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Item 7. Management’s Discussion and Analysis

2025-12-04 compared with 2024-12-05 · 94 added, 127 removed, 246 unchanged (47% of the section changed)

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Resources is an energy services company primarily engaged in the regulated sale and distribution of natural gas to approximately 62,500 residential, commercial and industrial customers in Roanoke, Virginia, and the 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.

Midstream, a wholly owned subsidiary of Resources, is a less than 1% investor in the MVP, Southgate and Boost.

More information regarding the investment in MVP is provided below and under the Equity Investment in Mountain Valley Pipeline section.

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In addition, Roanoke Gas is subject to other regulations which are not necessarily industry specific.

Beginning January 1, 2023, Roanoke Gas implemented interim, non-gas base rates designed to provide $8.55 million in additional annual revenues in response to higher operating costs and to recover its investment in non-SAVE related projects since the prior non-gas base rate increase in fiscal 2019.

Revenues from the SAVE Plan and Rider were incorporated into the interim, non-gas base rates.

On December 19, 2023, the SCC issued a final order approving a non-gas base rate increase of $7.45 million.

The order also directed Roanoke Gas to refund the excess revenues collected during the time the interim rates were in effect with interest.

Refunds to customers, which were accrued in fiscal 2023 and reflected in regulatory liabilities, were made in February 2024.

On February 2, 2024, primarily in response to continued inflationary pressures, Roanoke Gas filed for a non-gas base rate increase of $4.33 million.

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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%.

Following extended periods of regulatory and judicial delays, as well as receipt of authorization from the FERC, the MVP entered into service on June 14, 2024 and became available for interruptible or short-term firm transportation service.

On July 1, 2024, the MVP commenced long-term firm capacity obligations.

See the Equity Investment in Mountain Valley Pipeline section for additional information on the MVP.

On April 10, 2025, the SCC issued a final order approving the settlement in its entirety.

The order also directed Roanoke Gas to refund the excess revenues collected during the time the interim rates were in effect with interest.

The refunds to customers, which had previously been accrued as a regulatory liability, were made to customers in May 2025.

As the Company’s business is seasonal in nature, volatility in winter weather and the commodity price of natural gas can impact the effectiveness of the Company’s rates in recovering its costs and providing a reasonable return for its shareholders.

In order to mitigate the effect of weather variations and other factors not provided for in the Company's base rates, Roanoke Gas has certain approved rate mechanisms in place that help provide stability to customer bills and earnings, adjust for volatility in the price of natural gas and provide a return on qualified infrastructure investment.

These mechanisms include the SAVE Rider, WNA, ICC, RNG and PGA.

These mechanisms include the SAVE Rider, WNA, ICC, RNG Rider and PGA.

The SAVE Plan and Rider provides the Company with a mechanism through which it recovers costs related to SAVE qualified infrastructure investments on a prospective basis, until such time a formal rate application is filed incorporating these investments in non-gas base rates.

The SAVE Plan and Rider were reset effective January 1, 2023, when the recovery of all prior SAVE Plan investment was incorporated into the new non-gas base rates.

Roanoke Gas filed and received approval from the SCC for a new SAVE Plan and Rider with new rates placed into effect on October 1, 2023, and as a result, SAVE Plan revenues declined to approximately $461,000 in fiscal 2024 from approximately $1,104,000 in fiscal 2023.

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 to approximately $1,588,000 in fiscal 2025 from approximately $461,000 in fiscal 2024.

Roanoke Gas filed and received approval from the SCC for an updated annual SAVE Rider rate to become effective October 1, 2025 that will result in approximately $2,610,000 of SAVE-related revenues during fiscal 2026.

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Total ICC revenues decreased from approximately $728,000 in fiscal 2024 to $587,000 in fiscal 2025 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.

The average price of gas in storage at September 30, 2024 declined by 23% compared to the same period last year.

Accordingly, fiscal 2025 ICC revenues are expected to continue to remain below the prior year's levels.

The average price of gas in storage during fiscal 2025 declined by 12% compared to fiscal 2024, while the average price of gas in storage at September 30, 2025 increased by 5% compared to the same period last year.

