RGC Resources' Summer Margin Gain Is Wiped Out by Costs
Operating margin rose $757,000 year over year in the June quarter, but expenses rose by a similar amount and diluted earnings stayed at $0.05 a share.
RGC Resources, Inc. (RGCO) reported consolidated earnings of $559,000, or $0.05 a diluted share, for the third quarter ended June 30, 2026, compared with $538,000, or $0.05 a diluted share, a year earlier.
The Virginia gas utility said operating margin was $757,000 higher than in the year-earlier third quarter, aided by higher non-gas base rates that became effective January 1, 2026. Operating expenses rose by a similar amount, producing a nominal decline in operating earnings.
Operating revenues were $17,105,393 in the three months ended June 30, 2026, down from $17,264,615 a year earlier. Operating expenses were $15,933,124 versus $16,068,055. Operating income was $1,172,269 versus $1,196,560.
Chief executive Paul Nester said the quarter included improved margins from higher base rates and SAVE investment, as well as continued residential growth, offset by persistent inflation and the effect of an industrial customer ceasing operations. Delivered firm volumes were steady compared with the prior year, and interruptible volumes to industrial customers increased, albeit at lower-tiered margins.
The company provides energy and related products and services to customers in Virginia through Roanoke Gas Company and RGC Midstream, LLC.
The June quarter followed a second quarter in which earnings were $8.7 million, or $0.84 a diluted share, for the period ended March 31, 2026, compared with $7.7 million, or $0.74 a diluted share, a year earlier. The company attributed that increase to higher operating margins that included the positive effect of interim base rates under a pending rate case, higher earnings from its investment in Mountain Valley Pipeline, LLC, and lower interest expense.
Those interim rates went into effect January 1, 2026, and are subject to refund based on review by the State Corporation Commission. The company filed the rate case in early December, seeking $4.3 million in additional annualized revenue, primarily to address higher costs for personnel, IT, property taxes and depreciation.
For the first nine months of fiscal 2026, net income was $14.2 million, or $1.37 a diluted share, up 5.2% from $13.5 million, or $1.31 a diluted share, a year earlier, due to stronger operating margins and lower interest expense, particularly early in the year.
Equity in earnings of unconsolidated affiliates was $764,178 in the June quarter versus $772,082 a year earlier. Other income, net, was $328,966 versus $244,000. Interest expense was $1,551,750 versus $1,512,754. Income before income taxes was $713,663 versus $699,888. Income tax expense was $154,763 versus $161,476.
Cash dividends were $0.2175 a common share in the June quarter versus $0.2075 a year earlier. Weighted average diluted shares outstanding were 10,418,876 versus 10,324,165.
At June 30, 2026, total assets were $339,659,131 versus $324,757,993 a year earlier. Utility property, net, was $282,505,823 versus $270,538,465. Long-term debt, net, was $145,607,087 versus $139,743,390. Stockholders’ equity was $122,874,179 versus $116,261,318.
The company said forward-looking statements involve risks including inflation, customer growth, ratemaking, infrastructure investment and margins, as well as gas prices and supply, geopolitical considerations, and expectations regarding MVP and the company’s rate application.