Form 10-Q RGC RESOURCES INC For: Jun 30
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E-mailUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
| Form | |
| (Mark One) |
| | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
For Quarterly Period Ended
| OR |
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||||
| For Transition Period From | to | |||
Commission File Number
| RGC Resources, Inc. | ||
| (Exact name of Registrant as Specified in its Charter) |
| | |
| (State or Other Jurisdiction of | (I.R.S. Employer |
| | |
| (Address of Principal Executive Offices) | (Zip Code) |
(
(Registrant’s Telephone Number, Including Area Code)
None
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | ||||||
| | | |
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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated-filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| | ☒ | Smaller reporting company | | |||||||||||
| Emerging growth company | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at July 31, 2026 |
| Common Stock, $5 Par Value | |
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Page No. |
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| PART I. FINANCIAL INFORMATION |
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| Item 1. |
Financial Statements |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME | |
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |
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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY | 5 |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | 6 | |
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7 | |
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
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| Item 4. |
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| PART II. OTHER INFORMATION |
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| Item 1. |
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| Item 1A. |
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| Item 2. |
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| Item 3. |
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| Item 4. |
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| Item 5. |
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| Item 6. |
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GLOSSARY OF TERMS
| AFUDC |
Allowance for Funds Used During Construction |
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| AOCI/AOCL |
Accumulated Other Comprehensive Income (Loss) |
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| ARO |
Asset Retirement Obligation |
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| ARP |
Alternative Revenue Program, regulatory or rate recovery mechanisms approved by the SCC that allow for the adjustment of revenues for certain broad, external factors, or for additional billings if the entity achieves certain performance targets |
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| ASC |
Accounting Standards Codification |
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| ASU |
Accounting Standards Update as issued by the FASB |
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| ATM | At-the-market program whereby a Company can incrementally offer common stock through a broker at prevailing market prices and on an as-needed basis | |||
| Boost | Mountain Valley Pipeline, LLC's Boost project, which is a project to add compression on the MVP mainline to enable 600,000 additional DTHs of daily capacity | |||
| CODM | Chief Operating Decision Maker | |||
| Company |
RGC Resources, Inc. or Roanoke Gas Company |
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| CPCN |
Certificate of Public Convenience and Necessity |
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| DRIP |
Dividend Reinvestment and Stock Purchase Plan of RGC Resources, Inc. |
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| DTH |
Dekatherm (a measure of energy used primarily to measure natural gas) |
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| EPS |
Earnings Per Share |
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| ERISA |
Employee Retirement Income Security Act of 1974 |
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| FASB |
Financial Accounting Standards Board |
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| FDIC |
Federal Deposit Insurance Corporation |
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| FERC | Federal Energy Regulatory Commission | |||
| GAAP | Generally Accepted Accounting Principles in the United States | |||
| HDD |
Heating degree day, a measurement designed to quantify the demand for energy. It is the number of degrees that a day’s average temperature falls below 65 degrees Fahrenheit |
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| ICC |
Inventory carrying cost revenue, an SCC approved rate structure that mitigates the impact of financing costs on natural gas inventory |
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| IRS |
Internal Revenue Service |
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| KEYSOP |
RGC Resources, Inc. Key Employee Stock Option Plan |
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| LDI | Liability Driven Investment approach, a strategy which reduces the volatility in the pension plan's funded status and expense by matching the duration of the fixed income investments with the duration of the corresponding pension liabilities | |||
| LLC |
Mountain Valley Pipeline, LLC, a joint venture established to design, construct and operate the Mountain Valley Pipeline, MVP Southgate and MVP Boost |
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| LNG |
Liquefied natural gas, the cryogenic liquid form of natural gas. Roanoke Gas operates and maintains a plant capable of producing and storing up to 200,000 DTH of liquefied natural gas |
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| MGP |
Manufactured gas plant |
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| Midstream |
RGC Midstream, LLC, a wholly-owned subsidiary of Resources created to invest in pipeline projects including the MVP and Southgate |
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| MVP |
Mountain Valley Pipeline, a FERC-regulated natural gas pipeline connecting the EQT Corporation's gathering and transmission system in northern West Virginia to the Transco interstate pipeline in south central Virginia with interconnects to Roanoke Gas’ natural gas distribution system |
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| NQDC Plan |
RGC Resources, Inc. Non-qualified Deferred Compensation Plan |
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| Normal Weather |
The average number of heating degree days over the most recent 30-year period |
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| PBGC |
Pension Benefit Guaranty Corporation |
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| Pension Plan |
Defined benefit plan that provides pension benefits to employees hired prior to January 1, 2017 who meet certain years of service criteria |
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| PGA | Purchased Gas Adjustment, a regulatory mechanism, which adjusts natural gas customer rates to reflect changes in the forecasted cost of gas and actual gas costs | |||
| Postretirement Plan | Defined benefit plan that provides postretirement medical and life insurance benefits to eligible employees hired prior to January 1, 2000 who meet years of service and other criteria | |||
| R&D Tax Credit | Research and development federal tax credit defined under Internal Revenue Code section 41 and the related regulations | |||
| Resources |
RGC Resources, Inc., parent company of Roanoke Gas and Midstream |
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| RGCO |
Trading symbol for RGC Resources, Inc. on the NASDAQ Global Stock Market |
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| RNG | Renewable Natural Gas | |||
| RNG Rider | Renewable Natural Gas Rider, the rate component as approved by the SCC that is billed monthly to the Company’s customers to recover the costs associated with the investment in RNG facilities and related operating costs |
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| Roanoke Gas | Roanoke Gas Company, a wholly-owned subsidiary of Resources | |||
| ROU Asset | Right of Use Asset | |||
| RSPD |
RGC Resources, Inc. Restricted Stock Plan for Outside Directors |
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| RSPO |
RGC Resources, Inc. Restricted Stock Plan for Officers |
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| SAVE |
Steps to Advance Virginia's Energy, a regulatory mechanism per Chapter 26 of Title 56 of the Code of Virginia that allows natural gas utilities to recover the investment, including related depreciation and expenses and provide return on rate base, in eligible infrastructure replacement projects without the filing of a formal base rate application |
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| SAVE Plan |
Steps to Advance Virginia's Energy Plan, the Company's approved operational replacement plan and related spending under the SAVE regulatory mechanism |
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| SAVE Rider |
Steps to Advance Virginia's Energy Plan Rider, the rate component of the SAVE Plan as approved by the SCC that is billed monthly to the Company’s customers to recover the costs associated with eligible infrastructure projects including the related depreciation and expenses and return on rate base of the investment |
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| SCC |
Virginia State Corporation Commission, the regulatory body with oversight responsibilities of the utility operations of Roanoke Gas |
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| SEC |
U.S. Securities and Exchange Commission |
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| SOFR | Secured Overnight Financing Rate | |||
| Southgate |
Mountain Valley Pipeline, LLC’s Southgate project, which is a project to construct a FERC-regulated natural gas pipeline from the MVP in south central Virginia to North Carolina |
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| S&P 500 Index |
Standard & Poor’s 500 Stock Index |
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| WNA |
Weather Normalization Adjustment, an ARP mechanism which adjusts revenues for the effects of weather temperature variations as compared to the 30-year average |
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| Some of the terms above may not be included in this filing |
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RGC RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| June 30, | September 30, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable (less allowance for credit losses of $ and $, respectively) | ||||||||
| Inventories | ||||||||
| Gas in storage | ||||||||
| Prepaid income taxes | ||||||||
| Regulatory assets | ||||||||
| Interest rate swaps | ||||||||
| Other | ||||||||
| Total current assets | ||||||||
| UTILITY PROPERTY: | ||||||||
| In service | ||||||||
| Accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| In service, net | ||||||||
| Construction work in progress | ||||||||
| Utility property, net | ||||||||
| OTHER NON-CURRENT ASSETS: | ||||||||
| Regulatory assets | ||||||||
| Investment in unconsolidated affiliates | ||||||||
| Benefit plan assets | ||||||||
| Deferred income taxes | ||||||||
| Interest rate swaps | ||||||||
| Other | ||||||||
| Total other non-current assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
RGC RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| June 30, | September 30, | |||||||
| 2026 | 2025 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current maturities of long-term debt | $ | $ | ||||||
| Dividends payable | ||||||||
| Accounts payable | ||||||||
| Capital contributions payable | ||||||||
| Customer credit balances | ||||||||
| Income taxes payable | ||||||||
| Customer deposits | ||||||||
| Accrued expenses | ||||||||
| Interest rate swaps | ||||||||
| Regulatory liabilities | ||||||||
| Other | ||||||||
| Total current liabilities | ||||||||
| LONG-TERM DEBT: | ||||||||
| Line-of-credit | ||||||||
| Notes payable | ||||||||
| Unamortized debt issuance costs | ( | ) | ( | ) | ||||
| Long-term debt, net | ||||||||
| DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES: | ||||||||
| Asset retirement obligations | ||||||||
| Regulatory cost of retirement obligations | ||||||||
| Benefit plan liabilities | ||||||||
| Deferred income taxes | ||||||||
| Interest rate swaps | ||||||||
| Regulatory liabilities | ||||||||
| Other | ||||||||
| Total deferred credits and other non-current liabilities | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Common stock, $ par; authorized shares; issued and outstanding and shares, respectively | ||||||||
| Preferred stock, par, authorized shares; shares issued and outstanding | ||||||||
| Capital in excess of par value | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive income | ||||||||
| Total stockholders’ equity | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
See notes to condensed consolidated financial statements.
RGC RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| Three Months Ended June 30, |
Nine Months Ended June 30, |
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| 2026 |
2025 |
2026 |
2025 |
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| OPERATING REVENUES: |
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| Gas utility |
$ | $ | $ | $ | ||||||||||||
| Non utility |
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| Total operating revenues |
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| OPERATING EXPENSES: |
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| Cost of gas - utility |
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| Cost of sales - non utility |
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| Operations and maintenance |
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| Taxes other than income taxes |
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| Depreciation and amortization |
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| Total operating expenses |
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| OPERATING INCOME |
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| Equity in earnings of unconsolidated affiliates |
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| Other income, net |
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| Interest expense |
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| INCOME BEFORE INCOME TAXES |
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| INCOME TAX EXPENSE |
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| NET INCOME |
$ | $ | $ | $ | ||||||||||||
| BASIC EARNINGS PER COMMON SHARE |
$ | $ | $ | $ | ||||||||||||
| DILUTED EARNINGS PER COMMON SHARE |
$ | $ | $ | $ | ||||||||||||
See notes to condensed consolidated financial statements.
RGC RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
| Three Months Ended June 30, |
Nine Months Ended June 30, |
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| 2026 |
2025 |
2026 |
2025 |
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| NET INCOME |
$ | $ | $ | $ | ||||||||||||
| Other comprehensive income (loss), net of tax: |
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| Interest rate swaps |
( |
) | ( |
) | ||||||||||||
| Defined benefit plans |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX |
( |
) | ( |
) | ||||||||||||
| COMPREHENSIVE INCOME |
$ | $ | $ | $ | ||||||||||||
See notes to condensed consolidated financial statements.