If natural gas prices remain at or higher than the prior year, the average dollar balance of gas in storage may 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.

In March 2023, Roanoke Gas began the operation of the RNG facility to produce commercial quality biogas for delivery into its distribution system through a cooperative agreement with the Western Virginia Water Authority.

With SCC approval, Roanoke Gas is allowed to recover the costs associated with the investment in RNG facilities and related operating costs through an RNG Rider added to customer bills.

The customer benefits from this program through the monetization of environmental credits generated through RNG production, in which these credits are returned to customers through the RNG Rider.

Total RNG revenue increased from approximately $712,000 in fiscal 2023 to $1,629,000 in fiscal 2024 as the facility was operational for a full twelve months in the current year compared to seven months in the prior year.

The customer benefits from this program through the monetization of environmental credits generated through RNG production, which are returned to customers through the RNG Rider.

Total RNG revenue increased from approximately $1,629,000 in fiscal 2024 to $1,760,000 in fiscal 2025.

See Note 4 of the consolidated financial statements for more information on RNG.

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Natural gas commodity, delivery and storage capacity costs constitute the single largest expense of the Company, representing 55% of fiscal 2025 total operating expenses.

After peaking in December 2022, natural gas commodity prices decreased significantly through the remainder of fiscal 2023 and fiscal 2024.

After peaking in December 2022, natural gas commodity prices decreased significantly for the remainder of fiscal 2023 and through fiscal 2025.

The decline in prices was primarily due to improved supply availability resulting from a warm winter season.

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In addition, there is potential for higher bad debts related to customers' inability to pay higher natural gas bills.

Inflation, due to supply chain delays, labor shortages and limited availability of critical supplies, among other factors, affects the Company through increases in non-gas expenses such as labor, employee benefits, materials and supplies, contracted services, corporate insurance and other areas.

The Company continues to experience inflation over the 2% level targeted by the Federal Reserve.

Inflation levels in health care spending, 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.

The Company recovers non-gas related costs through the non-gas portion of its tariff rates, which are adjusted through a non-gas base rate application.

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Management regularly evaluates the Company's operations, economic conditions and other factors to assess the need to apply for a non-gas base rate adjustment.

Accordingly, management filed a non-gas rate application in February 2024 to incorporate increased expense levels from continued inflationary pressures since the last non-gas base rate application.

These new non-gas base rates were implemented effective July 1, 2024, subject to refund.

See Note 4 of the consolidated financial statements for more information, including reaching settlement with SCC staff.

Accordingly, on December 2, 2025, the Company filed a non-gas base rate application with the SCC to increase revenues by $4.3 million annually.

Results of Operations

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Additional segment analysis is provided when Midstream's investment in affiliates represents a significant component of the comparison.

Net income increased by $461,614 from the prior year primarily due to AFUDC and earnings from the MVP and the implementation of new non-gas base rates effective July 1, 2024, partially offset by increased inflationary pressures on operating expenses and higher interest rates.

Net income increased by $1,519,074 from the prior year primarily due to the implementation of higher non-gas base rates and record natural gas deliveries, as well as lower post-retirement benefit costs, partially offset by lower WNA revenues and lower equity earnings from the MVP as the project transitioned from construction into service.

The Company's operating revenues are affected by the cost of natural gas, as reflected in the consolidated statement of income under the line item cost of gas - utility.

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Year Ended September 30,

Increase / (Decrease)

Regulated natural gas (DTH):

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Total delivered volumes

Total gas utility operating revenues for the year ended September 30, 2024 decreased by 13% from the year ended September 30, 2023 primarily due to significantly lower natural gas commodity prices and lower deliveries due to warmer weather more than offsetting the implementation of a non-gas base rate increase and increases in WNA and RNG revenues.

Natural gas commodity prices for fiscal 2024 purchases declined by 43% per DTH from the prior year and the total commodity component of gas costs decreased by 44% per DTH from the prior year.

