RGC RESOURCES INC

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* March 31, 2025*, cash flows for thesix months ended* March 31, 2025and2024*, and the results of its operations, comprehensive income, and changes in stockholders' equity for thethree andsix months ended* March 31, 2025and2024*. The results of operations for thethree andsix months ended* March 31, 2025* arenot indicative of the results to be expected for the fiscal year ending* September 30, 2025*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 Form10-K for the year ended* September 30, 2024*. The* September 30, 2024* consolidated balance sheet was included in the Company’s audited financial statements included in Form10-K.

Midstream has $35.6 million of current maturities of long-term debt due in the12 months following the filing date of this Form10-Q. This amount exceeds the liquidity available to the Company through currently executed agreements and anticipated operating cash flows over this period. Management expects it will refinance $26.6 million prior to* December 31, 2025and $9 million prior to May 2, 2026.The Company has refinanced this debt in the past and is currently in discussions with lenders concerning refinancing the debt. Management believes discussions to date have been positive and that MVP's successful operation supports the likelihood of refinancing. Such refinancing cannot be completed without taking additional actions involving athird* party. As a result, under ASU2014-15, substantial doubt exists about the Company's ability to continue as a going concern.

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 Note1 to the consolidated financial statements contained in the Company's Form10-K for the year ended* September 30, 2024*.

Certain amounts previously disclosed have been reclassified to conform to current year presentations.

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Recently Issued or Adopted Accounting Standards

In* November 2023,the FASB issued ASU2023*-07, Segment Reporting (Topic280*) - Improvements to Reportable Segment Disclosures*. The new guidance is designed to provide users of financial statements with improved reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses, other segment items and measures of segment profit or loss used by the chief operating decision maker (CODM). Additionally, the new guidance requires a public entity to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually, which the Company currently discloses on an interim basis. The new guidance is effective for the Company for fiscal year beginning* October 1, 2024and interim periods within fiscal year beginning October 1, 2025.*The Company is currently assessing the impact of the new guidance on its financial statement disclosures, and expects the adoption of this standard will result in expanded disclosures within the segment reporting footnote, specifically regarding the information provided to the CODM and how the CODM uses the information in assessing the performance of each segment.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740*): 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 than5 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 doesnot expect certain requirements of this ASU to have a significant impact to its current disclosures as all of its operations are domestic and reside intwo states. Changes to the rate reconciliation table will result in additional disclosure. The new guidance is effective for the Company for annual periods beginning* October 1, 2025.*

In* November 2024,the SEC issued ASU2024*-03, Income Statement - Reporting Comprehensive Income (Topic220*):* 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 SEC issued ASU2025*-01, Income Statement - Reporting Comprehensive Income (Topic220*):* Expense Disaggregation Disclosures*: Clarifying the Effective Date*, which clarified the effective date of ASU2024-03. The new guidance is effective for the Company for fiscal year beginning* October 1, 2027and interim periods within fiscal year beginning October 1, 2028.*The Company is currently assessing the impacts of the new guidance on its financial statement disclosures.

Other accounting standards that have been issued by the FASB, SEC or other standard-setting bodies arenot currently applicable to the Company or arenot expected to have a material impact on the Company’s financial position, results of operations or cash flows.

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.

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The following tables summarize revenue by customer, product and income statement classification:

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 ASC606, Revenue from Contracts with Customers. 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 due20 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 isno 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.

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Other revenues

Other revenues primarily consist of miscellaneous fees and charges, utility-related revenuesnot 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 andno variable price consideration exists.

Alternative revenue program revenues

ARPs, which fall outside the scope of ASC606, 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 the30-year average; the SAVE Plan over/under collection mechanism, which adjusts revenues for the differences between SAVE Plan revenues billed to customers and the revenue 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 arenot related to customers. The asset and liability balances associated with customers are provided below:

(1) Included in accounts receivable in the condensed consolidated balance sheet. Amounts shown net of reserve for credit losses.

The Company didnot 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.

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 uses operating income and equity in earnings to assess segment performance.

Intersegment transactions are recorded at cost.

The reportable segments disclosed herein 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.