RGC RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
| Nine Months Ended June 30, 2026 | ||||||||||||||||||||
| Common Stock | Capital in Excess of Par Value | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||
| Balance - September 30, 2025 | $ | $ | $ | $ | $ | |||||||||||||||
| Net income | ||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||
| Cash dividends declared ($ per share) | ( | ) | ( | ) | ||||||||||||||||
| Net issuance of common stock ( shares) | ||||||||||||||||||||
| Balance - December 31, 2025 | $ | $ | $ | $ | $ | |||||||||||||||
| Net income | ||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||
| Cash dividends declared ($ per share) | ( | ) | ( | ) | ||||||||||||||||
| Net issuance of common stock ( shares) | ||||||||||||||||||||
| Balance - March 31, 2026 | $ | $ | $ | $ | $ | |||||||||||||||
| Net income | ||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||
| Cash dividends declared ($ per share) | ( | ) | ( | ) | ||||||||||||||||
| Net issuance of common stock ( shares) | ||||||||||||||||||||
| Balance - June 30, 2026 | $ | $ | $ | $ | $ | |||||||||||||||
| Nine Months Ended June 30, 2025 | ||||||||||||||||||||
| Common Stock | Capital in Excess of Par Value | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | ||||||||||||||||
| Balance - September 30, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| Net income | ||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||
| Cash dividends declared ($ per share) | ( | ) | ( | ) | ||||||||||||||||
| Net issuance of common stock ( shares) | ||||||||||||||||||||
| Balance - December 31, 2024 | $ | $ | $ | $ | $ | |||||||||||||||
| Net income | ||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||
| Cash dividends declared ($ per share) | ( | ) | ( | ) | ||||||||||||||||
| Net issuance of common stock ( shares) | ||||||||||||||||||||
| Balance - March 31, 2025 | $ | $ | $ | $ | $ | |||||||||||||||
| Net income | ||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||
| Cash dividends declared ($ per share) | ( | ) | ( | ) | ||||||||||||||||
| Net issuance of common stock ( shares) | ||||||||||||||||||||
| Balance - June 30, 2025 | $ | $ | $ | $ | $ | |||||||||||||||
See notes to condensed consolidated financial statements.
RGC RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended June 30, |
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| 2026 |
2025 |
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| CASH FLOWS FROM OPERATING ACTIVITIES: |
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| Net income |
$ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation and amortization |
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| Cost of retirement of utility property |
( |
) | ( |
) | ||||
| Stock-based compensation |
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| Equity in earnings of unconsolidated affiliates |
( |
) | ( |
) | ||||
| Distributions from unconsolidated affiliate |
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| Changes in assets and liabilities which (used) provided cash, exclusive of changes and noncash transactions shown separately |
( |
) | ||||||
| Net cash provided by operating activities |
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| CASH FLOWS FROM INVESTING ACTIVITIES: |
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| Additions to utility property |
( |
) | ( |
) | ||||
| Investment in unconsolidated affiliates |
( |
) | ( |
) | ||||
| Proceeds from disposal of utility property |
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| Net cash used in investing activities |
( |
) | ( |
) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: |
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| Proceeds from issuance of unsecured notes |
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| Repayments of notes payable |
( |
) | ( |
) | ||||
| Borrowings under line-of-credit |
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| Repayments under line-of-credit |
( |
) | ( |
) | ||||
| Debt issuance expenses |
( |
) | ( |
) | ||||
| Proceeds from issuance of stock |
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| Cash dividends paid |
( |
) | ( |
) | ||||
| Net cash used in financing activities |
( |
) | ( |
) | ||||
| NET INCREASE IN CASH AND CASH EQUIVALENTS |
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| BEGINNING CASH AND CASH EQUIVALENTS |
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| ENDING CASH AND CASH EQUIVALENTS |
$ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
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| Cash paid during the period for: |
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| Interest |
$ | $ | ||||||
| Income taxes, net of refunds |
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See notes to condensed consolidated financial statements.
RGC RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
| 1. | Basis of Presentation |
Resources is an energy services company primarily engaged in the sale and distribution of natural gas. The condensed consolidated financial statements include the accounts of Resources and its wholly owned subsidiaries: Roanoke Gas and Midstream.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to fairly present Resources' financial position as of June 30, 2026, cash flows for the nine months ended June 30, 2026 and 2025, and the results of its operations, comprehensive income, and changes in stockholders' equity for the three and nine months ended June 30, 2026 and 2025. The results of operations for the three and nine months ended June 30, 2026 are not indicative of the results to be expected for the fiscal year ending September 30, 2026 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 unaudited condensed consolidated financial statements and related notes are presented under the rules and regulations of the SEC. Pursuant to those rules, certain information and note disclosures normally included in the annual financial statements prepared in accordance with GAAP have been condensed or omitted. Although the Company believes that the disclosures are adequate, the unaudited condensed consolidated financial statements and the related notes should be read in conjunction with the financial statements and notes contained in the Company’s Form 10-K for the year ended September 30, 2025. The September 30, 2025 consolidated balance sheet was included in the Company’s audited financial statements included in Form 10-K.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.
The Company’s significant accounting policies are described in Note 1 to the consolidated financial statements contained in the Company's Form 10-K for the year ended September 30, 2025.
Certain amounts previously disclosed have been reclassified to conform to current year presentations.
Recently Issued or Adopted Accounting Standards
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The new guidance requires that on an annual basis public business entities disclose specific categories in the rate reconciliation table and provide additional information for reconciling items that meet a quantitative threshold (items equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory rate). The required disclosures will provide more granularity regarding the payment of income taxes to federal, state and foreign entities. The Company does not expect certain requirements of this ASU to have a significant impact to its current disclosures as all of its operations are domestic and reside in states. Changes to the rate reconciliation table will result in additional disclosure. The new guidance is effective for the Company this fiscal year end.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures. The new guidance requires public business entities to disclose certain additional detail about expenses including, among other items, purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each income statement expense line items within continuing operations. The guidance also requires disclosure of the total amount of selling expenses and the Company’s definition of selling expenses. Such disclosures must be made on an annual and interim basis and integrated with existing disclosure requirements in a tabular format in the footnotes to the financial statements. Further, in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income (Topic 220): Expense Disaggregation Disclosures: Clarifying the Effective Date, which clarified the effective date of ASU 2024-03. The new guidance is effective for the Company for fiscal year beginning October 1, 2027 and interim periods within fiscal year beginning October 1, 2028. The Company is currently assessing the impact of the new guidance on its financial statement disclosures.
RGC RESOURCES, INC. AND SUBSIDIARIES
In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements. The new guidance clarifies certain aspects of hedge accounting and addresses several incremental issues arising from the global reference rate reform initiative. The amendments expand the hedged risks permitted to be aggregated in a group of individual forecasted transactions in a cash flow hedge by changing the requirement to designate a group of individual forecasted transactions. The new guidance is effective for the Company for annual periods beginning October 1, 2027. The Company is currently assessing the impact, if any, of the new guidance on its financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The new guidance makes targeted improvements to interim reporting disclosures, clarifying when guidance is applicable. A new principle was added to require entities to continue to disclose material events in each quarter that have occurred since the end of the last annual reporting period. The new guidance is effective for the Company for interim periods within fiscal year beginning October 1, 2028. The Company is currently assessing the impact of the new guidance on its interim disclosures.
In May 2026, the FASB issued ASU 2026-02, Environmental Credits and Environmental Credit Obligations (Topic 818). The new guidance improves the financial accounting and disclosure to enhance understanding of the environmental credits and environmental credit obligations associated with regulatory compliance programs and the comparability of the information. The new guidance is effective for the Company for interim periods within the fiscal year beginning October 1, 2028. The Company is currently assessing the impact of the new guidance on its financial statements.
Other accounting standards that have been issued by the FASB, SEC or other standard-setting bodies are not currently applicable to the Company or are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
| 2. | Revenue |
The Company assesses new contracts and identifies related performance obligations for promises to transfer distinct goods or services to the customer. Revenue is recognized when performance obligations have been satisfied. In the case of Roanoke Gas, the Company contracts with its customers for the sale and/or delivery of natural gas.
The following tables summarize revenue by customer, product and income statement classification:
| Three Months Ended June 30, 2026 | Three Months Ended June 30, 2025 | |||||||||||||||||||||||
| Gas utility | Non utility | Total operating revenues | Gas utility | Non utility | Total operating revenues | |||||||||||||||||||
| Natural Gas (Billed and Unbilled): | ||||||||||||||||||||||||
| Residential | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial | ||||||||||||||||||||||||
| Transportation and interruptible | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Total contracts with customers | ||||||||||||||||||||||||
| Alternative revenue programs | ||||||||||||||||||||||||
| Total operating revenues | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Nine Months Ended June 30, 2026 | Nine Months Ended June 30, 2025 | |||||||||||||||||||||||
| Gas utility | Non utility | Total operating revenues | Gas utility | Non utility | Total operating revenues | |||||||||||||||||||
| Natural Gas (Billed and Unbilled): | ||||||||||||||||||||||||
| Residential | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Commercial | ||||||||||||||||||||||||
| Transportation and interruptible | ||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||
| Total contracts with customers | ||||||||||||||||||||||||
| Alternative revenue programs | ||||||||||||||||||||||||
| Total operating revenues | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
RGC RESOURCES, INC. AND SUBSIDIARIES
Gas utility revenues
Substantially all of Roanoke Gas' revenues are derived from rates authorized by the SCC through its tariffs. Based on its evaluation, the Company has concluded that these tariff-based revenues fall within the scope of ASC 606. Tariff rates represent the transaction price. Performance obligations include the procurement and transportation of natural gas through the Company's distribution system to customers. The delivery of natural gas to customers results in the satisfaction of the Company’s respective performance obligations over time.
All customers are billed monthly based on consumption as measured by metered usage with payments due 20 days from the rendering of the bill. Revenue is recognized as bills are issued for natural gas that has been delivered or transported. In addition, the Company utilizes the practical expedient that allows an entity to recognize the invoiced amount as revenue, if that amount corresponds to the value received by the customer. Since customers are billed tariff rates, there is no variable consideration in the transaction price.
Unbilled revenue is included in residential and commercial revenues in the preceding table. Natural gas consumption is estimated for the period subsequent to the last billed date and up through the last day of the month. Estimated volumes and approved tariff rates are utilized to calculate unbilled revenue. The following month, the unbilled estimate is reversed, the actual usage is billed and a new unbilled estimate is calculated. The Company obtains metered usage for transportation and interruptible customers at the end of each month, thereby eliminating any unbilled consideration for these rate classes.
Other revenues
Other revenues primarily consist of miscellaneous fees and charges, utility-related revenues not directly billed to utility customers and billings for non-utility activities. Customers are invoiced monthly based on services provided for these activities. The Company utilizes the practical expedient allowing revenue to be recognized based on invoiced amounts. The transaction price is based on a contractually predetermined rate schedule; therefore, the transaction price represents total value to the customer and no variable price consideration exists.
Alternative revenue program revenues
ARPs, which fall outside the scope of ASC 606, are SCC-approved mechanisms that allow for the adjustment of revenues for certain broad, external factors, or for additional billings if the entity achieves certain performance targets. The Company's ARPs include its WNA, which adjusts revenues for the effects of weather temperature variations as compared to the 30-year average; the SAVE Plan over/under collection mechanism, which adjusts revenues for the differences between SAVE Plan revenues billed to customers and the revenues earned, as calculated based on the timing and extent of infrastructure replacement completed during the period; and the RNG over/under collection mechanism, which adjusts revenues similar to the SAVE Plan, but is calculated based on the timing and costs associated with owning, operating and maintaining the RNG facility. These amounts are ultimately collected from, or returned to, customers through future rate changes as approved by the SCC.
Customer accounts receivable and liabilities
Accounts receivable, as reflected in the condensed consolidated balance sheets, includes both billed and unbilled customer revenues, as well as amounts that are not related to customers. The asset and liability balances associated with customers are provided below:
| Current Assets | Current Liabilities | |||||||||||||||
| Trade accounts receivable(1) | Unbilled revenue(1) | Customer credit balances | Customer deposits | |||||||||||||
| Balance at September 30, 2025 | $ | $ | $ | $ | ||||||||||||
| Balance at June 30, 2026 | ||||||||||||||||
| Increase (decrease) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||
(1) Included in accounts receivable in the condensed consolidated balance sheet. Amounts shown net of reserve for credit losses.
The Company did not incur any significant costs to obtain contracts during the period. Certain customers elect to pay even amounts monthly, giving rise to assets and liabilities presented in the table above. All amounts clear annually.
RGC RESOURCES, INC. AND SUBSIDIARIES
| 3. | Segment Information |
Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the Company's executive management in deciding how to allocate resources and assess performance. The Company has reportable segments based on the nature of their activities and are defined as follows:
Gas Utility - The natural gas segment of the Company generates revenue from its tariff rates and other regulatory mechanisms through which it provides the sale and distribution of natural gas to its residential, commercial and industrial customers.
Investment in Affiliates - The investment in affiliates segment reflects the income generated through the activities of the Company's investment in the LLC.