Total gas costs, including pipeline and storage demand charges, decreased by 29% compared to a year ago, which corresponds to a 31% decline in the gas cost component included in total customer billing rate.

Corresponding to the lower average price of natural gas in storage during 2024, ICC revenues declined 25%.

In addition, total heating degree days decreased by 6% from the same period last year, resulting in a 2% decline in the weather-sensitive residential and commercial volumes, while transportation and interruptible volumes, primarily driven by business activity rather than weather, increased by 1%.

The non-gas base rate increases implemented in 2023 and 2024 were the main contributing factors to an approximate $1.7 million increase in non-gas volumetric revenues, net of lower delivered volumes, and a $522,000 increase in customer base charge revenue.

Additionally, the operation of the RNG facility for a full twelve months in the current year compared to seven months in the prior year resulted in increased revenues of approximately $917,000.

Total gas utility operating revenues for the year ended September 30, 2025 increased by 13% from the year ended September 30, 2024 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 July 2024 was the main contributing factor to an approximate $5.6 million increase in non-gas volumetric revenues.

In addition, total heating degree days increased by 18% from the prior fiscal year, resulting in a 9% increase in the weather-sensitive residential and commercial volumes, while transportation and interruptible volumes increased 24%, primarily driven by business activity of a single, multi-fuel customer during the period.

Total gas costs also increased over the prior year primarily due to pipeline capacity charges increasing over $4.0 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 $1,127,000 more revenue compared to the same period in the prior year.

WNA revenues declined approximately $2.7 million from the prior fiscal year as weather was only 4% warmer than normal during the current year compared to 20% warmer than normal during the prior year.

Gross Utility Margin

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Gross utility margin

Gross utility margin increased over the prior fiscal year primarily as a result of the implementation of new non-gas base rates, net of SAVE, WNA and RNG revenue, offset by the reductions in ICC revenues.

When adjusted for WNA, the volumetric margin increased by approximately $2,430,000.

Base charge revenues increased by approximately $522,000 due to the non-gas base rate increase.

The RNG Rider contributed an additional $917,000 to margin, as it was operational for all twelve months of fiscal 2024 compared to seven months during fiscal 2023, and ICC revenue declined by $239,000 due to lower cost of gas in storage.

Gross utility margin increased over the prior fiscal year primarily as a result of the implementation of new non-gas base rates and increases in SAVE revenues, slightly offset by the reduction in ICC revenues.

The volumetric margin, net of the WNA, increased by approximately $2.8 million primarily due to the new non-gas base rates and increases in transportation and interruptible volumes.

As previously discussed, the SAVE Plan contributed an additional $1,127,000 to margin, while ICC revenues decreased by approximately $141,000 due to lower cost and volumes of gas in storage.

The changes in the components of the gross utility margin are summarized below:

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Operations and maintenance

Corporate and other

Total operations and maintenance

Total cost of sales

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Gross utility margin (Non-GAAP)

Operations and Maintenance Expense - Operations and maintenance expense increased by $2,450,764, or 15%, over the prior year primarily due to inflationary effects on personnel costs, professional services, costs associated to operate and maintain the RNG facility and lower capitalized overheads.

Personnel costs increased by approximately $1,094,000 due to increased staffing and the inflationary impact on salaries and benefits as well as awards of restricted stock.

During fiscal 2023, no performance-based restricted stock was awarded, but was reinstated in fiscal 2024.

Professional services expenses increased approximately $270,000 primarily due to increased external audit fees, actuarial services, recruiting costs and IT support.

Further, costs associated with the RNG facility increased approximately $299,000, as the facility was only operational during seven months of the prior year as compared to all twelve months in the current year.

Total capitalized construction overheads declined by approximately $429,000 compared to the prior year primarily due to a reduction in direct construction expenditures related to the RNG project, which was completed in fiscal 2023.

Corporate insurance premiums accounted for much of the remaining cost increase.

Operations and Maintenance Expense - Operations and maintenance expense increased by $1,556,674, or 8%, over the prior year primarily due to inflationary effects on personnel costs and contracted services, RNG-related costs and bad debt expense.