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Information related to the Company's segments are provided below:

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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, Roanoke Gas filed a general rate application with the SCC on* February 2, 2024seeking to increase its annual non-gas base rates by $4.33 million and its permitted return on equity from 9.44% to 10.35% reflecting its higher cost of capital, including higher interest expense. The SCC permitted the Company to implement its new rates on an interim basis for customer billings on or after July 1, 2024,subject to refund. On October 16, 2024,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 incremental revenue requirement increase of $4.08 million based on a return on equity of 9.90%. On April 10, 2025,the SCC issued a final order approving the settlement agreement in its entirety. The Company has recorded a provision for customer refund, including interest, associated with billings for the difference between the interim rates and the settlement rates. The Company expects to complete the customer refund process during thethird* fiscal quarter.

On* June 28, 2024,Roanoke Gas filed for approval of an updated annual SAVE Rider rate to become effective October 1, 2024.The proposed SAVE rate is based on an estimated $9.13 million of SAVE eligible investment during fiscal2025* and a revenue requirement of $1.53 million that reflects the cost of capital in the2024 rate case. The Commission approved the Company’s updated SAVE Rider on* September 24, 2024,which contained a lower revenue requirement of $1.39 million, largely attributable to SCC staff’s reliance on the overall cost of capital approved in the2022* rate case. The difference in the revenue requirements will be trued-up in subsequent SAVE Rider updates to the overall cost of capital now that the2024 rate case is final.

On* May 30, 2024,Roanoke Gas filed for an RNG Rider update to become effective October 1, 2024.The revenue requirement associated with the proposed RNG Rider is $1.56 million, offset by the sale of environmental credits in the amount of $1.11 million, as well as credits for the over-recovery of costs during the prior year of approximately $35,000, resulting in a net revenue requirement of approximately $415,000. The Commission approved the Company’s updated RNG Rider on September 4, 2024,which contained a lower net revenue requirement of approximately $356,000, largely attributable to SCC Staff’s reliance on the overall cost of capital approved in the2022* rate case. The difference in the revenue requirements will be trued-up in subsequent RNG Rider updates at the overall cost of capital now that the2024 rate case is final.

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Midstream owns a less than 1% equity investment in the LLC that owns and operates the MVP. 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. The Company has been using the equity method since the inception of its investment in fiscal2016. Following receipt of authorization from the FERC, the MVP entered commercial operation on* June 14, 2024and became available for interruptible or short-term firm transportation service. On July 1, 2024,the MVP commenced long-term firm capacity obligations. Midstream is also a less than 1% investor, accounted for under the cost method, in Southgate, which is in the design and permitting phase. Completion of the Southgate project is targeted for2028.*

While under construction, AFUDC provided the majority of the income recognized by Midstream. The amount of AFUDC recognized during the prior year was included in the equity in earnings of unconsolidated affiliate in the tables below. AFUDC ceased in* June 2024*when the pipeline went into commercial operation.

The Company participates in the earnings of the LLC proportionate to its level of investment. With the MVP now in operation, the Company recognizes its share of earnings from the LLC, 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 in2022. This basis difference amortization is a favorable non-cash adjustment to income over the operational life of the MVP, which is40 years. The Company's share of earnings from the LLC and the basis difference amortization are presented under equity in earnings of unconsolidated affiliate on the condensed consolidated statements of income. The Company receivedtwo quarterly cash distributions totaling approximately $1.8 million from the LLC during thefirst half of fiscal2025 and expects future quarterly distributions to be of a similar magnitude to those received to date.

Midstream assesses the value of its investment in the LLC on at least a quarterly basis, andno impairment indicators were identified in fiscal2025 or2024.

Investment balances of MVP and Southgate, as of* March 31, 2025* and* September 30, 2024*, are reflected in the table below:

The change in the investment in unconsolidated affiliates is provided below:

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Summary unaudited financial statements of MVP are presented below. Southgate financial statements, which are accounted for under the cost method, arenot included.

The Company had been operating with an unsecured Revolving Note in the principal amount of $25 million that it renewed annually in* March.On March 31, 2025,Roanoke Gas amended its Revolving Note to increase the principal amount to $30 million and extend the maturity date to March 31, 2027.The Revolving Note's variable interest rate is based upon Term SOFR plus 125 basis points and provides for multiple tier borrowing limits to accommodate seasonal borrowing demands. Other key terms and requirements of the Revolving Note were retained. The Company's total available borrowing limits during the term of the Revolving Note range from $20 million to $30 million. As of March 31, 2025*, the Company had an outstanding balance of $4,164,266 under the Revolving Note.