In order to reconcile to net income as disclosed in the consolidated statements of income, "Corporate and other" rows are included below associated with certain unallocated expenses that represent corporate reporting adjustments.
The accounting policies of the reported segments are the same as those described in Note 1 to the consolidated financial statements contained in the Company's Form 10-K for the year ended September 30, 2025. Information is routinely presented to the CODM, the Company's President and Chief Executive Officer, in a manner that makes significant elements of profitability and cash flows of each segment easily discernible. The CODM evaluates the performance of the reportable segments based on the Gas Utility's operating income (loss) and the Investment in Affiliates' equity in earnings, as well as cash flows, and uses these measures to evaluate segment performance and allocate resources, primarily during the annual budget and forecasting processes. The CODM regularly reviews variances between budgeted and actual results in assessing earnings, operational performance, and allocating resources including personnel and capital allocations that affect each reportable segment. When the CODM reviews balance sheet information, it is at the consolidated level. Intersegment transactions are recorded at cost.
Information related to the Company's segments are provided below:
| Gas Utility | Investment in Affiliates | Consolidated Total | ||||||||||
| Three Months Ended June 30, 2026 | ||||||||||||
| Operating revenues | $ | $ | $ | |||||||||
| Corporate and other | ||||||||||||
| Total revenues | ||||||||||||
| Cost of gas - utility | ||||||||||||
| Operations and maintenance | ||||||||||||
| Taxes other than income taxes | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Corporate and other | ||||||||||||
| Total operating income (loss) | ( | ) | ||||||||||
| Equity in earnings | ||||||||||||
| Interest expense | ||||||||||||
| Income before income taxes | ||||||||||||
| Corporate and other | ||||||||||||
| Total income before income taxes | $ | $ | $ | |||||||||
RGC RESOURCES, INC. AND SUBSIDIARIES
| Gas Utility | Investment in Affiliates | Consolidated Total | ||||||||||
| Three Months Ended June 30, 2025 | ||||||||||||
| Operating revenues | $ | $ | $ | |||||||||
| Corporate and other | ||||||||||||
| Total revenues | ||||||||||||
| Cost of gas - utility | ||||||||||||
| Operations and maintenance | ||||||||||||
| Taxes other than income taxes | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Corporate and other | ||||||||||||
| Total operating income (loss) | ( | ) | ||||||||||
| Equity in earnings | ||||||||||||
| Interest expense | ||||||||||||
| Income before income taxes | ||||||||||||
| Corporate and other | ||||||||||||
| Total income before income taxes | $ | $ | $ | |||||||||
| Gas Utility | Investment in Affiliates | Consolidated Total | ||||||||||
| Nine Months Ended June 30, 2026 | ||||||||||||
| Operating revenues | $ | $ | $ | |||||||||
| Corporate and other | ||||||||||||
| Total revenues | ||||||||||||
| Cost of gas - utility | ||||||||||||
| Operations and maintenance | ||||||||||||
| Taxes other than income taxes | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Corporate and other | ||||||||||||
| Total operating income (loss) | ( | ) | ||||||||||
| Equity in earnings | ||||||||||||
| Interest expense | ||||||||||||
| Income before income taxes | ||||||||||||
| Corporate and other | ||||||||||||
| Total income before income taxes | $ | $ | $ | |||||||||
| Gas Utility | Investment in Affiliates | Consolidated Total | ||||||||||
| Nine Months Ended June 30, 2025 | ||||||||||||
| Operating revenues | $ | $ | $ | |||||||||
| Corporate and other | ||||||||||||
| Total revenues | ||||||||||||
| Cost of gas - utility | ||||||||||||
| Operations and maintenance | ||||||||||||
| Taxes other than income taxes | ||||||||||||
| Depreciation and amortization | ||||||||||||
| Corporate and other | ||||||||||||
| Total operating income (loss) | ( | ) | ||||||||||
| Equity in earnings | ||||||||||||
| Interest expense | ||||||||||||
| Income before income taxes | ||||||||||||
| Corporate and other | ||||||||||||
| Total income before income taxes | $ | $ | $ | |||||||||
RGC RESOURCES, INC. AND SUBSIDIARIES
| Gas Utility | Investment in Affiliates | Consolidated Total | ||||||||||
| As of June 30, 2026: | ||||||||||||
| Assets | $ | $ | $ | |||||||||
| Corporate and other | ||||||||||||
| Total assets | ||||||||||||
| Gross additions to utility property | ||||||||||||
| Gross investment in affiliates | $ | $ | $ | |||||||||
| Gas Utility | Investment in Affiliates | Consolidated Total | ||||||||||
| As of September 30, 2025: | ||||||||||||
| Assets | $ | $ | $ | |||||||||
| Corporate and other | ||||||||||||
| Total assets | ||||||||||||
| Gross additions to utility property | ||||||||||||
| Gross investment in affiliates | $ | $ | $ | |||||||||
| 4. | Rates and Regulatory Matters |
The SCC exercises regulatory authority over the natural gas operations of Roanoke Gas. Such regulation encompasses terms, conditions and rates to be charged to customers for natural gas service, safety standards, service extension and depreciation.
In response to continued inflationary pressures, the Company filed an expedited rate application on December 2, 2025 with the SCC seeking to increase its non-gas base rates by $
On May 29, 2026, Roanoke Gas filed for approval of an updated RNG Rider to become effective October 1, 2026. The RNG Rider recovers costs associated with the RNG facility to produce renewable natural gas that was approved by the SCC in 2022. The revenue requirement associated with the RNG Rider is $
On June 30, 2026, Roanoke Gas filed for approval of an updated annual SAVE Rider to become effective October 1, 2026. The proposed SAVE Rider revenue requirement of $
RGC RESOURCES, INC. AND SUBSIDIARIES
| 5. | Other Investments |
Midstream has invested less than
The Company participates in the earnings of the LLC proportionate to its level of investment, favorably adjusted for a basis difference between the Company's capital account and its carrying value that arose when the Company recorded an other-than-temporary impairment of its investment in 2022. This basis difference amortization is a favorable non-cash adjustment to income over the book life of the MVP, which is 40 years. The Company's share of earnings from the LLC and the basis difference amortization are presented under equity in earnings of unconsolidated affiliates on the condensed consolidated statements of income. The Company received three quarterly cash distributions from the LLC during the first nine months of fiscal 2026 and 2025 totaling approximately $
Midstream assesses the value of its investment in the LLC on at least a quarterly basis, and no impairment indicators were identified in fiscal 2026 or 2025.
Investment balances of combined MVP, including Southgate and Boost, as of June 30, 2026 and September 30, 2025, are reflected in the table below:
| Balance Sheet location: | June 30, 2026 | September 30, 2025 | ||||||
| Other Assets: | ||||||||
| MVP | $ | $ | ||||||
| Southgate | ||||||||
| Boost | ||||||||
| Investment in unconsolidated affiliates | $ | $ | ||||||
The change in the investment in unconsolidated affiliates is provided below:
| Nine Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash investment | $ | $ | ||||||
| Change in accrued capital calls | ||||||||
| Equity in earnings of unconsolidated affiliates | ||||||||
| Distributions from unconsolidated affiliate | ( | ) | ( | ) | ||||
| Change in investment in unconsolidated affiliates | $ | $ | ( | ) | ||||
Summary combined unaudited financial statements of MVP, Southgate and Boost are presented below.
| Income Statements | ||||||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| AFUDC | ||||||||||||||||
| Other income, net | ||||||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
RGC RESOURCES, INC. AND SUBSIDIARIES
| Balance Sheets | ||||||||
| June 30, 2026 | September 30, 2025 | |||||||
| Assets: | ||||||||
| Current assets | $ | $ | ||||||
| Construction work in progress | ||||||||
| Property, plant and equipment, net | ||||||||
| Other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Equity: | ||||||||
| Current liabilities | $ | $ | ||||||
| Noncurrent liabilities | ||||||||
| Capital | ||||||||
| Total liabilities and equity | $ | $ | ||||||
| 6. | Line of Credit |
The Company has a line-of-credit in the principal amount of $
RGC RESOURCES, INC. AND SUBSIDIARIES
| 7. | Long-Term Debt |
Long-term debt consists of the following:
| June 30, 2026 | September 30, 2025 | |||||||||||||||
| Principal | Unamortized Debt Issuance Costs | Principal | Unamortized Debt Issuance Costs | |||||||||||||
| Roanoke Gas: | ||||||||||||||||
| Unsecured senior note payable at %, due September 18, 2034 | $ | $ | $ | $ | ||||||||||||
| Unsecured term note payable at %, due October 2, 2027 | ||||||||||||||||
| Unsecured term note payable at %, due March 28, 2031 | ||||||||||||||||
| Unsecured term note payable at %, due December 6, 2029 | ||||||||||||||||
| Unsecured term note payable at 30-day SOFR plus %, due August 20, 2026 (swap rate at %) | ||||||||||||||||
| Unsecured term note payable at Term SOFR plus %, due October 1, 2028 (swap rate at %) | ||||||||||||||||
| Unsecured delayed-draw term note payable at Term SOFR plus %, due August 20, 2029 (swap rate at %) | — | — | ||||||||||||||
| Midstream: | ||||||||||||||||
| Unsecured term note payable at Term SOFR plus %, due September 5, 2032 ($2.8M swap rate at % and $34.3M swap rate at %) | ||||||||||||||||
| Unsecured term note payable at Term SOFR plus %, due September 5, 2032 (swap rate at %) | ||||||||||||||||
| Revolving credit facility at Term SOFR plus %, due September 5, 2030 ("Southgate") | ||||||||||||||||
| Revolving credit facility at Term SOFR plus %, due September 5, 2030 ("Boost") | ||||||||||||||||
| Total long-term debt | ||||||||||||||||
| Less: current maturities of long-term debt | ( | ) | — | ( | ) | — | ||||||||||
| Total long-term debt, net current maturities | $ | $ | $ | $ | ||||||||||||
On June 2, 2026, Roanoke Gas entered into an unsecured delayed-draw promissory note through a Fourth Amendment to the loan agreement in the principal amount of $
On September 5, 2025, Midstream established new amortizing term notes with two banks in the initial amounts of $
Additionally, on September 5, 2025, Midstream entered into a loan agreement for the MVP Southgate extension and MVP Boost expansion that can be drawn to principal amounts of $
RGC RESOURCES, INC. AND SUBSIDIARIES
Debt issuance costs are amortized over the life of the related debt. As of June 30, 2026 and September 30, 2025, the Company also had an unamortized loss on the early retirement of debt of $
All debt agreements set forth certain representations, warranties and covenants to which the Company is subject, including financial covenants that limit consolidated long-term indebtedness to not more than
| 8. | Derivatives and Hedging |
The Company’s hedging and derivative policy allows management to enter into derivatives for the purpose of managing the commodity and financial market risks of its business operations, including the price of natural gas and the cost of borrowed funds. This policy specifically prohibits the use of derivatives for speculative purposes.
The Company has
The fair value of the current and non-current portions of the interest rate swaps are reflected in the condensed consolidated balance sheets under the caption interest rate swaps. The table in Note 11 reflects the effect on income and other comprehensive income of the Company's cash flow hedges.
| 9. | Fair Value Measurements |
ASC 820, Fair Value Measurements and Disclosures, established a fair value hierarchy that prioritizes each input to the valuation method used to measure fair value of financial and nonfinancial assets and liabilities that are measured and reported on a fair value basis into one of the following three levels:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 – Inputs other than quoted prices in Level 1 that are either for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 – Unobservable inputs for the asset or liability where there is little, if any, market activity for the asset or liability at the measurement date, which require the Company to develop its own assumptions.
The fair value hierarchy gives the highest priority to unadjusted quoted prices in active markets (Level 1) and the lowest priority to unobservable inputs (Level 3). All fair value disclosures are categorized within one of the three categories in the hierarchy based on the lowest level that is significant to the valuation.