Personnel costs and contracted services increased by approximately $969,000 due to increased staffing and the inflationary impact on salaries and benefits.

RNG expenses increased approximately $231,000 primarily due to increases in electric and telemetering charges.

Bad debt expense increased by approximately $170,000 due to higher bills from colder weather and more inactive accounts resulting from non-pay customer turnoffs.

Increased corporate insurance premiums accounted for much of the remaining increase.

Taxes Other Than Income Taxes - Taxes other than income taxes increased by $239,135, or 9%, primarily due to higher property tax rates and growth in utility property, as well as increases in payroll taxes related to increased staffing and compensation.

Depreciation and Amortization - Depreciation and amortization expense increased by $952,547, or 9%, corresponding to a similar increase in net additions to depreciable utility property.

Equity in Earnings of Unconsolidated Affiliate - The equity in earnings of the MVP investment increased by $1,766,881 associated with the recognition of AFUDC as a result of MVP construction activities continuing through May 2024.

Increases in fixed assets with shorter useful lives during the current fiscal year resulted in depreciation expense increasing slightly more than the 6% increase in utility property.

Equity in Earnings of Unconsolidated Affiliate - The equity in earnings of the MVP investment decreased by $617,239, or 16%.

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.

Other Income, Net - Other income increased by $382,233, or 59%, primarily due an increase of approximately $471,000 related to donations of certain natural gas distribution assets from a local housing authority.

Additionally, revenue sharing related to the asset management agreements increased by approximately $239,000.

These increases were offset by an approximate $286,000 decrease in AFUDC related to the RNG facility, which was placed in service in March 2023, and approximately $62,000 less interest income.

Interest Expense - Total interest expense increased by $886,080, or 16%, primarily due to higher interest rates on the Company's variable rate debt and, to a lesser extent, higher borrowing levels.

The weighted-average interest rate on the Company's total debt increased from 3.83% during fiscal 2023 to 4.27% during fiscal 2024, representing a 12% increase in the average rate.

Other Income, Net - Other income increased by $1,204,122, primarily due to an approximate $1,129,000 decrease in postretirement benefit plan costs as a result of actuarial changes, coupled with an increase of approximately $237,000 in revenue sharing related to the asset management agreements, which are described in more detail in Note 14 of the consolidated financial statements.

Interest Expense - Total interest expense remained relatively flat over the prior year, increasing slightly by $38,626, or 1%, primarily due to higher borrowing levels.

Total average debt outstanding during fiscal 2025 increased by 2% from fiscal 2024.

Total borrowing levels were mitigated by equity issues through the ATM in fiscal 2024.

Roanoke Gas' interest expense increased by $484,454, or 15%, as total average debt outstanding increased by approximately $5,600,000 associated with net borrowings under the Company's line-of-credit.

The average interest rate increased slightly from 3.51% in fiscal 2023 to 3.72% in fiscal 2024.

All of Roanoke Gas' long-term debt carry fixed rates either due to fixed rate notes or with variable rate debt that has a corresponding swap agreement.

Roanoke Gas' total average debt outstanding increased by approximately $1,346,000 associated with net borrowings under the Company's line-of-credit, while Midstream's total average debt outstanding increased by approximately $1,441,000 during the year.

There were minimal fluctuations in the weighted-average interest rates between the periods.

See Note 6 and 7 of the consolidated financial statements for more information on the Company's debt.

Midstream's interest expense increased by $401,626, or 17%, as the average interest rate on Midstream's total debt increased from 4.32% to 5.21% related to higher interest rates on the variable rate credit facilities that were refinanced in 2024, net of an approximate $1,600,000 decrease in total average debt outstanding during the period.

The current interest rate environment may result in lower interest costs associated with the Company's variable rate debt.

Income Taxes - Income tax expense increased by $394,924, or 11%, corresponding to an increase in pre-tax income.

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The Company anticipates funding these items through its operating cash flows, credit availability under short-term and long-term debt agreements and proceeds from the sale of its common stock.

Cash and cash equivalents decreased by approximately $618,000 in fiscal 2024 compared to $3.4 million in fiscal 2023.

