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 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.

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 and other regulatory actions, debt refinancing, technological developments, new products, research and development activities, weather variations, 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, as well as an updated risk within Item 1A "Risk Factors" in Part II below. 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 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.

Current wording

The three-month and six-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 six 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 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.

Current wording

Resources is an energy services company primarily engaged in the regulated sale and distribution of natural gas to approximately 63,900 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

Nearly all of the Company’s revenues are derived from the sale and delivery of natural gas to Roanoke Gas customers based on rates and fees authorized by the SCC. These rates are designed to provide the Company with the opportunity to recover its gas and non-gas expenses and to earn a reasonable rate of return for shareholders based on normal weather. These rates are determined based on various rate applications filed with the SCC. Generally, investments related to extending service to new customers are recovered through the additional revenues generated by the non-gas base rates in place at that time. The investment in replacing and upgrading existing non-SAVE infrastructure, as well as recovering increases in non-gas expenses due to inflationary pressures, regulatory requirements or operational needs, are generally not recoverable until a formal rate application is filed to include the additional investment and higher costs, and new non-gas base rates are approved.

Current wording

Nearly all of the Company’s revenues are derived from the sale and delivery of natural gas to Roanoke Gas customers based on rates and fees authorized by the SCC. These rates are designed to provide the Company with the opportunity to recover its gas and non-gas expenses and to earn a reasonable rate of return for shareholders based on normal weather. These rates are determined based on various rate applications filed with the SCC. Generally, investments related to extending service to new customers are recovered through the additional revenues generated by the non-gas base rates in place at that time. The investment in replacing and upgrading existing non-SAVE infrastructure, as well as recovering increases in non-gas expenses due to inflationary pressures, regulatory requirements or operational needs, are generally not recoverable until a formal rate application is filed to include the additional investment and higher costs, and new non-gas base rates are implemented.

Previous wording

On December 2, 2025, the Company filed for an expedited rate application with the SCC to increase non-gas base rates by $4.3 million annually. Pursuant to the Commission’s December 29, 2025 Order for Notice and Comment, the new base rates went into effect for services rendered on or after January 1, 2026, subject to refund. The SCC's review of Roanoke Gas' filing is underway and a hearing has been set for July 15, 2026. Based on the procedural schedule established in the Commission’s Order, the Company anticipates final resolution of the case in the first quarter of fiscal 2027.

Current wording

On December 2, 2025, the Company filed for an expedited rate application with the SCC to increase non-gas base rates by $4.3 million annually. Pursuant to the Commission’s December 29, 2025 Order for Notice and Comment, the new base rates went into effect for service rendered on or after January 1, 2026, subject to refund. The SCC's review of Roanoke Gas' filing is underway and a hearing is set for July 15, 2026. Based on the procedural schedule established in the Commission’s Order, the Company anticipates final resolution of the case in the first quarter of fiscal 2027.

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, 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.

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 $261,000 and $532,000, respectively, for the three-month and six-month periods ended March 31, 2026 compared to the same periods last year. The updated SAVE Rider is expected to result in approximately $2.61 million of annualized SAVE-related revenues during fiscal 2026. 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 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.

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 March 31, 2026, the Company accrued approximately $298,000 in additional revenues under the WNA model for weather that was 2% warmer than normal, compared to reducing revenues by approximately $27,000 for weather that was in line with normal for the corresponding period last year. For the six months ended March 31, 2026, the Company reduced revenues by approximately $21,000 for weather that was in line with normal, compared to approximately $473,000 in additional revenues for weather that was 2% warmer than normal for the corresponding period last year. The WNA for the 12-month period ended March 31, 2026 was approximately $483,000, which will be billed to customers during May 2026.

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 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.

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 decreased nominally for both the three-month and six-month periods ended March 31, 2026 compared to the corresponding periods last year. While the average price of gas in storage fluctuated nominally for the six-month period ended March 31, 2026 compared to the same period in the prior year, the average price of gas in storage decreased by 4% during the second quarter of fiscal 2026 compared to the second quarter of fiscal 2025. If natural gas prices remain at or continue to decline as compared to the prior year, coupled with possible reduced storage levels at the LNG facility, the average dollar balance of gas in storage is expected to decrease, leading to lower ICC revenues in fiscal 2026.

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 $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.

Current wording

Roanoke Gas operates an RNG facility, through a cooperative agreement with the Western Virginia Water Authority, to produce commercial quality RNG for delivery into its distribution system. Roanoke Gas is allowed to recover the costs associated with the investment in RNG facilities and the related operating costs through an RNG Rider added to customer bills that was approved by the SCC in 2023 and updated annually. Customers receive the benefit of environmental credits generated through the production of RNG. Roanoke Gas recognized approximately $450,000 and $934,000, respectively, in RNG revenue for the three and six months ended March 31, 2026 compared to approximately $429,000 and $817,000 for the corresponding periods 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. 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.