RGC RESOURCES, INC. AND SUBSIDIARIES
The following table summarizes the Company’s financial assets and liabilities that are measured at fair value on a recurring basis as required by existing guidance and the fair value measurements by level within the fair value hierarchy:
| Fair Value Measurements - June 30, 2026 | ||||||||||||||||
| Quoted | Significant | |||||||||||||||
| Prices | Other | Significant | ||||||||||||||
| in Active | Observable | Unobservable | ||||||||||||||
| Fair | Markets | Inputs | Inputs | |||||||||||||
| Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Interest rate swaps - current | $ | $ | $ | $ | ||||||||||||
| Interest rate swaps - noncurrent | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Natural gas purchases | $ | $ | $ | $ | ||||||||||||
| Interest rate swaps - current | ||||||||||||||||
| Interest rate swaps - noncurrent | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Fair Value Measurements - September 30, 2025 | ||||||||||||||||
| Quoted | Significant | |||||||||||||||
| Prices | Other | Significant | ||||||||||||||
| in Active | Observable | Unobservable | ||||||||||||||
| Fair | Markets | Inputs | Inputs | |||||||||||||
| Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Assets: | ||||||||||||||||
| Interest rate swaps - current | $ | $ | $ | $ | ||||||||||||
| Interest rate swaps - noncurrent | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Natural gas purchases | $ | $ | $ | $ | ||||||||||||
| Interest rate swaps - current | ||||||||||||||||
| Interest rate swaps - noncurrent | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
RGC RESOURCES, INC. AND SUBSIDIARIES
The fair value of the interest rate swaps are determined by using the counterparty's proprietary models that can include observable quoted market interest rates and interest rate futures as well as certain assumptions regarding past, present and future market conditions.
Under the asset management contract, a timing difference can exist between the payment for natural gas purchases and the actual receipt of such purchases. Payments are made based on a predetermined monthly volume and a weighted average basket price. At June 30, 2026 and September 30, 2025, the Company had recorded in accounts payable the estimated fair value of the liability expected to be settled.
The Company’s nonfinancial assets and liabilities measured at fair value on a nonrecurring basis consist of its AROs. The AROs are measured at fair value at initial recognition based on expected future cash flows required to settle the obligation.
The carrying value of cash and cash equivalents, accounts receivable, borrowings under line-of-credit, accounts payable, customer credit balances and customer deposits is a reasonable estimate of fair value due to the short-term nature of these financial instruments. In addition, the carrying amount of the variable rate line-of-credit is a reasonable approximation of its fair value.
The following table summarizes the fair value of the Company’s financial assets and liabilities that are not adjusted to fair value in the financial statements:
| Fair Value Measurements - June 30, 2026 | ||||||||||||||||
| Quoted | Significant | |||||||||||||||
| Prices | Other | Significant | ||||||||||||||
| in Active | Observable | Unobservable | ||||||||||||||
| Carrying | Markets | Inputs | Inputs | |||||||||||||
| Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Liabilities: | ||||||||||||||||
| Current maturities of long-term debt | $ | $ | $ | $ | ||||||||||||
| Notes payable | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Fair Value Measurements - September 30, 2025 | ||||||||||||||||
| Quoted | Significant | |||||||||||||||
| Prices | Other | Significant | ||||||||||||||
| in Active | Observable | Unobservable | ||||||||||||||
| Carrying | Markets | Inputs | Inputs | |||||||||||||
| Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Liabilities: | ||||||||||||||||
| Current maturities of long-term debt | $ | $ | $ | $ | ||||||||||||
| Notes payable | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The fair value of long-term debt is estimated by discounting the future cash flows of the fixed rate debt based on the underlying treasury rate or other treasury instruments with a corresponding maturity period and estimated credit spread extrapolated based on market conditions since the issuance of the debt.
ASC 825, Financial Instruments, requires disclosures regarding concentrations of credit risk from financial instruments. Cash equivalents are investments in high-grade, short-term securities (original maturity less than three months), placed with financially sound institutions. Accounts receivable are from a diverse group of customers including individuals and small and large companies in various industries.
RGC RESOURCES, INC. AND SUBSIDIARIES
| 10. | Earnings Per Share |
Basic EPS for the three and nine months ended June 30, 2026 and 2025 was calculated by dividing net income by the weighted-average common shares outstanding during the period excluding unvested nonemployee restricted stock issued to outside directors under the RSPD. Diluted EPS was calculated by dividing net income by the weighted-average common shares outstanding during the period plus potential dilutive common shares. Potential dilutive common shares are calculated in accordance with the treasury stock method, which assumes that proceeds from the exercise of all options are used to repurchase common stock at market value. The number of shares remaining after the proceeds are exhausted represents the potentially dilutive effect of the securities. The computation of diluted EPS for the three months ended June 30, 2026 and 2025 excludes potentially dilutive shares of
A reconciliation of basic and diluted earnings per share is presented below:
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Weighted-average common shares | ||||||||||||||||
| Effect of potentially dilutive securities | ||||||||||||||||
| Diluted average common shares | ||||||||||||||||
| Earnings per share of common stock: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
| 11. | Other Comprehensive Income (Loss) |
A summary of other comprehensive income and loss is provided below:
| Tax | ||||||||||||
| Before-Tax | (Expense) | Net-of-Tax | ||||||||||
| Amount | or Benefit | Amount | ||||||||||
| Three Months Ended June 30, 2026 | ||||||||||||
| Interest rate swaps: | ||||||||||||
| Unrealized gains | $ | $ | ( | ) | $ | |||||||
| Transfer of realized gains to interest expense | ( | ) | ( | ) | ||||||||
| Net interest rate swaps | ( | ) | ||||||||||
| Defined benefit plans: | ||||||||||||
| Amortization of net actuarial gains | ( | ) | ( | ) | ||||||||
| Other comprehensive income | $ | $ | ( | ) | $ | |||||||
| Three Months Ended June 30, 2025 | ||||||||||||
| Interest rate swaps: | ||||||||||||
| Unrealized losses | $ | ( | ) | $ | $ | ( | ) | |||||
| Transfer of realized gains to interest expense | ( | ) | ( | ) | ||||||||
| Net interest rate swaps | ( | ) | ( | ) | ||||||||
| Defined benefit plans: | ||||||||||||
| Amortization of net actuarial gains | ( | ) | ( | ) | ||||||||
| Other comprehensive loss | $ | ( | ) | $ | $ | ( | ) | |||||
RGC RESOURCES, INC. AND SUBSIDIARIES
| Tax | ||||||||||||
| Before-Tax | (Expense) | Net-of-Tax | ||||||||||
| Amount | or Benefit | Amount | ||||||||||
| Nine Months Ended June 30, 2026 | ||||||||||||
| Interest rate swaps: | ||||||||||||
| Unrealized gains | $ | $ | ( | ) | $ | |||||||
| Transfer of realized gains to interest expense | ( | ) | ( | ) | ||||||||
| Net interest rate swaps | ( | ) | ||||||||||
| Defined benefit plans: | ||||||||||||
| Amortization of net actuarial gains | ( | ) | ( | ) | ||||||||
| Other comprehensive income | $ | $ | ( | ) | $ | |||||||
| Nine Months Ended June 30, 2025 | ||||||||||||
| Interest rate swaps: | ||||||||||||
| Unrealized gains | $ | $ | ( | ) | $ | |||||||
| Transfer of realized gains to interest expense | ( | ) | ( | ) | ||||||||
| Net interest rate swaps | ( | ) | ( | ) | ||||||||
| Defined benefit plans: | ||||||||||||
| Amortization of net actuarial gains | ( | ) | ( | ) | ||||||||
| Other comprehensive loss | $ | ( | ) | $ | $ | ( | ) | |||||
The amortization of actuarial gains and losses, reflected in the preceding table, relate to the unregulated operations of the Company. Actuarial gains and losses attributable to the regulated operations are included as a regulatory asset. See Note 13 for a schedule of regulatory assets. The amortization of actual gains and losses is recognized as a component of net periodic pension and postretirement benefit costs under other income, net in the condensed consolidated statements of income.
Reconciliation of Accumulated Other Comprehensive Income
| Accumulated | ||||||||||||
| Other | ||||||||||||
| Interest Rate | Defined Benefit | Comprehensive | ||||||||||
| Swaps | Plans | Income | ||||||||||
| Balance at September 30, 2025 | $ | $ | ( | ) | $ | |||||||
| Other comprehensive income (loss) | ( | ) | ||||||||||
| Balance at June 30, 2026 | $ | $ | ( | ) | $ | |||||||
| 12. | Income Taxes |
The effective tax rates for the three-month and nine-month periods ended June 30, 2026 and 2025 reflected in the table below are less than the combined federal and state statutory rate of
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Effective tax rate | % | % | % | % | ||||||||||||
RGC RESOURCES, INC. AND SUBSIDIARIES
During September 2025, the Company participated in the IRS Fast Track Settlement (FTS), which is a process that provides the IRS and taxpayers an opportunity to resolve disputes with an appeals official using mediation skills and settlement authority. The IRS and Company agreed on a settlement equal to
ASC 740 provides for the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recognized in the financial statements. As a result of the FTS, the Company reduced the reserve for unrecognized tax benefits of $
The Company’s policy is to classify interest associated with uncertain tax positions as interest expense in the financial statements. Tax penalties, if any, are netted against other income.
The Company files a consolidated federal income tax return and state income tax returns in Virginia and West Virginia, and thus subject to examinations by federal and state tax authorities. The Company adjusted its income tax assets and liabilities to reflect the outcome of the FTS as of September 30, 2025. With the completion of the IRS examination of the fiscal and federal returns, the federal returns and the state returns for Virginia and West Virginia for the tax years ended through September 30, 2022 are closed to examination.
| 13. | Regulatory Assets and Liabilities |
The Company’s regulated operations follow the accounting and reporting requirements of ASC 980, Regulated Operations. A regulated company may defer costs that have been or are expected to be recovered from customers in a period different from the period in which the costs would ordinarily be charged to expense by an unregulated enterprise. When this situation occurs, costs are deferred as assets in the condensed consolidated balance sheet (regulatory assets) and amortized into expense over periods when such amounts are reflected in customer rates. Additionally, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for current collection in customer rates of costs that are expected to be incurred in the future (regulatory liabilities). In the event the provisions of ASC 980 no longer apply to any or all regulatory assets or liabilities, the Company would write off such amounts and include the effects in the condensed consolidated statements of income and comprehensive income in the period which ASC 980 no longer applied.
Regulatory assets included in the Company’s accompanying balance sheets are as follows:
| June 30, 2026 | September 30, 2025 | |||||||
| Assets: | ||||||||
| Current Assets: | ||||||||
| Regulatory assets: | ||||||||
| Accrued WNA revenues | $ | $ | ||||||
| Under-recovery of gas costs | ||||||||
| Under-recovery of RNG revenues | ||||||||
| Under-recovery of SAVE Plan revenues | ||||||||
| Accrued pension | ||||||||
| Other deferred expenses | ||||||||
| Total current | ||||||||
| Other Non-Current Assets: | ||||||||
| Regulatory assets: | ||||||||
| Premium on early retirement of debt | ||||||||
| Accrued pension | ||||||||
| Deferred LNG facility costs (Note 14) | ||||||||
| Other deferred expenses | ||||||||
| Total non-current | ||||||||
| Total regulatory assets | $ | $ | ||||||
RGC RESOURCES, INC. AND SUBSIDIARIES
Regulatory liabilities included in the Company’s accompanying balance sheets are as follows:
| June 30, 2026 | September 30, 2025 | |||||||
| Liabilities and Stockholders' Equity: | ||||||||
| Current Liabilities: | ||||||||
| Regulatory liabilities: | ||||||||
| Rate refund | $ | $ | ||||||
| Deferred income taxes | ||||||||
| Supplier refunds | ||||||||
| Other deferred liabilities | ||||||||
| Total current | ||||||||
| Deferred Credits and Other Non-Current Liabilities: | ||||||||
| Regulatory cost of retirement obligations | ||||||||
| Regulatory liabilities: | ||||||||
| Deferred income taxes | ||||||||
| Deferred postretirement medical | ||||||||
| Total non-current | ||||||||
| Total regulatory liabilities | $ | $ | ||||||
As of June 30, 2026 and September 30, 2025, the Company had regulatory assets in the amount of $
| 14. | Commitments and Contingencies |
Roanoke Gas currently holds the only franchises and/or CPCNs to distribute natural gas in its service area. These franchises generally extend for multi-year periods and are renewable by the municipalities, including exclusive franchises in the cities of Roanoke and Salem and the Town of Vinton, Virginia. All three franchises are set to expire December 31, 2035.
