)			$	10,368,023
Net earnings (loss) per share of common stock:
Basic		$	(2.89	)			$	0.58			$	(2.42	)			$	1.27
Diluted		$	(2.89	)			$	0.58			$	(2.42	)			$	1.27
Cash dividends per common share		$	0.195				$	0.185			$	0.760				$	0.720
Reconciliation of GAAP net income to underlying net income:
Net income (loss) as reported		$	(24,494,429	)			$	4,767,478			$	(20,298,579	)			$	10,368,023
Impairment - net of income tax			29,571,975					-				29,571,975					-
Underlying net income		$	5,077,546				$	4,767,478			$	9,273,396				$	10,368,023
Underlying earnings per share: basic and diluted		$	0.60				$	0.58			$	1.11				$	1.27
Weighted average number of common shares outstanding:
Basic			8,486,518					8,217,822				8,372,548					8,171,202
Diluted			8,486,518					8,230,650				8,372,548					8,185,332
Condensed Consolidated Balance Sheets
(Unaudited)
							March 31,
Assets								2022				2021
Current assets							$	32,520,634			$	16,563,212
Utility plant, net								218,709,630				203,698,440
Other assets								37,128,221				71,902,386
Total Assets							$	288,358,485			$	292,164,038
Liabilities and Stockholders' Equity
Current liabilities							$	36,576,652			$	20,775,066
Long-term debt, net								104,841,078				120,770,429
Deferred credits and other liabilities								41,478,026				53,043,935
Total Liabilities								182,895,756				194,589,430
Stockholders' Equity								105,462,729				97,574,608
Total Liabilities and Stockholders' Equity							$	288,358,485			$	292,164,038

Contact:	Paul W. Nester
	President and CEO
Telephone:	540-777-3837

FAQ

What was RGC Resources' net loss for Q2 2022?

RGC Resources reported a net loss of $24.5 million for the quarter ended March 31, 2022.

How did underlying net income change for RGC Resources in Q2 2022?

Underlying net income increased by 6.5% to $5.1 million, or $0.60 per share, compared to the same period last year.

What factors contributed to RGC Resources' improved operating income?

The 5% increase in operating income was driven by infrastructure investments, customer growth, and increased natural gas usage from a large customer.

What is the impact of the Mountain Valley Pipeline impairment on RGC Resources?

The impairment charge of $29.6 million significantly contributed to the overall net loss reported by the company.

What were the financial results for RGC Resources for the twelve months ending March 31, 2022?

For the twelve months, RGC Resources reported a net loss of $20.3 million, with underlying net income decreasing from $1.27 to $1.11 per share.