RGC RESOURCES INC

Previous wording

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, investments, inflation, ratemaking, debt refinancing, technological developments, new products, research and development activities, operational impacts 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 2024 Annual Report on Form 10-K. 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.

Current wording

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, debt refinancing, technological developments, new products, research and development activities, operational impacts 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. 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.

Previous wording

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, 2025. 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.

Current wording

The three-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 three months reflect higher billings due to the weather-sensitive nature of the natural gas business.

Previous wording

Resources is an energy services company primarily engaged in the regulated sale and distribution of natural gas to approximately 62,700 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 both the MVP and Southgate. 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.

Current wording

Resources is an energy services company primarily engaged in the regulated sale and distribution of natural gas to approximately 63,700 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.

Previous wording

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, 2024. As a result of the updated SAVE Rider, SAVE Plan revenues increased by approximately $299,000 and $855,000, respectively, for the three-month and nine-month periods ended June 30, 2025 compared to the same periods last year when the recovery of all prior SAVE Plan investment was incorporated into the non-gas base rates that were effective January 1, 2023. The updated SAVE Rider is expected to result in approximately $1,489,000 of annualized SAVE-related revenues during fiscal 2025. Additional information regarding the SAVE Plan and Rider is provided in Note 4 of the condensed consolidated financial statements.

Current wording

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 $271,000 for the three-month period ended December 31, 2025 compared to the same period last year. The updated SAVE Rider is expected to result in approximately $2.61 million of annualized SAVE-related revenues during fiscal 2026. Additional information regarding the SAVE Plan and Rider is provided in Note 4 of the condensed consolidated financial statements.

Previous wording

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, 2025, the Company accrued approximately $493,000 and $966,000 in additional revenues under the WNA model for weather that was 22% and 4% warmer than normal, respectively, compared to approximately $821,000 and $3,689,000 in additional revenues for weather that was 48% and 19% warmer than normal for the corresponding periods last year. The adjusted WNA balance for the 12-month period ended March 31, 2025 was approximately $1,473,000, and was collected from customers during May and June 2025.

Current wording

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 months ended December 31, 2025, the Company reduced revenues by approximately $319,000 under the WNA model for weather that was 4% colder than normal, compared to approximately $500,000 in additional revenues for weather that was 6% warmer than normal for the corresponding period last year.

Previous wording

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 by approximately $44,000 and $145,000 for the three-month and nine-month periods ended June 30, 2025 compared to the corresponding periods last year, due to lower natural gas commodity prices during the 2024 summer storage injection season resulting in a lower average cost of natural gas in storage and lower storage balances in the second and third quarters of fiscal 2025. Accordingly, fiscal 2025 and 2026 ICC revenues are expected to continue to remain below last year's levels.

Current wording

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 increased nominally for the three-month period ended December 31, 2025 compared to the corresponding period last year. The average price of gas in storage during the first quarter of fiscal 2026 increased by 3% compared to the same period in fiscal 2025. If natural gas prices remain at or higher than the prior year, the average dollar balance of gas in storage may continue to increase based on current storage levels and due to an increased ICC factor from the prior year may lead to higher ICC revenues in fiscal 2026.

Previous wording

In March 2023, Roanoke Gas began operating the 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 RNG facilities and the related operating costs through an RNG Rider added to customer bills. Customers receive the benefit of environmental credits generated through the production of RNG. Roanoke Gas recognized approximately $479,000 and $1,296,000 in RNG revenue for the three and nine months ended June 30, 2025 compared to approximately $394,000 and $1,211,000 for the corresponding periods in the prior year.

Current wording

In March 2023, Roanoke Gas began operating the 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 RNG facilities and the related operating costs through an RNG Rider added to customer bills. Customers receive the benefit of environmental credits generated through the production of RNG. Roanoke Gas recognized approximately $484,000 in RNG revenue for the three months ended December 31, 2025 compared to approximately $388,000 for the corresponding period in the prior year.

Previous wording

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 used by its customers. This rate component, referred to as the PGA, allows the Company to pass along 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.

Current wording

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 used by its customers. This rate component, referred to as the PGA, allows the Company to pass along 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. Due to the extended and extreme cold weather experienced across the eastern half of the United States, natural gas prices spiked from less than $4 per DTH to well over $30 per DTH at the end of January, resulting in an $8 million to $10 million under collection. These amounts are anticipated to be collected from customers over the ensuing 12 to 18 months through the PGA.