Cash and cash equivalents increased by approximately $1,426,000 in fiscal 2025 compared to a decrease of approximately $618,000 in fiscal 2024.

The following table summarizes the categories of sources and uses of cash:

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Net cash used in investing activities

Net cash provided by financing activities

Net decrease in cash and cash equivalents

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Cash Flows Provided by Operating Activities:

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During the first and fourth fiscal quarters, operating cash flows generally decrease due to the combination of increasing natural gas storage levels and rising customer receivable balances.

Cash flows from operating activities decreased by $6.4 million from the prior year.

The table below summarizes the significant components operating cash flow:

Years Ended September 30,

Cash Flows From Operating Activities:

Non-cash adjustments:

Equity in earnings

Changes in working capital and regulatory assets and liabilities:

Accounts receivable and customer deposits, net

Inventories and gas in storage

Prepaid income taxes

Change in under collection of gas costs

Change in under collection of RNG revenues

Net cash provided by operating activities

The decline in operating cash flows is primarily due to the reduction in the value of gas withdrawn from storage.

The average price of gas in storage during fiscal 2023 was more than $6.00 per DTH compared to approximately $4.00 per DTH during the current fiscal year.

The decrease in the unit cost of gas in storage was attributable to much lower commodity prices during last year's summer storage injections as compared to fiscal 2022.

Accordingly, as lower-priced gas was withdrawn from storage during fiscal 2024, cash flow levels were reduced when compared to fiscal 2023.

Additionally, though the SCC issued its final order in December 2023, Roanoke Gas implemented interim billing rates in January 2023; therefore, the Company began accruing an estimated rate refund representing the amount due customers for the difference between total customer billings at interim rates versus total customer billings at final rates.

Upon SCC approval of final rates, Roanoke Gas issued refunds in February 2024 to all customers that were billed at interim rates since January 2023.

When compared to the prior year, the distribution of the rate refund to customers reduced cash available for operations by $1.3 million.

Cash flows from operating activities increased by $11.5 million from the prior year.

The increase in operating cash flows is primarily due to net income increasing approximately $1,519,000, along with the cash distributions received from the LLC, direct impacts from weather and increased pipeline and storage capacity charges.

During fiscal 2025, the Company received approximately $3,645,000 in quarterly cash distributions from the LLC, which has been accounted for as a return on its invested capital.

The timing of collections related to gas costs, RNG and WNA resulted in approximately $5,011,000 in additional operating cash.

Colder weather and increased gas costs compared to the prior year resulted in higher accounts receivable and accounts payable balances.

Pipeline and storage capacity charges during fiscal 2025 increased over $3,400,000 from the prior year.

Additionally, total commodity costs increased from $3.44 per DTH in fiscal 2024 to $3.64 per DTH in fiscal 2025.

Cash Flows Used in Investing Activities:

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 the demands of customer growth.

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' expenditures were approximately $20.7 million and $22.1 million in fiscal 2025 and 2024, respectively.

The $3.2 million decrease in expenditures is primarily due to higher prior-year investment for the RNG project, which was placed in service in March 2023.

The $1.4 million decrease in expenditures is primarily due to higher prior-year investment for the MVP gate stations, which were placed into service in fiscal 2024.

Roanoke Gas renewed 4.2 miles of main and 311 service lines and 5.4 miles of main and 412 service lines in fiscal years 2025 and 2024, respectively.

With the recent approval of its new SAVE Plan and Rider, 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 strong and therefore extending the natural gas distribution system within its service territory is also a priority.

Roanoke Gas’ capital expenditures included costs to extend natural gas distribution mains and services to 521 customers in fiscal 2024, compared to 430 customers in fiscal 2023.

Under the SCC approved SAVE Plan and Rider, the Company is continuing its focus on SAVE infrastructure replacement projects, including the replacement of pre-1973 first generation plastic pipe.

Roanoke Gas’ capital expenditures included costs to extend natural gas distribution mains and services to 594 new customers in fiscal 2025, compared to 521 new customers in fiscal 2024.

