RGC Resources Inc. (NASDAQ:RGCO) Q1 2019 Results Earnings Conference Call February 11, 2019 9:00 AM ET Company Participants John D'Orazio - President and Chief Executive Officer Paul Nester - Chief Financial Officer Conference Call Participants Mike Gaugler - Janney Operator All right. Welcome to RGC Resources First Quarter Earnings Call. I am John D'Orazio, President and CEO of RGC Resources. Thank you for taking the time out of your morning to attend. Please mute your line and hold your questions until th ...

Revenue and Operating Performance - For the three months ended December 31, 2018, total operating revenues increased by 13% to $21,216,747 compared to $18,756,051 in the same period last year[104]. - Gas utility revenues rose by 14% to $21,036,581, while the cost of gas increased by 25% to $11,906,459, resulting in a gas utility margin of $9,130,122, a 2% increase year-over-year[105]. - SAVE Plan revenues increased by 12% to approximately $1,208,000 for the three-month period ended December 31, 2018, compared to $1,076,000 for the same period last year[102]. - Total delivered volumes of regulated natural gas increased by 5%, with residential and commercial volumes rising by 7% to 2,366,074 DTH[104]. - The average commodity price of natural gas delivered during the current quarter was approximately 25% higher than the same period last year, primarily due to weather and supply constraints[104]. - Gas utility margin increased to $9,130,122 for the three months ended December 31, 2018, up by $171,534 or 1.9% from $8,958,588 in 2017[106]. Expenses and Financial Impact - Operation and maintenance expenses rose by $294,255, or 9%, primarily due to increased compensation costs and maintenance on LNG facilities[106]. - General taxes increased by $41,567, or 9%, driven by higher property and payroll taxes[107]. - Interest expense increased by $204,137, or 33%, due to a 24% rise in total average debt outstanding and rising interest rates[110]. - Income tax expense decreased by $433,483, reflecting a reduction in the federal income tax rate from 24.3% to 21%[111]. Investments and Projects - The Mountain Valley Pipeline, in which the Company has a 1% investment, is currently under construction and is expected to enhance the Company's operational capabilities[93]. - Equity in earnings of unconsolidated affiliate more than doubled, increasing by $414,238, attributed to significant investment in the Mountain Valley Pipeline project[108]. - The estimated project cost for the Mountain Valley Pipeline increased from $3.5 billion to $4.6 billion, raising Midstream's cash investment from $35 million to $46 million[122]. - The Company invested more than $10.1 million in the MVP for the three months ended December 31, 2018, compared to $1.2 million for the same period last year[137]. Rate Cases and Refunds - Roanoke Gas filed a general rate case application requesting an annual increase in customer non-gas base rates of $10.5 million, effective January 1, 2019[125]. - The Company recorded an estimated refund for excess revenues totaling almost $1.9 million as of December 31, 2018, due to over-recovery from customers[127]. - The Company accrued a $157,000 reduction in revenue for weather that was 3% colder than normal, compared to an accrual of $37,000 in additional revenue for weather that was 1% warmer than normal in the previous year[99]. Cash Flow and Financial Position - Cash and cash equivalents decreased by $236,602 for the three months ended December 31, 2018, compared to an increase of $264,638 for the same period last year[134]. - Net cash used in operating activities was $(2,300,174) for the three months ended December 31, 2018, compared to $(1,958,693) for the same period last year[134]. - Total capital expenditures for the first three months were $5.7 million, representing a nearly $1.4 million increase over the same period last year[136]. - Cash flows provided by financing activities were $17.9 million for the current period, compared to $7.8 million for the same period last year[138]. - The Company had $15,801,798 balance under its variable rate line-of-credit as of December 31, 2018[141]. - A hypothetical 100 basis point increase in market interest rates would have resulted in an increase of approximately $93,000 in interest expense for the quarter[141]. - The long-term capitalization ratio as of December 31, 2018, was 52.4% equity and 47.6% debt[139]. Regulatory Environment - The Company’s utility operations are regulated by the Virginia State Corporation Commission, which oversees rates and terms for natural gas service[94]. - The 2019 SAVE Plan Rider is expected to provide approximately $362,000 in revenue, focusing on the replacement of pre-1973 plastic pipe[130]. - The utilization fee from the asset manager is shared with customers, with the first $700,000 going to customers and subsequent amounts split 25% to the Company and 75% to customers[131].