Due to the nature of the natural gas distribution business, the Company has entered into agreements with both suppliers and pipelines for natural gas commodity purchases, storage capacity and pipeline delivery capacity. The Company utilizes an asset manager to assist in optimizing the use of its transportation, storage rights and gas supply in order to provide a secure and reliable source of natural gas to its customers. The Company also has storage and pipeline capacity contracts to store and deliver natural gas to the Company’s distribution system. Roanoke Gas is currently served directly by primary pipelines that deliver the natural gas supplied to the Company’s distribution system. Depending on weather conditions and the level of customer demand, failure of one of these transmission pipelines could have a major adverse impact on the Company's ability to deliver natural gas to its customers and its results of operations.
During a routine inspection in the second quarter of fiscal 2026, the Company noted damage to its LNG facility and more specifically to the LNG tank. The LNG facility, which has been in operation since 1972, is used for peak shaving during the winter heating season. The Company has hired subject-matter experts to help assess the cause(s), the scope of the damage and to assist with developing possible workarounds or remediation. The Company has confirmed that the LNG facility will not be available in the 2026-2027 winter heating season. The Company has engaged with both the SCC Staff and its insurance carrier on these matters.
Although no natural or liquified natural gas was discovered outside of the LNG tank, upon the recommendation of experts and to ensure safety, during the third quarter of fiscal 2026, the Company substantially emptied the LNG tank, safely removing approximately $
With the LNG facility supply unavailable for the 2026-2027 winter heating season, the Company has taken several actions to add natural gas supply to its distribution system, including:
| 1. | Installing additional steel pipe to increase the gas flows from MVP farther into the Roanoke system | |
| 2. | Contracting for additional daily supply from the Columbia Gas Transmission Pipeline (often referred to as TCO) from November 2026 through March 2027 | |
| 3. | Procuring trucked LNG |
RGC RESOURCES, INC. AND SUBSIDIARIES
As of June 30, 2026, the Company had established a $
| 15. | Employee Benefit Plans |
The Company has both a pension plan and a postretirement plan. The pension plan covers the Company’s employees hired before January 1, 2017 and provides a retirement benefit based on years of service and employee compensation. The postretirement plan, covering employees hired before January 1, 2000, provides certain health care and supplemental life insurance benefits to retired employees who meet specific age and service requirements. Net pension plan and postretirement plan expense is detailed as follows:
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Components of net periodic pension cost: | ||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||
| Interest cost | ||||||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Recognized loss | ||||||||||||||||
| Net periodic pension cost | $ | $ | $ | $ | ||||||||||||
| Three Months Ended June 30, | Nine Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Components of postretirement benefit cost: | ||||||||||||||||
| Service cost | $ | $ | $ | $ | ||||||||||||
| Interest cost | ||||||||||||||||
| Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Recognized gain | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net postretirement benefit cost (income) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The components of net periodic benefit cost, excluding the service cost component, are included in other income, net in the condensed consolidated statements of income. Service cost is included in operations and maintenance expense in the condensed consolidated statements of income.
| 16. | Leases |
The Company has four leases for certain assets including office space and land classified as operating leases with original terms ranging from
Lease expense for minimum lease payments is recognized on a straight-line basis over the term of the agreement. The Company made an accounting policy election that payments under agreements with an initial term of 12 months or less will not be included on the condensed consolidated balance sheet but will be recognized when paid in the consolidated statements of operations.
RGC RESOURCES, INC. AND SUBSIDIARIES
The operating lease ROU assets are reflected in other non-current assets in the condensed consolidated balance sheets. The current operating lease liabilities and non-current lease liabilities are included in other current liabilities and deferred credits and other non-current liabilities, respectively, in the condensed consolidated balance sheets. The expense components of the Company’s operating leases are included under operations and maintenance expense in the condensed consolidated statements of income and were less than $
Other information related to leases were as follows:
| Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid on operating leases | $ | $ | ||||||
| Right of use obtained in exchange for operating lease obligations | N/A | 36,734 | ||||||
| Weighted-average remaining term (in years) | ||||||||
| Weighted-average discount rate | % | % | ||||||
| Nine Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Supplemental Cash Flow Information: | ||||||||
| Cash paid on operating leases |
|
| ||||||
| Right of use obtained in exchange for operating lease obligations | | 36,734 | ||||||
| Weighted-average remaining term (in years) | | | ||||||
| Weighted-average discount rate | | | ||||||
On June 30, 2026, the future minimum rental payments under non-cancelable operating leases by fiscal year were as follows:
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| Thereafter | ||||
| Total minimum lease payments | ||||
| Less imputed interest | ( | ) | ||
| Total | $ |
| 17. | Subsequent Events |
The Company has evaluated subsequent events through the date the financial statements were issued. There were no items not otherwise disclosed which would have materially impacted the Company's condensed consolidated financial statements.
RGC RESOURCES, INC. AND SUBSIDIARIES
ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
This report contains forward-looking statements that relate to future transactions, events or expectations. In addition, Resources may announce or publish forward-looking statements relating to such matters as anticipated financial performance, business prospects and closures, investments, inflation, ratemaking and other regulatory actions, debt refinancing, technological developments, new products, research and development activities, weather variations, operational impacts, including those related to the LNG facility, and similar matters. These statements are based on management’s current expectations and information available at the time of such statements and are believed to be reasonable and are made in good faith. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. 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 the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company’s business include, but are not limited to, those set forth in the following discussion and within Item 1A “Risk Factors” in the Company’s 2025 Annual Report on Form 10-K, as well as an updated risk within Item 1A "Risk Factors" in the Company's March 31, 2026 Form 10-Q. These factors are difficult to predict and many are beyond the Company’s control. Accordingly, while the Company believes its forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. When used in the Company’s documents or news releases, the words “anticipate,” “believe,” “intend,” “plan,” “estimate,” “predict,” “target,” “expect,” “objective,” “projection,” “potential,” “forecast,” “budget,” “assume,” “indicate” or similar words or future or conditional verbs such as “will,” “would,” “should,” “can,” “could,” “may,” or “might” are intended to identify forward-looking statements.
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.
The three-month and nine-month earnings presented herein should not be considered as reflective of the Company’s consolidated financial results for the fiscal year ending September 30, 2026. The total revenues and margins realized during the first nine months reflect higher billings due to the weather-sensitive nature of the natural gas business.
Overview
Resources is an energy services company primarily engaged in the regulated sale and distribution of natural gas to approximately 63,800 residential, commercial and industrial customers in Roanoke, Virginia and surrounding localities through its Roanoke Gas subsidiary. Midstream, a wholly owned subsidiary of Resources, is a less than 1% investor in the MVP, Southgate and Boost. The utility operations of Roanoke Gas are regulated by the SCC, which oversees the terms, conditions and rates charged to customers for natural gas service, safety standards, extension of service and depreciation. The Company is also subject to regulation from the United States Department of Transportation in regard to the construction, operation, maintenance, safety and integrity of its transmission and distribution pipelines. FERC regulates the prices for the transportation and delivery of natural gas to the Company’s distribution system and underground storage services. In addition, the Company is subject to other regulations which are not necessarily industry specific.
Nearly all of the Company’s revenues are derived from the sale and delivery of natural gas to Roanoke Gas customers based on rates and fees authorized by the SCC. These rates are designed to provide the Company with the opportunity to recover its gas and non-gas expenses and to earn a reasonable rate of return for shareholders based on normal weather. These rates are determined based on various rate applications filed with the SCC. Generally, investments related to extending service to new customers are recovered through the additional revenues generated by the non-gas base rates in place at that time. The investment in replacing and upgrading existing non-SAVE infrastructure, as well as recovering increases in non-gas expenses due to inflationary pressures, regulatory requirements or operational needs, are generally not recoverable until a formal rate application is filed to include the additional investment and higher costs, and new non-gas base rates are implemented.
In response to continued inflationary pressures, the Company filed an expedited rate application on December 2, 2025 with the SCC seeking to increase its non-gas base rates by $4.3 million annually. The SCC permitted the Company to implement its new rates on an interim basis for service rendered on or after January 1, 2026, subject to refund. On July 1, 2026, the Company reached a settlement with the SCC Staff on all outstanding issues in the case. Under the terms of the settlement, the Company agreed to an annual increase in revenues of $3.85 million. The Company began billing the stipulated rates effective August 1, 2026, as approved by the Hearing Examiner. The Company has recorded a provision for refund, including interest, associated with customer billings for the difference between the interim rates and the stipulated rates. The terms of the settlement stipulate that updates to future SAVE and RNG Riders will utilize a capital structure containing a 59% equity ratio and a 9.9% return on equity. Based on the Commission's procedural schedule, the Company expects final resolution of the case in the first quarter of fiscal 2027.
RGC RESOURCES, INC. AND SUBSIDIARIES
As the Company’s business is seasonal in nature, volatility in winter weather and the commodity price of natural gas can impact the effectiveness of the Company’s rates in recovering its costs and providing a reasonable return for its shareholders. In order to mitigate the effect of weather variations and other factors not provided for in the Company's base rates, Roanoke Gas has certain approved rate mechanisms in place that help provide stability in earnings, adjust for volatility in the price of natural gas and provide a return on qualified infrastructure investment. These mechanisms include the SAVE Rider, WNA, ICC, RNG Rider and PGA.
The SAVE Plan and Rider provides the Company with a mechanism through which it recovers costs related to qualified SAVE infrastructure investments on a prospective basis, until a rate application is filed incorporating these investments in non-gas base rates. Roanoke Gas filed and received approval from the SCC for an updated annual SAVE Rider rate which became effective October 1, 2025. As a result of the updated SAVE Rider, SAVE Plan revenues increased by approximately $242,000 and $774,000, respectively, for the three-month and nine-month periods ended June 30, 2026 compared to the same periods last year. The updated SAVE Rider is expected to result in approximately $2.61 million of annualized SAVE-related revenues during fiscal 2026. On June 30, 2026, Roanoke Gas filed for approval of an updated annual SAVE Rider to become effective October 1, 2026. The proposed SAVE Rider revenue requirement of $3.79 million is designed to recover the costs associated with prior years' SAVE-eligible investments that occurred under the current SAVE Plan and an estimated $9.26 million of SAVE-eligible investment during fiscal 2027. The revenue requirement also included an adjustment for under-recovered costs incurred during the prior year. The Company expects final resolution from the SCC in September 2026. Additional information regarding the SAVE Plan and Rider is provided in Note 4 of the condensed consolidated financial statements.
The WNA mechanism reduces the volatility in earnings due to the variability in temperatures during the heating season. The WNA is based on the most recent 30-year temperature average and provides the Company with a level of earnings protection when weather is warmer than normal and provides its customers with price protection when weather is colder than normal. The WNA allows the Company to recover from its customers the lost margin (excluding gas costs) from warmer-than-normal weather and correspondingly requires the Company to refund the excess margin earned for colder-than-normal weather. The WNA mechanism used by the Company is based on a linear regression model that determines the value of a single heating degree day and thereby estimates the revenue adjustment based on weather variance from normal. Any billings or refunds related to the WNA are completed following each WNA year, which extends for the 12-month period from April to March. For the three and nine months ended June 30, 2026, the Company accrued approximately $383,000 and $361,000, respectively, in additional revenues under the WNA model for weather that was 18% and 1% warmer than normal, compared to approximately $493,000 and $966,000 in additional revenues for weather that was 22% and 4% warmer than normal for the corresponding periods last year. The adjusted WNA balance for the 12-month period ended March 31, 2026 was approximately $481,000, and was collected from customers during May 2026.