Capital expenditures are expected to be approximately $22 million annually over the next few years as Roanoke Gas continues to focus on its SAVE Plan, as well as system improvements and customer growth.

The Company expects to utilize its operating cash flows and credit facilities, as well as to consider additional long-term debt and equity capital, to meet the funding requirements of these planned expenditures.

Investing cash flows also reflects the fiscal 2024 funding of approximately $18,000 for Midstream's participation in the LLC, down from the $2.1 million in fiscal 2023.

Midstream ceased future participation in capital calls following its May 2023 funding payment based on an agreement with the LLC's managing partner.

Midstream continues to be invested in the LLC; however, its ownership percentage declined as it did not make additional investments.

Now that the MVP is in service, Midstream will incur normal periodic capital investment related to ongoing MVP operations requirements and system improvements, in which it will again participate.

Midstream has and will continue to make capital investments in Southgate.

The targeted timing for completion of the Southgate project is 2028.

Investing cash flows also reflects the fiscal 2025 funding of approximately $76,000 for Midstream's participation in the LLC, up from approximately $18,000 in fiscal 2024.

Now that the MVP is in service, Midstream will be required to make periodic capital investment related to ongoing MVP operations requirements and system improvements.

Midstream has and will continue to make capital investments in Southgate and Boost.

The targeted timing for completion of the Southgate project is 2028 and the Boost project is 2029.

Cash Flows Provided by Financing Activities:

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 $4.0 million and $200,000 in fiscal 2024 and 2023, respectively.

The $3.8 million increase in financing cash flows is primarily attributable to net borrowings of $6.8 million under Roanoke Gas' line-of-credit during fiscal 2024 compared to $4.3 million in net borrowings in the prior year.

Additionally, Midstream borrowed a net amount of $680,000 during fiscal 2024 from its amended credit facility compared to net repayments of approximately $196,000 in the prior year.

During fiscal 2024, the Company realized $4.7 million from the issuance of 234,645 shares through the ATM program and DRIP activity compared to $3.9 million received from the issuance of 194,719 shares from those same activities, as well as the exercise of stock options, during the prior year.

Net cash flows used in financing activities were approximately $6.8 million in fiscal 2025, compared to $4.0 million in net cash flows provided by financing activities in fiscal 2024.

The $10.8 million decrease in financing cash flows is primarily attributable to net borrowings of approximately $751,000 under Roanoke Gas' line-of-credit during fiscal 2025 compared to net borrowings of $6.8 million in the same period last year.

In addition, during fiscal 2025, Resources issued a total of 88,409 shares of common stock, primarily from DRIP activity, resulting in net proceeds of approximately $1.8 million.

No shares were issued through the ATM program during fiscal 2025.

During fiscal 2024, the Company realized $4.7 million from the issuance of 234,645 shares through the ATM program and DRIP activity.

Cash outflows for dividend payments were $8.5 million as the annualized dividend rate increased from $0.80 to $0.83 per share and total outstanding shares increased as a result of the stock issuance activity.

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This compares to 44.1% equity and 55.9% long-term debt at September 30, 2024.

The current interest rate environment may result in lower interest costs associated with the Company's variable rate debt.

Current interest rate trends may result in lower interest costs associated with the Company's variable rate debt in 2026.

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.

The first shelf facility provides for the issuance of up to $40 million in unsecured notes in addition to the $28 million previously issued.

This shelf agreement is scheduled to expire on December 6, 2025.

The second facility provides for the issuance of up to $70 million in unsecured notes during its current term, which expires September 30, 2025.

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.

With the MVP now in service, Midstream's future cash requirements will relate to regular monthly operating expenses, debt service and capital contributions.

The Company received its first cash distribution from MVP of approximately $800,000 in October 2024, and should receive similar distributions quarterly.

On March 6, 2024, Midstream refinanced its Promissory Notes with one lender, increased the capacity of its $23 million credit facility to $25 million and extended the maturity date to December 31, 2025.

Further, on May 2, 2024, Midstream established a new $9 million line of credit facility that matures on May 2, 2026.