Previous wording

Total operating revenues for thenine months ended June 30, 2025, compared to the same period last year, increased by approximately 13% primarily due to the implementation of a non-gas base rate increase, along with higher delivered volumes, gas costs and SAVE revenues, partially offset by a decrease in WNA revenue. The non-gas base rate increase implemented in 2024 was the main contributing factor to an approximate $5.4 million increase in non-gas volumetric revenues. In addition, total heating degree days increased by 18% from the same period last year, resulting in a 9% increase in the weather-sensitive residential and commercial volumes, while transportation and interruptible volumes increased 28%, primarily driven by business activity of a single, multi-fuel customer during the period. Total gas costs also increased over the prior period primarily due to pipeline capacity charges increasing over $3.7 million as a result of higher rates and MVP capacity. SAVE Plan revenues increased as Roanoke Gas continues to invest in qualified SAVE infrastructure projects, resulting in approximately $855,000 more revenue compared to the same period in the prior year. WNA revenues declined approximately $2.7 million from the corresponding period last year as weather was only 4% warmer than normal during the current period compared to 20% warmer than normal during the prior period.

Current wording

Total operating revenues for the three months ended December 31, 2025, compared to the same period last year, increased by approximately 11% primarily due to higher gas costs resulting from interstate pipeline providers increasing their rates over $1,000,000. Increased residential and commercial delivered volumes and SAVE revenues, slightly offset by a decrease in WNA revenue, also contributed to the increase in operating revenues over the prior period. Total heating degree days increased by 11% from the same period in the prior year, resulting in a 6% increase in the weather-sensitive residential and commercial volumes, while transportation and interruptible volumes, which has a lower margin contribution, decreased 10%, primarily driven by reduced business activity from a single, multi-fuel customer during the current period. The increased residential and commercial volumes contributed to an approximate $510,000 increase in non-gas volumetric revenues. In addition, SAVE Plan revenues increased as Roanoke Gas continues to invest in qualified SAVE infrastructure projects, resulting in an increase in revenue of approximately $271,000 compared to the same period in the prior year. WNA revenues declined approximately $819,000 from the corresponding period last year as previously discussed.

Previous wording

Gross utility margin increased over the same period last year primarily as a result of the aforementioned increases in SAVE revenues, as well as increased RNG revenues, slightly offset by the reduction in ICC revenues. As discussed in the Overview section, the WNA model adjusts for the impact of variability of temperatures during the heating season. 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 years, the volumetric margin, net of the WNA, decreased slightly by approximately $56,000 due a decrease of 17% in WNA adjusted residential and commercial delivered volumes. The SAVE Plan and RNG Riders contributed an additional $299,000 and $85,000, respectively, to margin, while ICC revenues decreased by approximately $44,000 due to lower cost of gas in storage.

Current wording

Gross utility margin increased slightly over the same period last year primarily as a result of the aforementioned increases in SAVE revenues, as well as increased RNG revenues, which contributed $271,000 and $96,000, respectively, to margin. As discussed in the Overview section, the WNA model adjusts for the impact of variability of temperatures during the heating season. 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 years, the volumetric margin, net of the WNA, decreased by approximately $310,000 due a decrease of 3% in WNA adjusted residential and commercial delivered volumes.

Previous wording

Operations and maintenance expenses increased by $720,021, or 5%, from the same period last year primarily due to inflationary effects on personnel costs and contracted services, and lower capitalized overheads. Personnel costs and contracted services increased by approximately $367,000 due to increased staffing and the inflationary impact on salaries and benefits, as well as third party services. Total capitalized overheads declined by approximately $179,000 due to a reduction in direct construction expenditures related to Roanoke Gas capital projects compared to the same period last year and lower overheads capitalized as part of LNG due to timing of production. Increased RNG expenses, corporate insurance premiums and bad debt expense associated with the higher accounts receivable balances accounted for much of the remaining cost increase.

Current wording

Operations and maintenance expenses increased $533,810, or 11%, from the same period last year. The Company continues to experience inflation over the 2% level 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 $92,000 due to increased staffing and the inflationary impact on salaries and benefits. Contracted services increased by approximately $188,000 also due to inflationary pressures as well as increased customer turn-ons. Total capitalized construction overheads declined by approximately $188,000 due to a reduction in direct construction expenditures related to Roanoke Gas capital projects as a result of colder weather. Increased corporate insurance premiums accounted for much of the remaining cost increase, which were slightly offset by a decrease in professional services expenses.

Previous wording

Taxes other than income taxes increased by $118,077, or 19%, due to higher property taxes associated with growth in utility property and increased valuations.

Current wording

Taxes other than income taxes increased by $107,682, or 15%, due to higher property taxes associated with growth in utility property and increased tax rates, as well as increases in payroll taxes.

Previous wording

Equity in earnings of unconsolidated affiliate decreased by $552,353, or 19%. With the MVP in service, the Company now recognizes its share of operational earnings from the MVP, favorably adjusted for the amortization of a basis difference that arose when the Company recorded an other-than-temporary impairment of its investment in 2022. These in-service earnings did not fully replace the amount of AFUDC recognized while construction activities were ongoing during the first eight months of fiscal 2024. See Note 5 of the consolidated financial statements for additional information related to the MVP.