The Company has an approved rate structure to mitigate the impact of the financing costs of its natural gas inventory. Under this rate structure, Roanoke Gas recognizes revenue by applying the ICC factor, based on the Company’s weighted-average cost of capital, including interest rates on short-term and long-term debt, and the Company’s authorized return on equity, to the average cost of natural gas inventory during the period. Total ICC revenues decreased nominally for both the three-month and nine-month periods ended June 30, 2026 compared to the corresponding periods last year. While the average price of gas in storage fluctuated nominally for the nine-month period ended June 30, 2026 compared to the same period in the prior year, the average price of gas in storage decreased by 8% during the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025. If natural gas prices remain at or continue to decline as compared to the prior year, coupled with reduced storage levels at the LNG facility, the average dollar balance of gas in storage is expected to decrease, leading to lower ICC revenues in fiscal 2026 and 2027.
Roanoke Gas operates an RNG facility, through a cooperative agreement with the Western Virginia Water Authority, to produce commercial quality RNG for delivery into its distribution system. Roanoke Gas is allowed to recover the costs associated with the investment in its RNG facility and the related operating costs through an RNG Rider added to customer bills that was approved by the SCC in 2023 and updated annually. Customers receive the benefit of environmental credits generated through the production of RNG. Roanoke Gas recognized approximately $462,000 and $1,396,000, respectively, in RNG revenue for the three and nine months ended June 30, 2026 compared to approximately $479,000 and $1,296,000 for the corresponding periods in the prior year.
The cost of natural gas, which is a pass-through cost, is independent of the Company's non-gas rates. Accordingly, the Company's approved billing rates include a component designed to allow for the recovery of the cost of natural gas. This rate component, referred to as the PGA, allows the Company to pass through to its customers increases and decreases in natural gas costs through a quarterly filing, or more frequent if necessary, once SCC staff approval is received. As actual costs will differ from the projections used in establishing the PGA rate, the Company will either over-recover or under-recover its actual gas costs during the period. The difference between actual costs incurred and costs recovered through the application of the PGA is recorded as a regulatory asset or liability. At the end of the annual deferral period, the balance is amortized over a succeeding 12-month period through the ensuing non-gas rate component.
RGC RESOURCES, INC. AND SUBSIDIARIES
Results of Operations
The analysis on the results of operations is based on the consolidated operations of the Company, which is primarily associated with the utility segment. Additional segment analysis is provided when Midstream's investment in affiliates represents a significant component of the comparison.
The Company's operating revenues are affected by the cost of natural gas, as reflected in the condensed consolidated statements of income under cost of gas - utility. The cost of natural gas, which includes commodity price, transportation, storage, injection and withdrawal fees, with any increase or decrease offset by a correlating change in revenue through the PGA, is passed through to customers at cost. Accordingly, management believes that gross utility margin, a non-GAAP financial measure defined as utility revenues less cost of gas, is a useful and relevant measure to analyze financial performance. The term gross utility margin is not intended to represent or replace gross margin, the most comparable GAAP financial measure, as an indicator of operating performance and is not necessarily comparable to similarly titled measures reported by other companies. A reconciliation between gross utility margin and gross margin is presented under the Gross Utility Margin section below. The following results of operations analyses will reference gross utility margin.
Three Months Ended June 30, 2026:
Net income increased by $20,488 for the three months ended June 30, 2026, compared to the same period last year.
The tables below reflect operating revenues, volume activity and heating degree days.
| Three Months Ended June 30, | Increase / (Decrease) | |||||||||||||||
| 2026 |
2025 |
Percentage |
||||||||||||||
| Operating Revenues |
||||||||||||||||
| Gas utility |
$ | 17,082,066 | $ | 17,239,550 | $ | (157,484 | ) | (1 | )% | |||||||
| Non utility |
23,327 | 25,065 | (1,738 | ) | (7 | )% | ||||||||||
| Total operating revenues |
$ | 17,105,393 | $ | 17,264,615 | $ | (159,222 | ) | (1 | )% | |||||||
| Delivered Volumes |
||||||||||||||||
| Regulated natural gas (DTH) |
||||||||||||||||
| Residential and commercial |
725,779 | 735,293 | (9,514 | ) | (1 | )% | ||||||||||
| Transportation and interruptible |
1,450,364 | 1,146,410 | 303,954 | 27 | % | |||||||||||
| Total delivered volumes |
2,176,143 | 1,881,703 | 294,440 | 16 | % | |||||||||||
| HDD |
263 | 250 | 13 | 5 | % | |||||||||||
Total operating revenues for the three months ended June 30, 2026, compared to the same period last year, decreased slightly primarily due to weather-related normalization and lower natural gas commodity prices more than offsetting the implementation of a non-gas base rate increase and increases in SAVE revenues. Weather-sensitive residential and commercial volumes decreased, despite the increase in HDD, as weather for the whole quarter was 18% warmer compared to the 30-year norm. Transportation and interruptible volumes increased by 27% primarily driven by increased business activity of a single, multi-fuel customer that has been utilizing natural gas as its primary fuel source. Additionally, total natural gas costs decreased by 12% compared to the same period last year, primarily due to pipeline capacity charges decreasing over $350,000. The average commodity price per dekatherm during the current quarter was $3.10 compared to $3.60 per dekatherm for the corresponding quarter in the prior year. Roanoke Gas placed new non-gas rates into effect for natural gas service rendered on or after January 1, 2026, subject to refund, and when coupled with the increase in delivered volumes, contributed an additional $643,000 to revenues in the current quarter compared to the same period in the prior year. SAVE Plan revenues increased by approximately $242,000 compared to the same period in the prior year as Roanoke Gas continues to invest in qualified SAVE infrastructure projects.
| Three Months Ended June 30, | Increase / (Decrease) | |||||||||||||||
| 2026 |
2025 |
Percentage |
||||||||||||||
| Gross Utility Margin |
||||||||||||||||
| Gas utility revenues |
$ | 17,082,066 | $ | 17,239,550 | $ | (157,484 | ) | (1 | )% | |||||||
| Cost of gas - utility |
6,902,067 | 7,816,181 | (914,114 | ) | (12 | )% | ||||||||||
| Gross utility margin |
$ | 10,179,999 | $ | 9,423,369 | $ | 756,630 | 8 | % | ||||||||
RGC RESOURCES, INC. AND SUBSIDIARIES
Gross utility margin increased 8% from the same period last year primarily as a result of the aforementioned increases in non-gas base rates, delivered volumes and SAVE revenues. The WNA model calculates what the corresponding volumes would be if temperatures were equivalent to the 30-year normal during each period and adjusts for the difference in margin from normal. In applying the WNA model to both the current and prior periods, the volumetric margin, inclusive of the WNA, increased by approximately $533,000 due to weather that was 18% warmer than normal.
The changes in the components of gas utility margin are summarized below:
| Three Months Ended June 30, | Increase/ | |||||||||||
| 2026 |
2025 |
(Decrease) |
||||||||||
| Customer base charge |
$ | 4,143,580 | $ | 4,094,700 | $ | 48,880 | ||||||
| ICC |
78,635 | 92,187 | (13,552 | ) | ||||||||
| SAVE Plan |
668,766 | 426,551 | 242,215 | |||||||||
| Volumetric |
4,424,757 | 3,781,321 | 643,436 | |||||||||
| WNA |
382,515 | 492,840 | (110,325 | ) | ||||||||
| RNG |
461,938 | 479,380 | (17,442 | ) | ||||||||
| Other revenues |
19,808 | 56,390 | (36,582 | ) | ||||||||
| Total |
$ | 10,179,999 | $ | 9,423,369 | $ | 756,630 | ||||||
The tables below provide a reconciliation between gross utility margin and gross margin:
| Gas Utility |
Investment in Affiliates |
Consolidated Total |
||||||||||
| Three Months Ended June 30, 2026 |
||||||||||||
| Operating revenues |
||||||||||||
| Gas utility |
$ | 17,082,066 | $ | — | $ | 17,082,066 | ||||||
| Non utility |
23,327 | — | 23,327 | |||||||||
| Total operating revenues |
17,105,393 | — | 17,105,393 | |||||||||
| Cost of sales |
||||||||||||
| Cost of gas - utility |
(6,902,067 | ) | — | (6,902,067 | ) | |||||||
| Cost of sales - non utility |
(4,825 | ) | — | (4,825 | ) | |||||||
| Depreciation and amortization |
(3,071,105 | ) | — | (3,071,105 | ) | |||||||
| Operations and maintenance |
(5,098,310 | ) | (23,690 | ) | (5,122,000 | ) | ||||||
| Total cost of sales |
(15,076,307 | ) | (23,690 | ) | (15,099,997 | ) | ||||||
| Gross margin (GAAP) |
2,029,086 | (23,690 | ) | 2,005,396 | ||||||||
| Corporate and other, net |
(18,502 | ) | — | (18,502 | ) | |||||||
| Depreciation and amortization |
3,071,105 | — | 3,071,105 | |||||||||
| Operations and maintenance |
5,098,310 | 23,690 | 5,122,000 | |||||||||
| Gross utility margin (Non-GAAP) |
$ | 10,179,999 | $ | — | $ | 10,179,999 | ||||||
RGC RESOURCES, INC. AND SUBSIDIARIES
| Gas Utility |
Investment in Affiliates |
Consolidated Total |
||||||||||
| Three Months Ended June 30, 2025 |
||||||||||||
| Operating revenues |
||||||||||||
| Gas utility |
$ | 17,239,550 | $ | — | $ | 17,239,550 | ||||||
| Non utility |
25,065 | — | 25,065 | |||||||||
| Total operating revenues |
17,264,615 | — | 17,264,615 | |||||||||
| Cost of sales |
||||||||||||
| Cost of gas - utility |
(7,816,181 | ) | — | (7,816,181 | ) | |||||||
| Cost of sales - non utility |
(4,791 | ) | — | (4,791 | ) | |||||||
| Depreciation and amortization |
(2,909,344 | ) | — | (2,909,344 | ) | |||||||
| Operations and maintenance |
(4,544,554 | ) | (43,118 | ) | (4,587,672 | ) | ||||||
| Total cost of sales |
(15,274,870 | ) | (43,118 | ) | (15,317,988 | ) | ||||||
| Gross margin (GAAP) |
1,989,745 | (43,118 | ) | 1,946,627 | ||||||||
| Corporate and other, net |
(20,274 | ) | — | (20,274 | ) | |||||||
| Depreciation and amortization |
2,909,344 | — | 2,909,344 | |||||||||
| Operations and maintenance |
4,544,554 | 43,118 | 4,587,672 | |||||||||
| Gross utility margin (Non-GAAP) |
$ | 9,423,369 | $ | — | $ | 9,423,369 | ||||||
Operations and maintenance expenses increased $534,328, or 12%. The Company continues to experience inflation over the 2% level historically targeted by the Federal Reserve. Inflation levels in health care benefits, certain types of insurance, professional services and IT service costs, as well as other items, continue to put upward pressure on the Company's expenses. Personnel costs increased by approximately $180,000 due to increased staffing and the inflationary impact on salaries and benefits. Capitalized overheads declined by approximately $125,000 as there was no capitalization associated with LNG liquefaction during the quarter. See Note 14 of the consolidated financial statements for additional information related to the LNG facility. Higher corporate insurance premiums and professional services expenses accounted for much of the remaining cost increase.
Taxes other than income taxes increased by $83,060, or 11%, due to higher property taxes associated with growth in utility property and increased tax rates.
Depreciation expense increased by $161,761, or 6%, corresponding to a similar increase in investments in depreciable utility property. Increases over the last year in capitalized software, with shorter useful lives, resulted in depreciation expense increasing slightly more than the 5% increase in the average gross utility property balance from the prior year quarter.
Other income, net increased by $84,965, or 35%, primarily due to actuarially determined postretirement benefit plan income.
Interest expense increased by $38,996, or 3%, as the average debt outstanding for the quarter increased by approximately 5% compared to the same period in the prior year. Midstream's interest expense decreased by $66,044, or 10%, as the total average debt outstanding decreased by approximately $1,197,000 as a result of principal payments made on term notes, along with the weighted-average interest rate decreasing from 5.10% during the third quarter of fiscal 2025 to 4.72% in the current quarter. Roanoke Gas' interest expense increased by $105,040, or 13%, as total average debt outstanding increased by approximately $7,573,000 associated with higher net borrowings under the Company's line-of-credit. Roanoke Gas' weighted-average interest rate increased from 3.82% in the third quarter of fiscal 2025 to 3.96% in the current quarter. See Notes 6 and 7 of the consolidated financial statements for more information on the Company's debt.
