Q4 2020 RGC Resources Inc Earnings Call

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Morning.

That's true President and CEO of RTC resources welcome and thank you for joining us as we discuss RTC resources fourth quarter of a physical 2020 annual results Paul.

Joining me today are Randy Barton, our Chief Financial Officer, and Dave The Garcia, our director of financial planning and analysis day that helps us with the slides and calls and we asked him to join us today.

First I would like to over a few administrative items, we've needed all lines of asked that all participants remain muted.

After the presentation is completed we will take questions.

The length of today's presentation is available on the Investor and financial information page of our website at Www Dot RTC resources Dot com.

Now, let's begin our presentation.

Slide one contains our forward looking statements disclaimer. This presentation does have forecast and projections.

As outlined on slide two we will begin with the review of our operational and financial results for the fourth quarter.

And the annual periods of physical 2020, followed by the outlook for physical 2021.

As noted on slide three our fiscal 2020 customer growth extended our annual trend of adding over 550, new customers per year since 2017 or approximately 2%. We expect this trend to continue into physical 2021.

As represented on slide four fourth quarter volumes exceeded the prior year quarter due to increased uses of certain large industrial customers and the cooler than normal September.

As shown on slide five physical 2020 total volumes delivered increased 5% compared to last year, despite 5% overall warmer weather.

The increase in commercial industrial volumes offset the decreases in the from classes.

Moving on the slide six our capital spending for fiscal 2020 with $22.9 million or $1 million ahead of the prior year through the sale of infrastructure rider, we invested approximately $10.3 million to continue modernizing our system renewing just add nine miles of main.

As we have discussed over the years the save rider mechanism continues to allow us to make our distribution system safer and more reliable in an efficient manner Regulatorily speaking.

In September the FCC approved our save application for 2021.

Additionally, in 2020, we invested almost $8 million in growth and expansion of our system, which included the completion of the Blue Ridge main extension project, which we have discussed on prior calls.

Randy burden, our CFO will now walk us through earnings highlights Randy.

Thanks, Paul and good morning.

As indicated on slide seven resources completed fiscal 2020 with EPS, increasing approximately 20% over the prior year to $1.30 per diluted share.

These results reflect performance improvements driven by favorable utility margins and earnings on our MDP investment.

Now, let's turn to an overview of our operating results.

Dating the discussion we have included our condensed consolidated statements of income on slide eight.

Let's start with our quarter to quarter results.

In spite of the pandemic Renault gas had another solid operating quarter with increased volumes and continued improvement in gas utility margins.

The net of certain non cash expenses.

As the dress in our 10-K gas utility margin as the non-GAAP measure defined as gas utility revenue less cost of gas.

From a regulatory viewpoint and due to the strong 12 month performance run of gas exceeded midpoints of its authorized return on equity cash.

Consequently, we accelerated recovery of 462000 of regulatory assets in the fourth quarter. Additionally, as the pandemic continues to impact our customers. The walls. We added approximately 190000 in bad debt expense in the fourth quarter.

The non cash equity earnings from our GC Midstreams investment in the Mountain Valley pipeline increased 35% to approximately $1.3 million due to construction spending today.

Primarily due to the non cash charges of we have discussed.

The fourth quarter had a net loss of 320 non thousand dollars or four cents per share compared to net income of $456000 or six cents per diluted share for the fourth quarter of prior year.

Now lets review results from fiscal 2020.

Operating income increased 8% to $12.5 million.

The primary drivers were the higher non gas rates and increased transportation and the interruptible volumes.

These increases were offset by higher expenses related to the fourth quarter regulatory asset acceleration bad debt expense accelerated vesting of restricted stock and to the lesser extent increases in professional services repairs and maintenance general taxes and depreciation expense.

Equity.

Earnings on the MVP investment increased by approximately $1.8 million to 4.8 million again related to the construction spend today.

The other income increases reflects the recognition of few DC by Renault gas related to the two MDP interconnect projects as discussed in earlier calls.