On* March 6, 2024,Midstream entered into the Sixth Amendment to Credit Agreement and related Promissory Notes on the non-revolving credit facility. The Sixth Amendment revised the interest rate from Term SOFR plus 2.00% to Term SOFR plus 2.00% subject to adjustment to Term SOFR plus 1.75% and Term SOFR plus 1.55% upon meeting certain milestones. The Sixth Amendment also consolidated the Promissory Notes toone* Promissory Note withone lender, increased the available non-revolving credit facility to $25 million, and extended the maturity date to* December 31, 2025.*All other terms and requirements remained unchanged.

On* May 2, 2024,Midstream established a new $9 million revolving credit facility. The interest rate on the borrowings under the facility is Daily Simple SOFR plus 2.215%; the arrangement included a 0.40% upfront fee and 0.125% unused line fee. The facility matures on May 2,*2026.

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On* May 29, 2024,Midstream paid in full the $9 million note payable that was set to mature June 1, 2024*with proceeds from the new credit facility.

On* March 6, 2024,Midstream amended and restated its $8 million Term Note. The amendment suspended quarterly principal payments beginning April 1, 2024through January 1, 2025.Principal payments began again on April 1, 2025.All other terms and requirements of the Term Note were retained. The interest rate swap related to the $8 million Term Note wasnot* amended on* March 6, 2024.*

Long-term debt consists of the following:

Debt issuance costs are amortized over the life of the related debt. As of* March 31, 2025* and* September 30, 2024*, the Company also had an unamortized loss on the early retirement of debt of $1,084,778 and $1,141,872, respectively, which has been deferred as a regulatory asset and is being amortized over a 20-year period.

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 tonot more than 65% of total capitalization. All of the debt agreements provide for Priority Indebtedness (defined in the debt agreements) tonot exceed 15% of consolidated total assets. The $15 million and $10 million notes, as well as the line-of-credit, have an interest coverage ratio requirement ofnot less than 1.5 to1, which excludes the effect of the non-cash impairments on the LLC investments up to the total investment as of* December 31, 2021,as revised by the Seventh Amendment to the Credit Agreement. The $9 million revolving line of credit facility also has an interest coverage ratio requirement ofnot* less than 1.5 to1. The Company was in compliance with all debt covenants as of* March 31, 2025* and* September 30, 2024*.

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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 hasfour interest rate swaps associated with certain of its variable rate debt as of* March 31, 2025*. Roanoke Gas hastwo variable-rate term notes in the amounts of $15 million and $10 million, with corresponding swap agreements to effectively convert the variable interest rates into fixed rates of 2.00% and 2.49%, respectively. Midstream hastwo swap agreements corresponding to the variable-rate term notes with original principal amounts of $14 million and $8 million. The swap agreement pertaining to the $14 million note effectively converts the variable interest rate into a fixed rate of 3.24%. The swap agreement pertaining to the $8 million note remains in place and was concurrently re-designated to hedge an applicable portion of the note, taking into account the temporary suspension of amortization described in Note7, and converts that portion of the note to a fixed rate of 2.443%. The swaps qualify as cash flow hedges with changes in fair value reported in other comprehensive income.No portion of the swaps were deemed ineffective during the periods presented.

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 Note11 reflects the effect on income and other comprehensive income of the Company's cash flow hedges.

ASC820, 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 intoone of the followingthree levels:

Level1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level2 – Inputs other than quoted prices in Level1 that are either for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that arenot 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.

Level3 – 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 (Level1) and the lowest priority to unobservable inputs (Level3). All fair value disclosures are categorized withinone of thethree categories in the hierarchy based on the lowest level that is significant to the valuation.

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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:

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.

Underone of the asset management contracts, 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 with the price based on weighted averagefirst of the month index prices corresponding to the month of the scheduled payment. At* March 31, 2025* and* September 30, 2024*, the Company had recorded in accounts payable the estimated fair value of the liability valued at the correspondingfirst of month index prices for which the liability is 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.

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The following table summarizes the fair value of the Company’s financial assets and liabilities that arenot adjusted to fair value in the financial statements:

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.