RGC RESOURCES, INC. AND SUBSIDIARIES
Nine Months Ended June 30, 2026:
Net income increased by $701,946 for the nine months ended June 30, 2026, compared to the same period last year, primarily due to the aforementioned implementation of higher non-gas base rates in January 1, 2026, lower interest expense and income taxes, slightly offset by continued inflationary pressures on operating costs.
The tables below reflect operating revenues, volume activity and heating degree days.
| Nine Months Ended June 30, |
Increase/ |
|||||||||||||||
| 2026 |
2025 |
(Decrease) |
Percentage |
|||||||||||||
| Operating Revenues |
||||||||||||||||
| Gas utility |
$ | 92,750,085 | $ | 80,938,690 | $ | 11,811,395 | 15 | % | ||||||||
| Non utility |
72,785 | 77,508 | (4,723 | ) | (6 | )% | ||||||||||
| Total operating revenues |
$ | 92,822,870 | $ | 81,016,198 | $ | 11,806,672 | 15 | % | ||||||||
| Delivered Volumes |
||||||||||||||||
| Regulated natural gas (DTH) |
||||||||||||||||
| Residential and commercial |
6,222,831 | 6,270,883 | (48,052 | ) | (1 | )% | ||||||||||
| Transportation and interruptible |
3,731,778 | 3,630,280 | 101,498 | 3 | % | |||||||||||
| Total delivered volumes |
9,954,609 | 9,901,163 | 53,446 | 1 | % | |||||||||||
| HDD |
3,752 | 3,641 | 111 | 3 | % | |||||||||||
Total operating revenues for the nine months ended June 30, 2026, compared to the same period last year, increased by approximately 15% primarily due to higher natural gas commodity prices, the implementation of a non-gas base rate increase and increased SAVE revenues. Total natural gas costs increased by 26% compared to the same period last year, primarily due to pipeline capacity charges increasing over $1.9 million, which corresponds to a 29% increase in the gas cost component included in the total customer billing rate. The average commodity price per dekatherm for the first nine months of fiscal 2026 was $4.84 compared to $3.67 per dekatherm for the same period in the prior year. Commodity prices during the second quarter of fiscal 2026 included the effect of Winter Storm Fern. The non-gas base rate increase implemented in January 2026, which will generate approximately $3.85 million in additional annual revenues, have contributed an additional $2.0 million to non-gas volumetric revenues during the current year compared to the same period in the prior year. Weather-sensitive residential and commercial volumes declined 1%, while transportation and interruptible volumes increased by 3% primarily driven by business activity of a single, multi-fuel customer that has been utilizing natural gas as its primary fuel source. SAVE Plan revenues increased by approximately $774,000 compared to the same period in the prior year as Roanoke Gas continues to invest in qualified SAVE infrastructure projects.
| Nine Months Ended June 30, |
||||||||||||||||
| 2026 |
2025 |
Increase |
Percentage |
|||||||||||||
| Gross Utility Margin |
||||||||||||||||
| Gas utility revenues |
$ | 92,750,085 | $ | 80,938,690 | $ | 11,811,395 | 15 | % | ||||||||
| Cost of gas - utility |
46,095,234 | 36,581,043 | 9,514,191 | 26 | % | |||||||||||
| Gross utility margin |
$ | 46,654,851 | $ | 44,357,647 | $ | 2,297,204 | 5 | % | ||||||||
Gross utility margin increased 5% from the same period last year primarily as a result of the aforementioned increases in non-gas base rates and SAVE revenues.
The changes in the components of gas utility margin are summarized below:
| Nine Months Ended June 30, |
Increase/ |
|||||||||||
| 2026 |
2025 |
(Decrease) |
||||||||||
| Customer base charge |
$ | 12,377,037 | $ | 12,278,739 | $ | 98,298 | ||||||
| ICC |
357,587 | 383,852 | (26,265 | ) | ||||||||
| SAVE Plan |
1,844,645 | 1,070,742 | 773,903 | |||||||||
| Volumetric |
30,164,279 | 28,197,870 | 1,966,409 | |||||||||
| WNA |
361,405 | 966,296 | (604,891 | ) | ||||||||
| RNG |
1,396,197 | 1,296,313 | 99,884 | |||||||||
| Other revenues |
153,701 | 163,835 | (10,134 | ) | ||||||||
| Total |
$ | 46,654,851 | $ | 44,357,647 | $ | 2,297,204 | ||||||
RGC RESOURCES, INC. AND SUBSIDIARIES
The tables below provide a reconciliation between gross utility margin and gross margin:
| Gas Utility |
Investment in Affiliates |
Consolidated Total |
||||||||||
| Nine Months Ended June 30, 2026 |
||||||||||||
| Operating revenues |
||||||||||||
| Gas utility |
$ | 92,750,085 | $ | — | $ | 92,750,085 | ||||||
| Non utility |
72,785 | — | 72,785 | |||||||||
| Total operating revenues |
92,822,870 | — | 92,822,870 | |||||||||
| Cost of sales |
||||||||||||
| Cost of gas - utility |
(46,095,234 | ) | — | (46,095,234 | ) | |||||||
| Cost of sales - non utility |
(14,563 | ) | — | (14,563 | ) | |||||||
| Depreciation and amortization |
(9,213,315 | ) | — | (9,213,315 | ) | |||||||
| Operations and maintenance |
(15,873,629 | ) | (89,818 | ) | (15,963,447 | ) | ||||||
| Total cost of sales |
(71,196,741 | ) | (89,818 | ) | (71,286,559 | ) | ||||||
| Gross margin (GAAP) |
21,626,129 | (89,818 | ) | 21,536,311 | ||||||||
| Corporate and other, net |
(58,222 | ) | — | (58,222 | ) | |||||||
| Depreciation and amortization |
9,213,315 | — | 9,213,315 | |||||||||
| Operations and maintenance |
15,873,629 | 89,818 | 15,963,447 | |||||||||
| Gross utility margin (Non-GAAP) |
$ | 46,654,851 | $ | — | $ | 46,654,851 | ||||||
| Gas Utility |
Investment in Affiliates |
Consolidated Total |
||||||||||
| Nine Months Ended June 30, 2025 |
||||||||||||
| Operating revenues |
||||||||||||
| Gas utility |
$ | 80,938,690 | $ | — | $ | 80,938,690 | ||||||
| Non utility |
77,508 | — | 77,508 | |||||||||
| Total operating revenues |
81,016,198 | — | 81,016,198 | |||||||||
| Cost of sales |
||||||||||||
| Cost of gas - utility |
(36,581,043 | ) | — | (36,581,043 | ) | |||||||
| Cost of sales - non utility |
(14,558 | ) | — | (14,558 | ) | |||||||
| Depreciation and amortization |
(8,609,472 | ) | — | (8,609,472 | ) | |||||||
| Operations and maintenance |
(14,484,248 | ) | (115,286 | ) | (14,599,534 | ) | ||||||
| Total cost of sales |
(59,689,321 | ) | (115,286 | ) | (59,804,607 | ) | ||||||
| Gross margin (GAAP) |
21,326,877 | (115,286 | ) | 21,211,591 | ||||||||
| Corporate and other, net |
(62,950 | ) | — | (62,950 | ) | |||||||
| Depreciation and amortization |
8,609,472 | — | 8,609,472 | |||||||||
| Operations and maintenance |
14,484,248 | 115,286 | 14,599,534 | |||||||||
| Gross utility margin (Non-GAAP) |
$ | 44,357,647 | $ | — | $ | 44,357,647 | ||||||
Operations and maintenance expenses increased $1,363,913, or 9%. The Company continues to experience inflation over the 2% level historically targeted by the Federal Reserve. Inflation levels in health care benefits, certain types of insurance, contracted services and IT service costs, as well as other items, continue to put upward pressure on the Company's expenses. Personnel costs increased by approximately $327,000 due to increased staffing and the inflationary impact on salaries and benefits. Contracted services increased by approximately $166,000 also due to inflationary pressures as well as increased customer turn-ons. Capitalized overheads declined by approximately $436,000 as there was no capitalization associated with LNG liquefaction during the current year. See Note 14 of the consolidated financial statements for additional information related to the LNG facility. Higher corporate insurance premiums and RNG-related costs accounted for much of the remaining increase, which were slightly offset by a decrease in professional services expenses.
RGC RESOURCES, INC. AND SUBSIDIARIES
Taxes other than income taxes increased by $242,687, or 11%, due to higher property taxes associated with growth in utility property and increased tax rates, as well as increases in payroll taxes.
Depreciation expense increased by $603,843, or 7%, corresponding to a similar increase in investments in depreciable utility property. Increases over the last year in capitalized software, with shorter useful lives, resulted in depreciation expense increasing slightly more than the 5% increase in the average gross utility property balance.
Equity in earnings of unconsolidated affiliate increased by $67,769, or 3%. See Note 5 of the consolidated financial statements for additional information related to the MVP.
Other income, net increased by $345,406, or 29%, primarily due to interest income and increased postretirement benefit plan income, partially offset by a decrease in revenue sharing related to the asset management agreement.
Interest expense decreased by $114,221, or 2%, as the weighted-average interest rate on total debt decreased from 4.36% during the first nine months of fiscal 2025 to 4.12% in the current year. Midstream's interest expense decreased by $276,339, or 13%, as the total average debt outstanding decreased by approximately $1,372,000 as a result of principal payments made on term notes, along with the weighted-average interest rate decreasing from 5.18% during the first nine months of fiscal 2025 to 4.62 % in the current year. Roanoke Gas' interest expense increased by $162,118, or 6%, as total average debt outstanding increased by approximately $4,342,000 associated with net borrowings under the Company's line-of-credit. Roanoke Gas' weighted-average interest rate remained relatively flat from the first nine months of fiscal 2025 to the current year. See Notes 6 and 7 of the consolidated financial statements for more information on the Company's debt.
Income tax expense decreased by $92,516, or 2%. The effective tax rate was 22.1% and 23.4% for the nine-month periods ended June 30, 2026 and 2025, respectively. The effective tax rate is below the combined statutory state and federal rate due to the amortization of excess deferred taxes and tax credits. R&D tax credit amortization and certain restricted stock-related tax deductions further reduced the effective tax rate during the current period.
Critical Accounting Policies and Estimates
The consolidated financial statements of Resources are prepared in accordance with GAAP. The amounts of assets, liabilities, revenues and expenses reported in the Company’s consolidated financial statements are affected by accounting policies, estimates and assumptions that are necessary to comply with generally accepted accounting principles. Estimates used in the financial statements are derived from prior experience, statistical analysis and management judgments. Actual results may differ significantly from these estimates and assumptions.
There have been no significant changes to the critical accounting policies as reflected in the Company’s Annual Report on Form 10-K for the year ended September 30, 2025.
Asset Management and Gas Supply
Roanoke Gas relies on multiple interstate pipelines and gas storage to transport natural gas from production and storage fields into the Company's distribution system. Roanoke Gas is currently served directly by three primary pipelines and uses a third-party asset manager to oversee its pipeline transportation, storage rights and gas supply inventories and deliveries in order to provide a secure and reliable source of natural gas to its customers. In return for utilizing the excess capacities of the transportation and storage rights, the asset manager pays Roanoke Gas a monthly utilization fee. In accordance with an SCC order issued in 2018, a portion of the utilization fee is retained by the Company with the balance passed through to customers through reduced gas costs. The current asset management contract is for a three-year term, expiring in March 2028.