Current wording

Equity in earnings of unconsolidated affiliate decreased by $27,143, or 3%. See Note 5 of the consolidated financial statements for additional information related to the MVP.

Previous wording

Interest expense decreased by $54,339, or 4%, as the weighted-average interest rate on total debt decreased from 4.42% during the third quarter of fiscal 2024 to 4.12% during the third quarter of fiscal 2025. Roanoke Gas' interest expense decreased by $45,984, or 5%, as total average debt outstanding decreased by approximately $2,671,000 associated with net payments on the Company's line-of-credit. See Notes 6 and 7 of the consolidated financial statements for more information on the Company's debt.

Current wording

Interest expense decreased by $108,780, or 6%, as the weighted-average interest rate on total debt decreased from 4.45% during the first quarter of fiscal 2025 to 4.14% in the current quarter. Midstream's interest expense decreased by $121,278, or 16%, as the total average debt outstanding decreased by approximately $1,336,000 as a result of principal payments made on term notes, along with the weighted-average interest rate decreasing from 5.38% during the first quarter of fiscal 2025 to 4.62% in the current quarter. Roanoke Gas' interest expense increased by $12,498, or 1%, as total average debt outstanding increased by approximately $1,608,000 associated with net borrowings under the Company's line-of-credit. Roanoke Gas' weighted-average interest rate remained relatively flat from the first quarter of fiscal 2025 to the current quarter. See Notes 6 and 7 of the consolidated financial statements for more information on the Company's debt.

Previous wording

Income tax expense increased by $555,661, or 16%, corresponding to an increase in pre-tax income. The effective tax rate was 23.4% and 23.5% for the nine-month periods ended June 30, 2025 and 2024, 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.

Current wording

Income tax expense decreased by $277,570, or 17%, primarily corresponding to the decrease in pre-tax income. The effective tax rate was 21.4% and 23.4% for the three-month periods ended December 31, 2025 and 2024, 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. Additionally, a one-time item related to R&D tax credits contributed to a further reduction to the effective tax rate during the current period.

Previous wording

Roanoke Gas 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 tocustomers through reduced gas costs. On March 26, 2025, the Company entered into a new asset manager agreement effective April 1, 2025 and is set to expire on March 31, 2028.

Current wording

Roanoke Gas 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 tocustomers through reduced gas costs. The current asset management contract was signed for a three year period which will expire in March 2028.

Previous wording

From inception through May 2024, earnings from the LLC were primarily attributable to AFUDC income. With the MVP in operation, 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 three and nine months ended June 30, 2025, the Company recorded equity in earnings of consolidated affiliate of approximately $772,000 and $2.4 million, respectively, compared to $283,000 and $3.0 million for the same periods in 2024, with the 2024 amounts being derived from AFUDC. Midstream has received quarterly cash distributions of its share from the LLC totaling approximately $2.7 million during the first nine months of fiscal 2025 which was a return on its invested capital. Future quarterly distributions are expected to be of a similar magnitude. The Company is using this cash to pay interest and other expenditures related to Midstream.

Current wording

With the MVP in operation, 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 first quarter of fiscal 2026 and 2025, the Company recorded equity in earnings of consolidated affiliates of approximately $827,000 and $854,000, respectively. The Company received a quarterly cash distribution of its share from the LLC totaling approximately $753,000 and $802,000 during the first 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. 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.

Previous wording

Cash and cash equivalents increased by $1,232,704 for the nine-month period ended June 30, 2025 compared to an increase of $1,028,662 for the nine-month period ended June 30, 2024. The following table summarizes the sources and uses of cash:

Current wording

Cash and cash equivalents increased by $335,665 for the three-month period ended December 31, 2025 compared to an increase of $1,204,178 for the three-month period ended December 31, 2024. The following table summarizes the sources and uses of cash:

Previous wording

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 generally decrease due to increases in natural gas storage levels and rising customer receivable balances.

Current wording

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.

Previous wording

The increase in operating cash flows is primarily due to higher net income and the cash distributions received from the LLC, along with direct impacts from weather and increased pipeline and storage capacity charges. During the first nine months of fiscal 2025, the Company received approximately$2,659,000 in quarterly cash distributions from the LLC, which was has been accounted for as a return on its invested capital. In addition, colder weather and increased gas costs compared to the same period last year resulted in higher accounts receivable and accounts payable balances. Pipeline and storage capacity charges during the first nine months of fiscal 2025 increased over $3,100,000 from the same period in the prior year. Additionally, total commodity costs increased from $3.53 per DTH in the first nine months of fiscal 2024 to $3.69 per DTH in the first nine months of fiscal 2025. WNA revenues for the first nine months of fiscal 2025 declined by approximately $2.7 million from the same period last year corresponding to an 18% increase in the number of heating degree days between periods. This decline in WNA receivable contributed $2.0 million in additional operating cash. In December 2024, the Company received an approximate $890,000 supplier refund, resulting from a FERC rate case settlement, from one of the interstate pipelines that supplies the Company with natural gas.