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. 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 during Winter Storm Fern, natural gas prices spiked from less than $4 per DTH to well over $30 per DTH at the end of January and into February 2026. As such, the Company adjusted the PGA rate effective February 2026 to offset the increased under-recovery of gas costs, which are anticipated to be collected from customers over the ensuing 12 to 18 months.

Previous 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.

Current wording

Gross utility margin increased 7% from the same period last year primarily as a result of the aforementioned increases in non-gas base rates, as well as increased SAVE and RNG revenues, which contributed $611,000 and $298,000, respectively. 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 periods, the volumetric margin, inclusive of the WNA, increased by approximately $1.1 million due to weather that was 2% warmer than normal.

Previous 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.

Current wording

Equity in earnings of unconsolidated affiliate increased by $102,816, or 13%. See Note 5 of the consolidated financial statements for additional information related to the MVP.

Previous 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.

Current wording

Interest expense decreased by $44,437, or 3%, as the weighted-average interest rate on total debt decreased from 4.33% during the second quarter of fiscal 2025 to 4.10% in the current quarter. Midstream's interest expense decreased by $89,017, or 13%, as the total average debt outstanding decreased by approximately $1,586,000 as a result of principal payments made on term notes, along with the weighted-average interest rate decreasing from 5.06% during the second quarter of fiscal 2025 to 4.53% in the current quarter. Roanoke Gas' interest expense increased by $44,580, or 5%, as total average debt outstanding increased by approximately $3,870,000 associated with higher net borrowings under the Company's line-of-credit. Roanoke Gas' weighted-average interest rate remained relatively flat from the second 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 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.

Current wording

Income tax expense increased by $191,767, or 8%, primarily corresponding to the increase in pre-tax income. The effective tax rate was 22.6% and 23.5% for the three-month periods ended March 31, 2026 and 2025, respectively. The effective tax rate is below the combined statutory state and federal rate due to the amortization of excess deferred taxes and tax credits. Additionally, certain restricted stock-related tax deductions contributed to a further reduction to the effective tax rate during the current period.

Previous wording

Net income decreased by $386,824 for the three months ended December 31, 2025, compared to the same period last year, primarily due to continued inflationary pressures on operating costs slightly offset by lower interest expense and income taxes.

Current wording

Net income increased by $681,458 for the six months ended March 31, 2026, compared to the same period last year, primarily due to the aforementioned implementation of higher non-gas base rates this quarter, lower interest expense and income taxes, slightly offset by continued inflationary pressures on operating costs.

Previous 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.

Current wording

Operations and maintenance expenses increased $829,585, or 8%. The Company continues to experience inflation over the 2% level historically targeted by the Federal Reserve. Inflation levels in health care benefits, certain types of insurance, contracted services and IT service costs, as well as other items, continue to put upward pressure on the Company's expenses. Personnel costs increased by approximately $147,000 due to increased staffing and the inflationary impact on salaries and benefits. Contracted services increased by approximately $274,000 also due to inflationary pressures as well as increased customer turn-ons. Capitalized construction overheads declined by approximately $311,000 due to a reduction in Roanoke Gas capital projects as a result of winter weather. Higher corporate insurance premiums and RNG-related costs accounted for much of the remaining increase, which were slightly offset by a decrease in professional services expenses.

Previous 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.

Current wording

Taxes other than income taxes increased by $159,627, or 10%, due to higher property taxes associated with growth in utility property and increased tax rates, as well as increases in payroll taxes.

Previous wording

Depreciation expense increased by $227,745, or 8%, corresponding to a similar increase in investments in depreciable utility property. Increases in fixed assets with shorter useful lives over the last year resulted in depreciation expense increasing slightly more than the 7% increase in the average utility property balance.

Current wording

Depreciation expense increased by $442,082, or 8%, corresponding to a similar increase in investments in depreciable utility property. Increases over the last year in capitalized software, with shorter useful lives, resulted in depreciation expense increasing slightly more than the 5% increase in the average utility property balance.

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. The current asset management contract was signed for a three year period which will expire in March 2028.

Current wording

Roanoke Gas relies on multiple interstate pipelines and gas storage to transport natural gas from production and storage fields into the Company's distribution system. Roanoke Gas is currently served directly by three primary pipelines and uses a third-party asset manager to oversee its pipeline transportation, storage rights and gas supply inventories and deliveries in order to provide a secure and reliable source of natural gas to its customers. In return for utilizing the excess capacities of the transportation and storage rights, the asset manager pays Roanoke Gas a monthly utilization fee. In accordance with an SCC order issued in 2018, a portion of the utilization fee is retained by the Company with the balance passed through tocustomers through reduced gas costs. The current asset management contract is for a three-year term, expiring in March 2028.