Increased borrowings resulted in a 13% increase in income interest expense net.

Growing the levels increase over the same period of the prior year due to continued funding of our MDP investment as well as the funding of run of gases capital projects. The current favorable interest rate environment eased the interest expense in light of these additional borrowings.

Income tax expense increased due to the company's growth in taxable income.

In combination all of these factors resulted in a $1.9 million or 21% increase in net income for fiscal 2020 as compared to fiscal 2019.

As this concludes our review of financial results I will now hand, the presentation back over to Paul.

Thank you Randy we did have an outstanding 2020 in fact, our six consecutive year of record earnings.

I would like to take this opportunity to thank our customers and employees. They are the reason for this.

Consistent success.

Let's discuss 2021, we're on slide nine.

We plan to invest $21.1 million this fiscal year as we continue to renew strengthen and expand the run of gas distribution system investments through say Roger projects will lead the way.

The NBP has returned to limit the construction and is still working through various permit issues. The project is targeting an in service date during the second half of calendar 2021.

We look forward to the pipe going in service and providing needed additional supply of southwest Virginia.

As we sit here today, the pandemic of still with us and as such we wanted to give you an update on on is the effects.

To our operating conditions as we are entering the winter heating season. It continues to create significant uncertainty the.

The of our customers and employees of still our number one priority protocols and procedures to meet that per already are still in place.

As Randy discussed earlier of the primary impact to our financial statements of the increased aging of accounts receivable, which we expect will continue at least through the winter heating season as the moratorium on residential customer turn offs continue.

We are regularly analyzing our delivered volumes at the individual customer level and finally, we are working hard at being flexible.

While we continue to work hard to being flexible and adaptable.

As conditions May change the.

That concludes our prepared remarks, if you have any questions. Please dial pound six the Unmute your line pound six on mute your line and.

Randy David Rob the glad to the to discuss your question.

Good morning, everyone.

Hi, good morning, how are you.

Doing well yourself.

Very well thank you good to hear from you.

The just actually two questions both both of them on NBC.

Good to hear the.

Limited construction is back.

Any dates we should be watching in terms of current activity deadlines et cetera here from the next couple of months.

The net of the Great question, Mike I don't think there are any specific data at this point in time as you know there was the.

Really of flurry of activity in October and November, particularly in the.

Fourth Circuit court.

The court of appeals around the biological opinion in the nationwide 12.

As you probably know the nationwide 12 permit was in fact.

Stayed by the court.

On November nine.

The biological opinion was not stayed by the court that was the favorable outcome there so.

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As far as we know at this point, there aren't any hard and fast day.

Related to those two permit.

Or any of the other FERC actions at the moment certainly be glad to keep you updated of those become available.

The.

The.

No the question.

I know there was.

And the rest chatter that.

I guess going back maybe even to your last your last conference call that so.

Con Ed was planning on divesting their ownership stake just wondering is that has occurred yet or is that process still on the ongoing.

Yes, we have not had any communication with them Mike in regards to that end.

Certainly it would make sense the to the confer with them there.

As you know last year about this time, they did publicly announced that they were exercising their.

Right to.

Limit their contributions, which they have been doing through 2020 and will do through the remainder of the project and that that action does.

Dilute down there.

Ownership they were originally of 12.5% partner in the joint venture and.

Over time to the completion may will dollar dilute down from that.

Correct.

Well, that's all I have had gentlemen.

I will speak to you before the new year have a great.

Of the season.

Thanks, Mike well, thank you Mike Likewise.

Do we have any other other questions you can dial pound six the Unmute your line if you'd like to ask the question.

Okay.

Well if there are no more questions. This concludes our.

2020 annual earnings call.

We look forward to speaking with you again in 2021 to review our first quarter results.

Thank you again for joining us we just wish all of you to have the Merry Christmas and a happy new year in a safe and healthy holiday season overall.

I hope you have a great.

Great Friday of.

Wonderful weekend. Thank you. Thank you.

Okay.

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