With these proceeds, Midstream paid in full the $9 million balance on its note payable that matured on June 1, 2024.

With the extension of its original credit facility and the establishment of the new credit facility, Midstream's total debt repayment over the succeeding 12 months is $800,000 in principal payments.

Management believes that it will be able to meet Midstream's cash requirements over the ensuing 12-month period with its quarterly cash distributions from MVP.

The Company received four quarterly cash distributions from MVP in fiscal 2025 totaling approximately $3.6 million, and should receive similar quarterly distributions going forward.

On September 5, 2025, Midstream established a new $53.6 million term note with two banks, which refinanced and replaced all of Midstream's outstanding debt.

This term note matures 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 note, 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.

Notes 6 and 7 of the consolidated financial statements provide details on the Company's line-of-credit and borrowing activities.

The Company opted to not utilize the ATM program for the year ended September 30, 2025, although it remains in place.

Resources issued 129,164 shares of common stock for $2,635,200, net of $67,569 in fees, under the ATM program for the year ended September 30, 2024.

For the year ended September 30, 2023, Resources issued 127,852 shares of common stock for $2,713,020, net of $69,565 in fees, under the ATM program.

Off-Balance Sheet Arrangements

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Equity Investment in Mountain Valley Pipeline

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 and the Company's involvement as a customer of the MVP.

The Company owns a less than 1% interest in the LLC that owns and operates the MVP, as defined in its operating agreement.

The Company has been using the equity method since the inception of its investment in fiscal 2016.

Following receipt of authorization from the FERC, the MVP entered commercial operation on June 14, 2024 and 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 pipeline is targeted for June 2028.

From inception through May 2024, earnings from the LLC were primarily attributable to AFUDC income.

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 proportional share of assets and its carrying value that arose when the Company recorded an other-than-temporary impairment of its investment in 2022.

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 fiscal 2024 and 2023, the Company recorded equity in earnings of consolidated affiliates of $3.9 million and $2.1 million, respectively, which included $3.0 million and $2.1 million from AFUDC.

The Company participates in quarterly cash distributions by the LLC, the first of which was in October 2024.

The Company's share was approximately $800,000.

During fiscal 2025 and 2024, the Company recorded equity in earnings of consolidated affiliates of approximately $3.2 million and $3.9 million, respectively, with the 2024 amounts being primarily derived from AFUDC.

The LLC began to return excess cash in fiscal 2025.

Midstream received quarterly cash distributions of its share from the LLC totaling approximately $3.6 million during 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.

The Company refinanced all of the debt supporting its investment in the MVP in September 2025, as described in the liquidity section above.

See Note 4 of the consolidated financial statements for discussion on Regulatory matters.

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The expenses and liabilities associated with these plans, as disclosed in Note 12 of the consolidated financial statements, are based on numerous assumptions and factors, including provisions of the plans, employee demographics, contributions made to the plan, return on plan assets and various actuarial calculations, assumptions and accounting requirements.

Demographic assumptions include projections of future mortality rates, pay increases and retirement patterns, as well as projected health care costs.

In regard to the pension plan, specific factors include assumptions regarding the discount rate used in determining future benefit obligations, expected long-term rate of return on plan assets, compensation increases and life expectancies.

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In selecting the discount rate to be used in determining the benefit liability, the Company utilized t he FTSE Pension Discount Curve, which incorporates the rates of return on high-quality, fixed-income investments that corresponded to the length and timing of benefit streams expected under both the pension plan and postretirement plan.

The Company used a discount rate of 4.83% for valuing both its pension plan and postretirement plan liabilities at September 30, 2024.

These discount rates represent a decrease from the 5.63% for the pension plan and postretirement plan used for valuing the corresponding liabilities at September 30, 2023.

The decrease in discount rates reflect the Federal Reserve's easing of interest rates in 2024 and general long-term rate decline.

The yield on the 30-year Treasury increased from 3.79% at September 30, 2022 to 4.73% at September 30, 2023 and decreased to 4.14% at September 30, 2024.