RGC RESOURCES, INC. AND SUBSIDIARIES
In addition, the Company produces commercial quality RNG for delivery into its distribution system and operates and maintains an LNG liquefaction, vaporization and storage tank facility to supplement heating season gas supply requirements on the coldest days (the LNG peak shaving facility). During a routine inspection in the second quarter of fiscal 2026, the Company noted damage to its LNG facility, and more specifically, to the LNG tank. The Company has hired subject-matter experts to help assess the cause(s), the scope of the damage and to design possible workarounds, replacement or remediation. The Company has confirmed that the LNG facility will not be available in the 2026-2027 winter heating season. Although no natural or liquified natural gas was discovered outside of the LNG tank, analysis shows the LNG tank underwent significant stress. Further damage investigation costs could exceed $1 million, could be partially destructive in nature, and may or may not be determinative. Accordingly, the Company is considering alternatives and has not finalized its long-term plans for the LNG tank or the LNG facility, but has taken several actions to add natural gas supply to its distribution system, including (1) installing additional steel pipe to increase the gas flows from MVP farther into the Roanoke system, (2) contracting for additional daily supply from TCO from November 2026 through March 2027, and (3) procuring trucked LNG. Currently, the Company is unable to estimate the total cost associated with this event. The Company has fully engaged with its insurer but does not yet know what portion, if any, of its spending will be covered by insurance. The Company has held numerous discussions with the SCC Staff, and continues to keep them apprised of significant developments. The Company has established a regulatory asset for costs to safely empty the LNG tank and evaluate future options, and will seek recovery of the regulatory asset in a future regulatory proceeding.
Equity Investment in Mountain Valley Pipeline
The Company owns a less than 1% interest in the LLC that owns and operates the MVP, Southgate and Boost, as defined in the respective operating agreements. The Company accounts for its interest in the LLC under the equity method of accounting given the LLC maintains specific ownership accounts for each investor, and also considering the Company's rights under the LLC management agreement and the Company's involvement as a stakeholder of the MVP. The Company has been using the equity method since the inception of its investment in fiscal 2016.
The Company recognizes its share of earnings from the LLC, favorably adjusted for a basis difference between the Company's proportional share of assets and its carrying value that arose when the Company recorded an other-than-temporary impairment of its investment in 2022. This basis difference amortization is a favorable non-cash adjustment over the operational life of the MVP, or 40 years. For the third quarter of fiscal 2026 and 2025, the Company recorded equity in earnings of consolidated affiliates of approximately $764,000 and $772,000, respectively. For the first nine months of fiscal 2026 and 2025, the Company recorded equity in earnings of consolidated affiliates of approximately $2.5 million and $2.4 million, respectively. The Company received a quarterly cash distribution of its share from the LLC totaling approximately $971,000 and $874,000 during the third quarter of fiscal 2026 and 2025, respectively, which was a return on its invested capital, and expects future quarterly distributions to be of a similar magnitude. For the first nine months of fiscal 2026 and 2025, quarterly cash distributions totaled $2.4 million and $2.7 million, respectively. The Company is using this cash to pay interest and other expenditures related to Midstream. The Company refinanced all of the debt supporting its investment in the MVP in September 2025, as described in the liquidity section.
Regulatory
See Note 4 of the condensed consolidated financial statements for discussion on Regulatory matters.
Capital Resources and Liquidity
Due to the capital-intensive nature of the utility business, as well as the impact of weather variability, the Company’s primary capital needs are the funding of its capital projects, the seasonal funding of its natural gas inventories and accounts receivables, debt service and payments of dividends to shareholders. The Company anticipates funding these items through its operating cash flows, credit availability under short-term and long-term debt agreements and proceeds from the sale of its common stock.
The following table summarizes the sources and uses of cash for the nine-month periods ended June 30, 2026 and 2025:
| Nine Months Ended June 30, |
||||||||
| Cash Flow Summary |
2026 |
2025 |
||||||
| Net cash provided by operating activities |
$ | 22,408,613 | $ | 28,273,016 | ||||
| Net cash used in investing activities |
(17,058,705 | ) | (15,756,669 | ) | ||||
| Net cash used in financing activities |
(5,196,850 | ) | (11,283,643 | ) | ||||
| Increase in cash and cash equivalents |
$ | 153,058 | $ | 1,232,704 | ||||
RGC RESOURCES, INC. AND SUBSIDIARIES
Cash Flows Provided by Operating Activities:
The seasonal nature of the natural gas business causes operating cash flows to fluctuate significantly during the year as well as from year-to-year. Factors including weather, energy prices, natural gas storage levels and customer collections contribute to working capital levels and related cash flows. Generally, operating cash flows are positive during the second and third fiscal quarters as a combination of earnings, declining storage gas levels and collections on customer accounts contribute to higher cash inflows. During the first and fourth fiscal quarters, operating cash flows are generally moderate and decrease due to increases in natural gas storage levels and rising customer receivable balances.
Cash flows from operating activities for the nine months ended June 30, 2026 decreased by $5,864,403 compared to the same period last year. Under-recovered gas costs increased approximately $2.4 million during the nine months ended June 30, 2026 compared to a $4.1 million increase in over-recovered gas cost during the same period in the prior year. The fluctuation from a liability position to an asset position resulted in a decline of approximately $6.5 million in operating cash flows between periods. Additionally, due to the extended and extreme cold weather experienced across the eastern half of the United States during Winter Storm Fern, natural gas prices spiked from less than $4 per DTH to well over $30 per DTH at the end of January and into February 2026. As a result, total commodity costs increased from $3.67 per DTH during the first nine months of fiscal 2025 to $4.84 per DTH in the first nine months of fiscal 2026. Although incurred by the Company during the second quarter of fiscal 2026, the recovery of these costs will be collected from customers over the ensuing 12 months. The colder weather and increased gas costs also resulted in higher accounts receivable balances. WNA revenues for the first nine months of fiscal 2026 declined by approximately $605,000 from the same period last year, corresponding to a 3% increase in the number of heating degree days between periods. This decline in the WNA receivable contributed approximately $387,000 in operating cash.
Cash Flows Used in Investing Activities:
Investing activities primarily consist of expenditures related to Roanoke Gas' utility property, which includes replacing aging natural gas pipe with new plastic or coated steel pipe, improvements to the LNG plant, separate from the repairs previously discussed, and gas distribution system facilities and expansion of its natural gas system to meet new customer demand. The Company is continuing its focus on SAVE infrastructure replacement projects, including the replacement of pre-1973 first generation plastic pipe. New customer demand for natural gas continues to be steady and therefore extending the natural gas distribution system within its service territory is also a priority. Roanoke Gas' total capital expenditures for the nine-month period ended June 30, 2026 were approximately $16.1 million compared to $15.7 million during the same period last year. Total fiscal 2026 capital expenditures are expected to be approximately $22 million.
Investing cash flows also include the Company's participation in Southgate and Boost, with a total cash investment of approximately $1 million for the nine months ended June 30, 2026, which are being funded by dedicated revolving credit facilities as described below. Upon receiving FERC approval and the Notice to Proceed, construction activities began in Virginia on the Southgate extension in March 2026. In June 2026, work began in North Carolina after the project received all necessary permits and authorizations for construction. While the Boost expansion is pending FERC approval, work has continued with federal and state regulators as they review project plans and permit applications, and investments have been made for materials related to the construction of the pipeline and other pre-constructions costs. Midstream will incur periodic future capital investment related to ongoing MVP operations requirements and system improvements.
Cash Flows Used in Financing Activities:
Financing activities generally consist of borrowings and repayments under credit agreements, issuance of common stock and the payment of dividends. Net cash flows used in financing activities were approximately $5.2 million for the nine months ended June 30, 2026, compared to approximately $11.3 million for the same period last year. The $6.1 million reduction in financing cash flows is primarily attributable to a decrease in net repayments under Roanoke Gas' line-of-credit, slightly offset by an increase in net payments under Midstream's notes payable. The Company's net borrowings on Roanoke Gas' line-of-credit during the first nine months of fiscal 2026 were approximately $895,000 compared to net payments of $6.2 million in the same period last year. Additionally, during the first nine months of fiscal 2026, Midstream repaid a net $1.1 million compared to $255,000 during the same period in the prior year. Notes 6 and 7 provide details on the Company's line-of-credit and borrowing activity.
Resources issued a total of 79,947 shares of common stock resulting in net proceeds of approximately $1.7 million during the first nine months of fiscal 2026, compared to issuing 74,057 shares of common stock resulting in net proceeds of approximately $1.5 million during the first nine months of fiscal 2025. The ATM program was not utilized during either period.
Management regularly evaluates the Company’s liquidity through a review of its available financing resources and its cash flows. On June 2, 2026, Roanoke Gas entered into an unsecured delayed-draw promissory note in the principal amount of $15 million. Under the provisions of the loan agreement, Roanoke Gas can draw the funds at any time through September 20, 2026. The Company intends to draw the full amount on August 20, 2026 and the proceeds will be used to repay a maturing note of equal amount. Management believes Roanoke Gas has access to sufficient financing resources to meet its cash requirements for the next year, including cash from operations, the line of credit and a private shelf facility. Roanoke Gas may also adjust capital spending as necessary, if such a need would arise.
RGC RESOURCES, INC. AND SUBSIDIARIES
Midstream's future cash requirements will relate to regular monthly operating expenses, debt service and capital contributions. Since MVP became operational, the Company has received quarterly Excess Cash Distributions, as defined in the agreements, that have averaged from $800,000 to $900,000. The Company expects future distributions to be of a similar magnitude. On September 5, 2025, Midstream established new amortizing term notes with two banks in the initial amounts of $38.6 million and $15 million, which refinanced and replaced all of Midstream's outstanding debt. The term notes mature on September 5, 2032. Also on September 5, 2025, Midstream entered into a new loan agreement for the MVP Southgate extension and MVP Boost expansion that can be drawn to principal amounts of $1.85 million and $3.65 million, respectively. These loans mature on September 5, 2030, at which time the outstanding principal balance on each note is due. Management believes that it will be able to meet Midstream's cash requirements over the ensuing 12-month period with availability on the Southgate and Boost revolving credit facilities and its quarterly cash distributions from MVP.
Resources expects to amortize debt totaling $2,846,018 in the ensuing 12 months.
As of June 30, 2026, Resources' long-term capitalization ratio was 45% equity and 55% debt.
ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4 – CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to be effective in providing reasonable assurance that information required to be disclosed in reports under the Exchange Act are identified, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to management to allow for timely decisions regarding required disclosure.
Through June 30, 2026, the Company has evaluated, under the supervision and with the participation of management, including the chief executive officer and the chief financial officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based upon that evaluation, the chief executive officer and chief financial officer concluded that the Company’s disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2026.
Changes in Internal Control over Financial Reporting
On April 6, 2026, the Company implemented a new system of record for revenue transactions with customers. In connection with this implementation, the Company has enhanced its processes and procedures, which has resulted in changes to internal control over financial reporting, to align with the upgraded system functionality. The Company will continue to monitor and evaluate the operating effectiveness of the related controls during subsequent periods.
Management routinely reviews the Company’s internal control over financial reporting and makes changes, as necessary, to enhance the effectiveness of the internal controls. Except for the implementation of the new revenue system, there were no other changes in internal control over financial reporting that occurred during the three months ended June 30, 2026, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
Limitations on the Effectiveness of Controls
Because of the inherent limitations in an effective internal control system, any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will prevent or detect all misstatements, due to error or fraud, from occurring in the consolidated financial statements. Additionally, management is required to use judgment in evaluating controls and procedures.
RGC RESOURCES, INC. AND SUBSIDIARIES
None.
There have been no material changes to the risk factors previously disclosed in Resources' Annual Report on Form 10-K for the year ended September 30, 2025 and on the March 31, 2026 Form 10-Q.
ITEM 2 – UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3 – DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 – MINE SAFETY DISCLOSURES
Not applicable.
RGC RESOURCES, INC. AND SUBSIDIARIES
| * |
These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and are not to be incorporated by reference into any filing of the Registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
RGC RESOURCES, INC. AND SUBSIDIARIES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| RGC Resources, Inc. |
||||||||
| Date: August 6, 2026 |
By: |
/s/ Timothy J. Mulvaney |
||||||
| Timothy J. Mulvaney |
||||||||
| Vice President, Treasurer and Chief Financial Officer |
||||||||
| (Principal Financial Officer) |
ATTACHMENTS / EXHIBITS
XBRL TAXONOMY EXTENSION SCHEMA
XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
XBRL TAXONOMY EXTENSION LABEL LINKBASE
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