Current wording

Cash flows from operating activities for thethree months ended December 31, 2025 increased by $252,670 compared to the same period last year. Colder weather and increased gas costs compared to the same period last year resulted in higher accounts receivable and accounts payable balances increasing operating cash flows. Pipeline and storage capacity charges during the first three months of fiscal 2026 increased over $1,100,000 from the same period in the prior year. Additionally, total commodity costs increased from $3.44 per DTH during the first quarter of fiscal 2025 to $3.93 per DTH during the first quarter of fiscal 2026. WNA revenues for the first three months of fiscal 2026 declined by approximately $819,000 from the same period last year as previously discussed, increasing operating cash.

Previous wording

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 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, 2025 were approximately $15.7 million compared to $16.6 million during the same period last year. Total fiscal 2025 capital expenditures are expected to be approximately $22 million. Midstream continues to be invested in the LLC; however, the Company did not make capital contributions in 2024 or 2025 under a prior agreement with the LLC's managing partner. Accordingly, Midstream's ownership percentage declined during the remaining construction period of the project. Now that the MVP is in service, Midstream will incur periodic, future capital investment related to ongoing MVP operations requirements and system improvements. Midstream has and will continue to make capital investments in Southgate. The targeted timing for completion of the Southgate project is 2028.

Current wording

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 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 three-month period ended December 31, 2025 were approximately $5.6 million compared to $5.7 million during the same period last year. Total fiscal 2026 capital expenditures are expected to be approximately $22 million. With MVP in service, Midstream will incur periodic, future capital investment related to ongoing MVP operations requirements and system improvements. Midstream has and will continue to make capital investments in Southgate and Boost.

Previous wording

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 $11.3 million for the nine months ended June 30, 2025, compared to $517,000 in net cash flows provided by financing activities for the same period last year. The $11.8 million decrease in financing cash flows is primarily attributable to net payments of $6.2 million under Roanoke Gas' line-of-credit during the first nine months of fiscal 2025 compared to net borrowings of $3.3 million in the same period last year.

Current wording

Financing activities generally consist of borrowings and repayments under credit agreements, issuance of common stock and the payment of dividends. Net cash flows provided by financing activities were approximately $5.4 million for the three months ended December 31, 2025, compared to approximately $6.1 million for the same period last year. The $700,000 decrease in financing cash flows is primarily attributable to net borrowings of $7.4 million under Roanoke Gas' line-of-credit during the first three months of fiscal 2026 compared to net borrowings of $7.9 million in the same period last year. Additionally, during the first quarter of fiscal 2026, Midstream repaid a net $169,000 compared to borrowing a net $40,000 during the same period in the prior year. Notes 6 and 7 provide details on the Company's line-of-credit and borrowing activity.

Previous wording

In addition, Resources issued a total of 74,057 shares of common stock resulting in net proceeds of approximately $1.5 million. No shares were issued through the ATM program during the first nine months of fiscal 2025. During the same period last year, Resources issued 177,906 shares for approximately $3.5 million, including 85,501 shares through the ATM program for approximately $1.7 million, net of fees.

Current wording

In addition, Resources issued a total of 19,492 shares of common stock resulting in net proceeds of approximately $384,000 during the first three months of fiscal 2026, compared to issuing 14,792 shares of common stock resulting in net proceeds of approximately $269,000 during the first three months of fiscal 2025. No shares were issued through the ATM program during the first quarter of fiscal 2026 or 2025.

Previous wording

Management regularly evaluates the Company’s liquidity through a review of its available financing resources and its cash flows. Resources maintains the ability to raise equity capital through its ATM program, private placement or other public offerings. Management believes Roanoke Gas has access to sufficient financing resources to meet its cash requirements for the next year, including the line of credit and the two private shelf facilities. Roanoke Gas may also adjust capital spending if such a need would arise.

Current wording

Management regularly evaluates the Company’s liquidity through a review of its available financing resources and its cash flows. Roanoke Gas has a term note in the principal amount of $15 million coming due in August 2026. Management believes Roanoke Gas has access to sufficient financing resources to meet its cash requirements for the next year, including cash from operations and the line of credit. Roanoke Gas may also adjust capital spending as necessary, if such a need would arise.

Previous wording

As of June 30, 2025, Resources' long-term capitalization ratio was 45% equity and 55% debt.

Current wording

As of December 31, 2025, Resources' long-term capitalization ratio was 43% equity and 57% debt.