Previous 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.

Current wording

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 second quarter of fiscal 2026 and 2025, the Company recorded equity in earnings of consolidated affiliates of approximately $904,000 and $801,000, respectively. For the first six months of fiscal 2026 and 2025, the Company recorded equity in earnings of consolidated affiliates of approximately $1.7 million in both periods. The Company received a quarterly cash distribution of its share from the LLC totaling approximately $641,000 and $983,000 during the second quarter of fiscal 2026 and 2025, respectively, which was a return on its invested capital, and expects future quarterly distributions to be of a similar magnitude. For the first half of fiscal 2026 and 2025, quarterly cash distributions totaled $1.4 million and $1.8 million, respectively. The Company is using this cash to pay interest and other expenditures related to Midstream. The Company refinanced all of the debt supporting its investment in the MVP in September 2025, as described in the liquidity section.

Previous 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:

Current wording

Cash and cash equivalents increased by $1,071,617 for the six-month period ended March 31, 2026 compared to an increase of $1,258,586 for the six-month period ended March 31, 2025. The following table summarizes the sources and uses of 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 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.

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 six-month period ended March 31, 2026 were approximately $9.8 million compared to $10.7 million during the same period last year. The decline is a result of colder weather delaying completion of capital projects. Total fiscal 2026 capital expenditures are expected to be approximately $22 million.

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 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.

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 used in financing activities were approximately $4.9 million for the six months ended March 31, 2026, compared to approximately $9.9 million for the same period last year. The $5 million reduction in financing cash flows is primarily attributable to a decrease in net repayments under Roanoke Gas' line-of-credit, slightly offset by an increase in net payments under Midstream's notes payable. The Company's net payments on Roanoke Gas' line-of-credit during the first six months of fiscal 2026 were $1.2 million compared to $7.0 million in the same period last year. Additionally, during the first half of fiscal 2026, Midstream repaid a net $692,000 compared to borrowing a net $145,000 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 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.

Current wording

Resources issued a total of 67,503 shares of common stock resulting in net proceeds of approximately $1.4 million during the first six months of fiscal 2026, compared to issuing 59,986 shares of common stock resulting in net proceeds of approximately $1.2 million during the first six months of fiscal 2025. The ATM program was not utilized during either period.

Previous 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.

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, the line of credit and a private shelf facility. Roanoke Gas may also adjust capital spending as necessary, if such a need would arise.

Previous wording

Midstream's future cash requirements will relate to regular monthly operating expenses, debt service and capital contributions. The Company has received a quarterly cash distribution from MVP in fiscal 2026 of approximately $753,000, and should receive similar quarterly distributions going forward. On September 5, 2025, Midstream established new amortizing term notes with two banks in the initial amounts of $38.6 million and $15 million, which refinanced and replaced all of Midstream's outstanding debt. This term notes mature on September 5, 2032. Also on September 5, 2025, Midstream entered into a new Loan Agreement for the MVP Southgate extension and MVP Boost expansion that can be drawn to principal amounts of $1.85 million and $3.65 million, respectively. These loans mature on September 5, 2030, at which time the outstanding principal balance on each note is due. With the establishment of the new term notes, Midstream's total debt principal payments over the succeeding 12 months is $2,846,018. Management believes that it will be able to meet Midstream's cash requirements over the ensuing 12-month period with availability on the Southgate and Boost Loan Agreements and its quarterly cash distributions from MVP.

Current wording

Midstream's future cash requirements will relate to regular monthly operating expenses, debt service and capital contributions. The Company received two quarterly cash distributions from MVP in fiscal 2026 totaling approximately $1.4 million, and should receive similar quarterly distributions going forward. On September 5, 2025, Midstream established new amortizing term notes with two banks in the initial amounts of $38.6 million and $15 million, which refinanced and replaced all of Midstream's outstanding debt. The term notes mature on September 5, 2032. Also on September 5, 2025, Midstream entered into a new Loan Agreement for the MVP Southgate extension and MVP Boost expansion that can be drawn to principal amounts of $1.85 million and $3.65 million, respectively. These loans mature on September 5, 2030, at which time the outstanding principal balance on each note is due. With the establishment of the new term notes, Midstream's total debt principal payments over the succeeding 12 months is $2,846,018. Management believes that it will be able to meet Midstream's cash requirements over the ensuing 12-month period with availability on the Southgate and Boost revolving credit facilities and its quarterly cash distributions from MVP.

Previous wording

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

Current wording

As of March 31, 2026, Resources' long-term capitalization ratio was 46% equity and 54% debt.