ASC825, 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 thanthree 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. No individual customer amounted to more than5% of total accounts receivable at* March 31, 2025* and* September 30, 2024*. The Company maintains certain credit standards with its customers and requires a customer deposit if warranted.

Basic EPS for thethree andsix months ended* March 31, 2025and2024* was calculated by dividing net income by the weighted-average common shares outstanding during the period. 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 thethree months ended* March 31, 2025* and2024 excludes potentially dilutive shares of 2,203 and 2,712 respectively, and 2,160 and 3,175, respectively, for thesix months ended* March 31, 2025* and2024, because to include them would be antidilutive for the periods. However, these shares could potentially dilute EPS in the future.

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A reconciliation of basic and diluted earnings per share is presented below:

A summary of other comprehensive income and loss is provided below:

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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 Note13 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

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The effective tax rates for thethree-month andsix-month periods ended* March 31, 2025* and2024 reflected in the table below are less than the combined federal and state statutory rate of 25.74%. The reduction to the effective tax rates is due to additional tax deductions from the amortization of excess deferred taxes and amortization of RNG tax credits deferred as a regulatory liability.

ASC740 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. The Company has a reserve recorded for unrecognized tax benefits of $273,936 as of* March 31, 2025* and* September 30, 2024* related to tax positions taken in the Company's prior tax returns. The Company has evaluated its tax positions for thethree andsix months ended* March 31, 2025* and determinedno additional reserve for unrecognized tax benefits was necessary. A reconciliation of the Company's unrecognized tax benefits is as follows:

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 IRS is currently examining the Company's 2018 and2019 amended federal tax returns. The focus of the examination relates to research and development credits, and the final results of the examination havenot been presented to the Company as of the date of this Form10-Q. The Company believes its income tax assets and liabilities are fairly stated as of* March 31, 2025and September 30, 2024;however, these assets and liabilities could be adjusted asa result of this examination. The Company's amended federal returns for fiscal 2018 and2019* remain open related to the examination. Aside from these exceptions, the federal returns and the state returns for Virginia and West Virginia for the tax years ended prior to* September 30,2021 areno* longer subject to examination.

The Company’s regulated operations follow the accounting and reporting requirements of ASC980, Regulated Operations. A regulated company* maydefer 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 ASC980* 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 ASC980 no longer applied.

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Regulatory assets included in the Company’s accompanying balance sheets are as follows:

Regulatory liabilities included in the Company’s accompanying balance sheets are as follows:

As of* March 31, 2025* and* September 30, 2024*, the Company had regulatory assets in the amount of $6,787,558 and $9,548,954, respectively, on which the Company didnot earn a return during the recovery period.

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. Allthree franchises are set to expire* December 31, 2035.*

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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. Through* March 31, 2025,the Company utilizedtwo* asset managers 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. Those services were consolidated toone asset manager as of* April 1, 2025.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 bythree* primary pipelines that deliver all of the natural gas supplied to the Company’s distribution system. Depending on weather conditions and the level of customer demand, failure ofone 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. With the MVP now in service, there is an enhanced reliability in the system to meet the Company's increasing distribution demand for natural gas.

The Company has both a pension plan and a postretirement plan. The pension plan covers the Company’s employees hired before* January 1, 2017and 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:

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.

No funding contributions were made to the pension plan or postretirement plan for the periods presented in the tables above. The Company isnot currently planning to make any funding contributions to either plan for the remainder of fiscal2025.

The Company hasfour leases for certain assets including office space and land classified as operating leases with original terms ranging from 3 to 20 years. The Company determines if an arrangement is a lease at inception of the agreement based on the terms and conditions in the contract. The operating lease ROU assets and operating lease liabilities are recognized at the present value of the future minimum lease payments over the lease term at commencement date. As most of the leases donot provide an implicit rate, the Company uses an estimate of its secured incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The incremental borrowing rate is determined by management aided by inquiries of athird party.

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 of12 months or less willnot be included on the condensed consolidated balance sheet but will be recognized when paid in the consolidated statements of operations.

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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 $50,000 for each period presented.

Other information related to leases were as follows:

On* March 31, 2025*, the future minimum rental payments under non-cancelable operating leases by fiscal year were as follows:

The Company has evaluated subsequent events through the date the financial statements were issued. There wereno itemsnot otherwise disclosed which would have materially impacted the Company’s condensed consolidated financial statements.

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