The Company used a discount rate of 5.29% and 5.16% for valuing its pension plan liability and postretirement plan liability, respectively, at September 30, 2025.

These discount rates represent an increase from the 4.83% rate used for valuing the corresponding liabilities for both the pension plan and postretirement plan at September 30, 2024.

The increase in discount rates corresponds to the market reactions to the continuing inflationary pressures on the financial markets and economy .

The yield on the 30-year Treasury increased from 4.14% at September 30, 2024 to 4.73% at September 30, 2025.

Corporate bond rates experienced a smaller increase as credit spreads have narrowed.

The rise in the discount rates through 2023 was the primary factor in the reduction of the benefit obligations for both the pension and the postretirement plan.

The rise in the discount rates was the primary factor in the reduction of the benefit obligations for both the pension and the postretirement plan.

Mortality assumptions were based on the PRI-2012 Mortality Table with improvements projected generational using Projection Scale MP-2021 for the curr ent year valuation.

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With the soft freezes of both the pension and postretirement plans, future liability growth associated with participant service and compensation has been limited.

Since January 2017, when the pension plan froze access to new employees, the asset allocation has transitioned from 60% equity and 40% fixed income to 25% equity and 75% fixed.

Since January 2017, when the pension plan froze access to new employees, the target asset allocation has transitioned from 60% equity and 40% fixed income to 25% equity and 75% fixed.

During the same period, the fixed income portion of the plan was transitioned to an LDI approach, with the fixed income assets invested in securities with a duration that corresponds to the duration of the corresponding liability.

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Similar to the pension plan, the revision to the asset allocation will seek to reduce the volatility in funded status while still providing the opportunity for asset growth through the equity portion of the portfolio.

The funded status for the postretirement plan was 139% a nd 116% as of September 30, 2024 and 2023, respecti vely.

The funded status for the postretirement plan was 147% and 139% as of September 30, 2025 and 2024, respecti vely.

The improvement in the funded status was due to stronger-than-expected market performance only partially offset by higher liabilities as the Company is effectively matching durations within the portfolio.

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The Company annually evaluates the long-term rate of return on its targeted investment allocation model, as well as the overall asset allocation of its benefit plans, and reviews both plans' potential long-term rate of return assumptions with its investment advisors to determine the rates used in each plan's actuarial calculations.

The long-term rates of return increased slightly from 4.50% in fiscal 2024 to 4.95% for fiscal 2025 for the pension plan and from 4.21% in fiscal 2024 to 4.95% for fiscal 2025 for the postretirement plan.

Management will continue to evaluate the return assumptions and asset allocation and adjust both as market conditions warrant.

The long-term rates of return increased slightly from 4.95% in fiscal 2024 to 5.75% for fiscal 2025 for both the pension plan and the postretirement plan.

Management evaluates the return assumptions and asset allocation and adjusts both as market conditions warrant.

Management estimates that the Company will have no minimum funding requirements next year.

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Change in Assumption

Increase (Decrease) in Postretirement Benefit Cost

Increase in Postretirement Benefit Cost

Increase in Accumulated Postretirement Benefit Obligation

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Furthermore, the actual market value at the point of realization of the derivative may be significantly different from the values used in determining fair value in prior financial statements.

The Company had four interest-rate swaps outstanding at September 30, 2024 related to its variable rate notes.

The corresponding fair value of these swaps is reflected on the consolidated balance sheets as of September 30, 2024 and 2023.

A 25 basis point decrease and increase on the yield curve would result in a $228,248 decrease and $226,748 increase, respectively, in the fair value of the interest rate swaps on the balance sheet.

The Company had six interest-rate swaps outstanding at September 30, 2025 related to its variable rate notes, compared to four at September 31, 2024.

The corresponding fair value of the swaps is reflected on the consolidated balance sheets as of September 30, 2025 and 2024.

A 25 basis point decrease or increase on the yield curve would result in an approximately $600,000 corresponding decrease or increase in the fair value of the interest rate swaps on the balance sheet.

See Notes 1 and 8 to the consolidated financial statements for additional information regarding the swaps.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis