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What changed in Knife River Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Knife River Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+647 added−727 removedSource: 10-K (2025-02-21) vs 10-K (2024-02-27)

Top changes in Knife River Corp's 2024 10-K

647 paragraphs added · 727 removed · 485 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

86 edited+23 added−101 removed9 unchanged
Biggest changeAdditional details about each of the reportable segments as of and for the year ended December 31, 2023, is as follows: Pacific Northwest Mountain Central Energy Services Consolidated Knife River States of Operation Alaska, California and Hawaii Oregon and Washington Idaho, Montana and Wyoming Iowa, Minnesota, North Dakota, South Dakota and Texas California, Iowa, Nebraska, South Dakota, Texas and Wyoming Aggregate Reserves (tons) 161.3 million 499.7 million 226.2 million 215.8 million — 1.1 billion Properties: Active Aggregate Sites* 14 47 32 87 — 180 Ready-Mix Plants 18 26 17 41 — 102 Asphalt Plants 4 12 19 21 — 56 Revenue $462.2 million $666.1 million $634.0 million $825.0 million $292.3 million $2,830.3 million Percent revenue by segment 16 % 23 % 22 % 29 % 10 % 100 % Revenue Composition: Construction Materials 77 % 61 % 44 % 58 % 100 % 62 % Contracting Services 23 % 39 % 56 % 42 % — % 38 % Public-Sector Services 56 % 66 % 71 % 95 % — % 77 % Private-Sector Services 44 % 34 % 29 % 5 % — % 23 % __________________ * Does not include 6 sites that are classified as exploration stage properties.
Biggest changeAdditional details about each of the reportable segments as of and for the year ended December 31, 2024, is as follows: Pacific Northwest Mountain Central Energy Services Consolidated Knife River States of Operation Alaska, California and Hawaii Oregon and Washington Idaho, Montana and Wyoming Iowa, Minnesota, North Dakota, South Dakota and Texas California, Iowa, Nebraska, Oregon, South Dakota, Texas, Washington and Wyoming Aggregate Reserves (tons) 157.2 million 494.0 million 220.9 million 289.7 million — 1.2 billion Properties: Active Aggregate Sites* 16 52 32 82 — 182 Ready-Mix Plants 21 27 17 41 — 106 Asphalt Plants 4 12 15 20 — 51 Revenue $493.1 million $692.4 million $663.1 million $818.1 million $275.7 million $2,899.0 million Percent revenue by segment 17 % 23 % 23 % 28 % 10 % 100 % Revenue Composition: Construction Materials 76 % 59 % 43 % 58 % 100 % 61 % Contracting Services 24 % 41 % 57 % 42 % — % 39 % Public-Sector Services 72 % 77 % 79 % 95 % — % 83 % Private-Sector Services 28 % 23 % 21 % 5 % — % 17 % __________________ * Does not include 4 sites that are classified as exploration stage properties. 2 Index On January 1, 2025, we completed a reorganization of our operating segments, including the management of the segments, to align with our business strategy.
These federal, state and local laws and regulations include, among others: the federal Clean Air Act and the federal Clean Water Act; the Resource Conservation and Recovery Act; the federal Mine Safety and Health Administration; the federal Occupational Safety and Health Administration; the federal CERCLA; the federal EPA; 15 and, occasionally, the Endangered Species Act.
These federal, state and local laws and regulations include, among others: the federal Clean Air Act and the federal Clean Water Act; the Resource Conservation and Recovery Act; the federal Mine Safety and Health Administration; the federal Occupational Safety and Health Administration; the federal CERCLA; the federal EPA; and, occasionally, the Endangered Species Act.
In 2023, the United States Geological Survey reported that throughout the United States a total of 1,400 companies operated 3,500 quarries and 180 sales/distribution yards producing crushed stone and 3,400 companies operated 6,500 pits and 200 sales/distribution yards producing construction sand and gravel. This fragmentation is a result of high transportation costs that typically limit supply areas of producers.
In 2024, the United States Geological Survey reported that throughout the United States a total of 1,400 companies operated 3,500 quarries and 180 sales/distribution yards producing crushed stone and 3,400 companies operated 6,500 pits and 200 sales/distribution yards producing construction sand and gravel. This fragmentation is a result of high transportation costs that typically limit supply areas of producers.
One such site is the Portland, Oregon, Harbor Superfund Site where Knife River - Northwest was named as a PRP by the EPA related to a commercial property site acquired in 1999. For further information related to environmental reclamation obligations, see Item 8. Note 18.
One such site is the Portland, Oregon, Harbor Superfund Site where Knife River - 11 Index Northwest was named as a PRP by the EPA related to a commercial property site acquired in 1999. For further information related to environmental reclamation obligations, see Item 8. Note 18.
These laws and regulations impose numerous obligations and limitations on our operations, including: • Zoning and land use requirements to obtain a permit or other approval before conducting regulated activities; • Restriction on the types, quantities and concentration of materials that can be released into the environment (including noise and discharges to air and water); • Restrictions on the management of hazardous wastes and underground storage tank systems, as well as obligations to clean up or remediate spills of hazardous materials into the environment; • Limitation or prohibition of activities on certain lands lying within wilderness, wetlands or other protected areas; • Obligations to restore or reclaim former mining areas; • Requirements to comply with specific health and safety criteria addressing worker protection; and • The imposition of substantial liabilities for pollution resulting from the Company’s operations.
These laws and regulations impose numerous obligations and limitations on our operations, including: • Zoning and land use requirements to obtain a permit or other approval before conducting regulated activities; • Restriction on the types, quantities and concentration of materials that can be released into the environment (including noise and discharges to air and water); • Restrictions on the management of hazardous wastes and underground storage tank systems, as well as obligations to clean up or remediate spills of hazardous materials into the environment; • Limitation or prohibition of activities on certain lands lying within wilderness, wetlands or other protected areas; • Obligations to restore or reclaim former mining areas; • Requirements to comply with specific health and safety criteria addressing worker protection; and • The imposition of substantial liabilities for pollution which may result from our operations.
Access to well-positioned reserves is critical. • Vertical integration . Market participants that operate a vertically integrated business model can access certain efficiencies that lead to reduced product costs and other benefits for customers, including greater reliability of supply. • Industry fragmentation . There are thousands of construction materials producers of varying scope and size.
Access to well-positioned reserves is critical. • Vertical integration . Market participants that operate a vertically integrated business model can access certain efficiencies that lead to reduced product costs and other benefits for customers, including greater reliability of supply. • Industry fragmentation . There are thousands of construction materials producers and contracting services providers of varying scope and size.
Liquid Asphalt Liquid asphalt (sometimes referred to as asphalt cement or asphalt oil) is the binding agent used in combination with aggregates to produce asphalt mix for road construction, streets, parking lots, driveways and more. Knife River’s Energy Services segment supplies liquid asphalt to both internal and third-party customers, which helps support the Company’s vertically integrated business model.
Liquid Asphalt Liquid asphalt (sometimes referred to as asphalt cement or asphalt oil) is the binding agent used in combination with aggregates to produce asphalt mix for road construction, streets, parking lots, driveways and more. Our Energy Services segment supplies liquid asphalt to both internal and third-party customers, which helps support our vertically integrated business model.
Knife River also is subject to comprehensive environmental permit requirements, which are usually associated with new mining operations, although requirements vary widely from state to state and even within states. In some areas, land use regulations and associated permitting requirements are minimal. However, some states and local jurisdictions have very demanding requirements for permitting new mines.
Our company is also subject to comprehensive environmental permit requirements, which are usually associated with new mining operations, although requirements vary widely from state to state and even within states. In some areas, land use regulations and associated permitting requirements are minimal. However, some states and local jurisdictions have very demanding requirements for permitting new mines.
Environmental and zoning approvals are often required for the development and expansion of facilities. • Production inputs . Cost and availability of energy, labor and other inputs can vary over time based on macroeconomic factors and impact profitability of operations. Knife River participates in the following primary markets: aggregates, ready-mix concrete, asphalt, liquid asphalt and contracting services.
Environmental and zoning approvals are often required for the development and expansion of facilities. • Production inputs . Cost and availability of energy, labor and other inputs can vary over time based on macroeconomic factors and impact profitability of operations. We participate in the following primary markets: aggregates, ready-mix concrete, asphalt, liquid asphalt and contracting services.
In addition, full-time employees are eligible for health insurance, physical, mental and financial wellness programs, paid and unpaid leave, retirement plans, life insurance, disability and accident coverage, and more. The Company also offers a variety of voluntary benefits to allow employees to select the best options to meet their needs.
In addition, full-time employees are eligible for health insurance, physical, mental and financial wellness programs, paid and unpaid leave, retirement plans, life insurance, disability and accident coverage, and more. We also offer a variety of voluntary benefits to allow employees to select the best options to meet their individual needs.
Demand in the contracting services industry is 10 influenced by the cyclical nature of the construction industry and correlates with the demand for construction materials. The contracting services portion of Knife River’s business is heavily weighted toward public markets, which provide more stability throughout the economic cycles.
Demand in the contracting services industry is influenced by the cyclical nature of the construction industry and correlates with the demand for construction materials. The contracting services portion of our business is heavily weighted toward public markets, which provide more stability throughout the economic cycles.
Noncompliance with these laws and regulations can subject Knife River to fines, loss of licenses or registrations or various forms of civil or criminal prosecution, any of which could have a material adverse effect on Knife River’s reputation, business, financial position, results of operations and cash flows.
Noncompliance with these laws and regulations can subject us to fines, loss of licenses or registrations, or various forms of civil or criminal prosecution, any of which could have a material adverse effect on our reputation, business, financial position, results of operations and cash flows.
The three categories having the most impact to Knife River’s California operations are: off-road diesel particulate and oxides of nitrogen; on-road diesel particulate and oxides of nitrogen; and harbor craft diesel particulate and oxides of nitrogen.
The three categories having the most impact to our California operations are: off-road diesel particulate and oxides of nitrogen; on-road diesel particulate and oxides of nitrogen; and harbor craft diesel particulate and oxides of nitrogen.
The Company’s 1.1 billion tons of aggregate reserves provide the foundation for a vertically integrated business strategy with approximately 37 percent of its aggregates in 2023 being used internally to support value-added downstream products (ready-mix concrete and asphalt) and contracting services (heavy-civil construction, asphalt paving, concrete construction, site development and grading services, and in some segments the manufacturing of prestressed concrete products).
Our 1.2 billion tons of aggregate reserves provide the foundation for our vertically integrated business strategy, with approximately 37 percent of our aggregates in 2024 being used internally to support value-added downstream products (ready-mix concrete and asphalt) and contracting services (asphalt paving, heavy-civil construction, concrete construction, site development and grading services, and in some segments the manufacturing of prestressed concrete products).
Knife River’s operations are also subject to California emission reductions and regulatory compliance. The California Air Resources Board has implemented several regulations around air quality standards, including reporting requirements. These regulations are based on source categories, several of which impact Knife River.
Our operations are also subject to California emission reductions and regulatory compliance. The California Air Resources Board has implemented several regulations around air quality standards, including reporting requirements. These regulations are based on source categories, several of which impact our company.
The Company’s SEC filings are available to the public over the internet at the SEC’s website at https://www.sec.gov and on the Company’s website free of charge at https://www.kniferiver.com as soon as reasonably practicable after they are filed with or furnished to the SEC. The Company maintains a website at https://www.kniferiver.com.
Our SEC filings are available to the public over the internet at the SEC’s website at https://www.sec.gov and on our website free of charge at https://www.kniferiver.com as soon as reasonably practicable after they are filed with or furnished to the SEC.
Knife River believes public-sector funding is subject to fewer fluctuations in spending, as government funding tends to be less correlated with economic cycles and more reliant on approvals of government appropriation bills toward infrastructure initiatives.
We believe public-sector funding is subject to fewer fluctuations in spending, as government funding tends to be less correlated with economic cycles and more reliant on approvals of government appropriation bills toward infrastructure initiatives.
Knife River believes its integrated and expansive business model is a strong competitive advantage that provides scale, efficiency and operational excellence for the benefit of customers, stockholders and the broader communities that it serves. The Separation On May 31, 2023, the Separation of Knife River from MDU Resources was completed as a tax-free spin-off for U.S. federal income tax purposes.
We believe our integrated and expansive business model is a strong competitive advantage that provides scale, efficiency and operational excellence for the benefit of customers, stockholders and the broader communities that we serve. The Separation On May 31, 2023, the Separation of Knife River from MDU Resources was completed as a tax-free spin-off for U.S. federal income tax purposes.
The total number of hourly personnel at any given time is subject to the volume of projects in progress and fluctuates on a seasonal basis. At the peak of the 2023 construction season, Knife River employed over 5,700 people. The table below provides additional details on the employee demographics as of December 31, 2023.
The total number of hourly personnel at any given time is subject to the volume of projects in progress and fluctuates on a seasonal basis. At the peak of the 2024 construction season, we employed over 5,900 people. The table below provides additional details on the employee demographics as of December 31, 2024.
Knife River has six additional distribution centers with storage and barging capabilities across the islands of Hawaii. (6) Contracting Services Knife River’s contracting services include responsibilities as general contractor and subcontractor, aggregate laydown, asphalt paving, concrete construction, site development and bridges, and in some segments the manufacturing of prestressed concrete products.
We have six additional distribution centers with storage and barging capabilities across the islands of Hawaii. (6) Contracting Services Our contracting services include responsibilities as general contractor and subcontractor, aggregate laydown, asphalt paving, concrete construction, site development and bridges, and in some segments the manufacturing of prestressed concrete products.
Knife River may be required to remediate contaminated properties currently or formerly owned or operated by the Company or materials disposed of by the Company, regardless of whether such contamination resulted from actions taken by the Company or from the conduct of others at the time those actions were taken.
We may be required to remediate contaminated properties currently or formerly owned or operated by us or materials we have disposed of, regardless of whether such contamination resulted from actions taken by us or from the conduct of others at the time those actions were taken.
Cement supply and storage Cement is a key ingredient in the production of ready-mix concrete. Knife River’s core supply of cement is sourced from a diverse range of suppliers. Knife River has strategically located cement storage facilities in Alaska and Hawaii that can hold approximately 60,000 tons and 90,000 tons of cement, respectively.
Cement supply and storage Cement is a key ingredient in the production of ready-mix concrete. Our core supply of cement is sourced from a diverse range of suppliers. We have strategically located cement storage facilities in Alaska and Hawaii that can hold approximately 60,000 tons and 90,000 tons of cement, respectively.
Vertical integration allows Knife River to have direct internal 12 access to critical raw materials, resulting in competitive advantages from better control of product inventory. In 2023, most of Knife River’s contracting services were related to “horizontal” construction, such as streets and highways, airports and bridges for customers in the public sector.
Vertical integration allows us to have direct internal access to critical raw materials, resulting in competitive advantages from better control of product inventory. In 2024, most of our contracting services were related to “horizontal” construction, such as streets and highways, airports and bridges for customers in the public sector.
In addition, beginning in 2026 Knife River will be required to publicly report on 2025 scope 1 and scope 2 GHG emissions, and beginning in 2027 will be required to report on 2026 scope 3 GHG emissions.
In addition, beginning in 2026, we will be required to publicly report on 2025 scope 1 and scope 2 GHG emissions, and beginning in 2027 reporting on 2026 scope 3 GHG emissions will be required.
Smaller, independent operators make up the majority of Knife River’s competition; however, it also faces competition in some markets from large, publicly traded United States aggregates producers, including Cemex S.A.B. de C.V., CRH plc, Eagle Materials, Inc., Granite Construction, Inc., Heidelberg Materials, Holcim, Martin Marietta Materials, Inc., Summit Materials, Inc. and Vulcan Materials Company.
Smaller, independent operators make up the majority of our competition; however, we also face competition in some markets from large, publicly traded United States aggregates producers, including Cemex S.A.B. de C.V., CRH plc, Eagle Materials, Inc., Granite Construction, Inc., Heidelberg Materials, Holcim, Martin Marietta Materials, Inc., Construction Partners, Inc., and Vulcan Materials Company.
Governmental and Environmental Regulations Knife River’s pledge to operate in an environmentally responsible manner is reviewed and encouraged through several measures, including oversight by professional environmental staff with reporting and accountability to regional operations leaders, regular review of environmental and sustainability disclosures by the executive Sustainability Committee, thorough audits of operating activities and thorough property reviews during due diligence on potential acquisitions.
Environmental Regulations With environment being one of our core values, our pledge to operate in an environmentally responsible manner is reviewed and encouraged through several measures, including oversight by professional environmental staff with reporting and accountability to regional operations leaders, regular review of environmental and sustainability disclosures by the executive Sustainability Committee, thorough audits of operating activities, and in-depth property reviews during due diligence on potential acquisitions.
Knife River has five liquid-asphalt terminal sites and six used-oil collection points. (5) Other Although not common to all locations, Knife River provides various other products and services, depending on customer needs. These include, but are not limited to, retail sales of cement in Alaska and Hawaii and petroleum recovery services in the Energy Services segment.
We have nine liquid asphalt terminal sites and six used-oil collection points. (5) Other Although not common to all locations, we provide various other products and services, depending on customer needs. These include, but are not limited to, retail sales of cement in Alaska and Hawaii and petroleum recovery services in the Energy Services segment.
However, customers often consider several other factors in selecting a service provider, such as technical expertise and experience, safety ratings, geographic presence, financial and operational resources and industry reputation around dependability. Products and Services Knife River’s core product lines include: aggregates, ready-mix concrete, asphalt and liquid asphalt. The Company also performs related contracting services.
However, customers often consider several other factors in selecting a service provider, such as technical expertise and experience, safety ratings, geographic presence, financial and operational resources and industry reputation around dependability. 5 Index Products and Services Our core product lines include: aggregates, ready-mix concrete, asphalt and liquid asphalt. We also perform related contracting services.
The segment has terminals in five states, where it stores and manufactures value-added liquid asphalt, polymer modified asphalt and emulsions to meet the requirements of end users. Contracting Services Knife River vertically integrates its construction materials with contracting services such as aggregate laydown, asphalt paving, concrete construction, site development and bridges.
The segment has terminals in seven states, where it stores and manufactures value-added liquid asphalt, polymer modified asphalt and emulsions to meet the requirements of end users. Contracting Services We vertically integrate our construction materials with contracting services such as aggregate laydown, asphalt paving, concrete construction, site development and bridges.
Due to the relative speed at which ready-mix concrete sets, supply is generally localized and delivered within close proximity to the production site, with an estimated 7,000-plus ready-mix concrete batching plants in the United States and Canada according to the National Ready Mixed Concrete Association.
According to the National Ready Mixed Concrete Association, concrete is the most widely used material in the construction sector today. 4 Index Due to the relative speed at which ready-mix concrete sets, supply is generally localized and delivered within close proximity to the production site, with an estimated 7,000-plus ready-mix concrete batching plants in the United States and Canada according to the National Ready Mixed Concrete Association.
Knife River is strategically focused on being the provider of choice in mid-size, high-growth markets. The Company is committed to continued growth and to delivering for its stakeholders—customers, communities, employees and stockholders—by executing on its four core values: People, Safety, Quality and the Environment.
We are strategically focused on being the provider of choice in mid-size, high-growth markets and are committed to our plan for continued growth and to delivering for our stakeholders—customers, communities, employees and stockholders—by executing on our four core values: People, Safety, Quality and the Environment.
Knife River is an industry leader in safe and efficient delivery of ready-mix concrete and has pioneered what has become the industry-standard training program for ready-mix delivery professionals. Knife River continues to update the program with a focus on safety for drivers and the public.
We are an industry leader in safe and efficient delivery of ready-mix concrete and have pioneered what has become the industry-standard training program for ready-mix delivery professionals. We continue to update and improve the program with a focus on safety for drivers and the public.
The website and the information contained on or connected to that site are not incorporated into this Annual Report. 17
Our website and the information contained on or connected to that site are not incorporated into this report. 12 Index
Of the 56 plants, 22 are portable plants that support large asphalt paving projects on roadways, airports and commercial sites. Similar to ready-mix concrete, asphalt sets rapidly, limiting delivery to within close proximity to the production facility. In 2023, Knife River sold 6.8 million tons of asphalt.
Of the 51 plants, 20 are portable plants that support large asphalt paving projects on roadways, airports and commercial sites. Similar to ready-mix concrete, asphalt sets rapidly, limiting delivery to within close proximity to the production facility. In 2024, we sold 6.5 million tons of asphalt.
Due to the time-sensitive nature of delivering ready-mix concrete, the Company focuses on supplying customers near its facilities. In 2023, Knife River sold 3.8 million cubic yards of ready-mix concrete. Incremental to the hauling capabilities across products and services, ready-mix concrete plants are complemented by the Company’s fleet of ready-mix trucks and drivers who safely deliver heavy materials on time.
Due to the time-sensitive nature of delivering ready-mix concrete, we focus on supplying customers near our facilities. In 2024, we sold 3.5 million cubic yards of ready-mix concrete. Incremental to the hauling capabilities across products and services, ready-mix concrete plants are complemented by our fleet of ready-mix trucks and drivers who safely deliver heavy materials on time.
The nature of Knife River’s competition varies among its products and geographies due to the generally local and regional nature of supply. Knife River believes it has a competitive advantage in aggregates through its high-quality, strategically located reserves and assets, and its internal fleet of trucks, rail and barge.
The nature of our competition varies among our products and geographies due to the generally local and regional nature of supply. We believe we have a competitive advantage in aggregates through our high-quality, strategically located reserves and assets, and our internal fleet of trucks, rail and barge.
Employees in managerial or supervisory positions have an average tenure of 16 years with Knife River, which demonstrates our workforce’s pride in and dedication to the Company. Knife River believes it has good relationships with its employees, including its unionized workforce. As of December 31, 2023, Knife River employed 4,389 people, all of whom were employed in the United States.
Employees in managerial or supervisory positions have an average tenure of 15 years, which demonstrates our workforce’s pride in and dedication to the company. We believe we have good relationships with our employees, including our unionized workforce. As of December 31, 2024, we employed 4,761 people, all of whom were employed in the United States.
There has been a steady increase (4 percent compound annual growth rate) in shipments since the industry cycle low of 257 million cubic yards in 2010. In 2022, the National Ready Mixed Concrete Association estimated shipments of 404 million cubic yards of ready-mix concrete, which is 12 percent below the industry peak of 458 million cubic yards in 2005.
There has been a steady increase in shipments since the industry cycle low of 257 million cubic yards in 2010. In 2023, the National Ready Mixed Concrete Association estimated shipments of 400 million cubic yards of ready-mix concrete, which is 13 percent below the industry peak of 458 million cubic yards in 2005 and 0.4 percent lower than 2022.
Knife River adheres to seven key principles regarding safety: • All injuries can be prevented; • Working safely is a condition of employment for all employees; • Management must demonstrate leadership in preventing injuries by providing a safe work environment, adequate resources, performance incentives and appropriate follow-up on any unsafe conditions or actions; • All employees are responsible for preventing injuries to themselves and others; • All operating exposures can be safeguarded or controlled; • Training employees to work safely is essential; and • Preventing personal injuries and property damage is good business.
We also adhere to seven key principles regarding safety: • All injuries can be prevented; • Working safely is a condition of employment for all employees; • Management must demonstrate leadership in preventing injuries by providing a safe work environment, adequate resources, performance incentives and appropriate follow-up on any unsafe conditions or actions; • All employees are responsible for preventing injuries to themselves and others; • All operating exposures can be safeguarded or controlled; • Training employees to work safely is essential; and • Preventing personal injuries and property damage is good business. 10 Index We have a goal of zero workplace injuries and have developed a safety culture complete with programs, trainings, and best practices appropriate for our industry and operations.
There are five reportable segments, four of which are aligned by key geographic areas due to the production of construction materials and related contracting services and one of which is based on product line. The Company’s reportable segments are: Pacific, Northwest, Mountain, Central and Energy Services.
These operating segments are used to determine our reportable segments: Pacific, Northwest, Mountain, Central and Energy Services, which are based on our method of internal reporting and management of the business. Four of our reportable segments are aligned by key geographic areas due to the production of construction materials and related contracting services and one is based on product line.
Asphalt pavement material is highly recyclable, predominantly through reclaimed asphalt pavement. In 2023, Knife River used approximately 800,000 tons of recycled asphalt pavement in its asphalt production. Additionally, the use of warm-mix asphalt allows producers to reduce temperatures during the mixing process, lowering energy use and carbon emissions. In 2023, Knife River produced approximately 700,000 tons of warm-mix asphalt.
Asphalt pavement material is highly recyclable, predominantly through reclaimed asphalt pavement. In 2024, we used approximately 1.4 million tons of recycled asphalt pavement in our asphalt production. Additionally, the use of warm-mix asphalt allows producers to reduce temperatures during the mixing process, lowering energy use and carbon emissions.
Knife River mines crushed stone and sand and gravel at its aggregate sites that are utilized in general construction and are a major component in its production of ready-mix concrete and asphalt paving products. Leveraging its vertically integrated platform, 37 percent of its aggregates revenue was derived from internal sales in 2023.
We mine crushed stone and sand and gravel from our aggregate sites, as these aggregates are utilized in general construction and are a major component in our production of ready-mix concrete and asphalt paving products. Leveraging our vertically integrated platform, 34 percent of our aggregates revenue was derived from internal sales in 2024.
ITEM 1. BUSINESS Overview Knife River is an aggregates-led construction materials and contracting services provider in the United States.
ITEM 1. BUSINESS Overview Knife River Corporation (referred to as we, our, us, the Company or Knife River) is an aggregates-led construction materials and contracting services provider in the United States.
For more information about the aggregate sites, see “Item 2. Properties.” (2) Ready-Mix Concrete Knife River produces ready-mix concrete through its 102 ready-mix plants situated across 13 states. Knife River’s vertically integrated portfolio of assets allows the Company to provide most of the aggregates it uses in the production of ready-mix concrete.
For more information about the aggregate sites, see “Item 2. Properties.” (2) Ready-Mix Concrete We produce ready-mix concrete through our 106 ready-mix plants situated across 13 states. Our vertically integrated portfolio of assets allows us to provide most of the aggregates we use in the production of ready-mix concrete.
Knife River is subject to complex federal, state and local environmental compliance and reclamation regulations.
We are subject to complex federal, state and local environmental compliance and reclamation regulations.
Through its network of 180 active aggregate sites, 102 ready-mix plants and 56 asphalt plants, Knife River supplies construction materials and contracting services to customers in 14 states. Its construction materials are sold to public and private-sector customers, including federal, state and municipal governments, as well as industrial, commercial and residential developers and other private parties.
Through our network of 182 active aggregate sites, 106 ready-mix plants, 51 asphalt plants and 9 liquid asphalt terminals, we supply construction materials and contracting services to customers across 14 states. Our construction materials are sold to public and private-sector customers, including federal, state and municipal governments, as well as industrial, commercial and residential developers and other private parties.
Knife River’s contracting services are primarily provided to public-sector customers for the development and servicing of highways, local roads, bridges and other public-infrastructure projects. Knife River has broad access to high-quality aggregates in most of its markets, which forms the foundation of its vertically integrated business model.
Our contracting services are primarily provided to public-sector customers for the development and servicing of highways, local roads, bridges and other public-infrastructure projects. We have broad access to high-quality aggregates in most of our markets, which forms the foundation of our vertically integrated business model. We share resources, including plants, equipment and people, across our various locations to maximize efficiency.
Aggregates Aggregates, consisting of crushed stone and sand and gravel, are a natural, granular material engineered to various sizes, grades and chemical compositions primarily for construction applications. Aggregates also are a major material component in the production of ready-mix concrete and asphalt.
Aggregates Aggregates, consisting of crushed stone and sand and gravel, are a natural, granular material engineered to various sizes and grades primarily for construction applications. Aggregates also are a major material component in the production of ready-mix concrete and asphalt. Aggregate sources can be found in relatively uniform sediments in certain regions of each state throughout the United States.
Knife River’s ability to provide contracting services in the states in which it operates depends on the weather. In states with colder winter weather, Knife River’s contracting services are primarily performed from May through October, compared to most of the year in states with largely consistent warmer weather.
Our ability to provide contracting services in the states where we operate depends on the weather. In states with colder winter weather, our contracting services are primarily performed from May through October, compared to most of the year in states with largely consistent warmer weather. Employees “People” is the first of our core values.
Significant resources are employed to attract, develop and retain extraordinary and diverse talent and fully promote each employee’s capabilities. The Company’s focus on diversity, inclusion, talent development, talent acquisition and succession planning has provided for a deep bench of talented employees.
We consider our employees to be our most valuable resource and they are critical to our success. Significant resources are utilized to attract, develop and retain extraordinary and diverse talent and fully promote each employee’s capabilities. Our focus on workforce, talent development, talent acquisition and succession planning has provided for a deep bench of talented employees.
Each geographic segment offers a vertically integrated suite of products and services, including aggregates, ready-mix concrete, asphalt, and contracting services, while the Energy Services segment, which has locations throughout the Company’s geographic footprint, produces and supplies liquid asphalt and related services, primarily for use in asphalt road construction, and is a supplier to some of the other segments.
The Energy Services segment, which has locations throughout our geographic footprint, produces and supplies liquid asphalt, primarily for use in asphalt road construction, and is a supplier to some of our other segments.
In addition, Knife River anticipates spending $4.7 million for capital expenditures related to compliance with current environmental laws and regulations in 2024 and has not developed a budget for 2025 and 2026. These amounts do not include expenditures related to what may be ultimately determined with regard to the issues described previously for the Portland, Oregon, Harbor Superfund Site.
Capital expenditures related to environmental compliance are anticipated to be $5.6 million in 2025, $9.1 million in 2026 and $9.4 million in 2027. These amounts do not include expenditures related to what may be ultimately determined with regard to the issues described previously for the Portland, Oregon, Harbor Superfund Site.
(2) Action Plans To be the employer of choice for the broadest pool of talent and skill, Knife River is committed to equal employment opportunity and affirmative action and is dedicated to the achievement of equality and opportunity for all employees and applicants for employment.
To be the employer of choice for the broadest pool of talent and skill, we are committed to equal employment opportunity and affirmative action and are dedicated to the achievement of equality and opportunity for all employees and applicants for employment. We strive to meet or exceed all EEO and affirmative action laws, directives and legislation.
The Company focuses primarily on supplying markets with strong local demand, and in most cases serves customers close to its strategically located aggregate sites. In 2023, Knife River sold 33.6 million tons of aggregates, with 30.7 million being produced from aggregate mining properties.
We focus primarily on supplying markets with strong local demand, and in most cases serve customers close to our strategically located aggregate sites. In 2024, we sold 31.8 million tons of aggregates, with 30.3 million being produced from all aggregate mining properties.
Furthermore, the existence of contamination at properties owned, leased or operated by the Company could result in increased operation costs or restrictions on the Company’s ability to use those properties as intended, including for mining purposes.
In addition, in connection with certain acquisitions, we could assume, or be required to provide indemnification against, environmental liabilities that could expose us to material losses. Furthermore, the existence of contamination at properties owned, leased or operated by us could result in increased operation costs or restrictions on our ability to use those properties as intended, including for mining purposes.
Ready-Mix Concrete Ready-mix concrete, a mixture principally comprised of cement, aggregates and water, is measured in cubic yards and specifically batched or produced for customers’ projects and then transported and poured on site. It also can be poured at a manufacturing facility to produce prefabricated building solutions, such as wall panels, concrete roofing systems, parking garages and stadium components.
Ready-Mix Concrete Ready-mix concrete, a mixture principally comprised of aggregates, cement and water, is measured in cubic yards and specifically batched or produced for customers’ projects and then transported and poured on site.
For the year ended December 31, 2023, Knife River’s revenue and gross profit by products and services were as follows: Revenue ($ in millions) (% of total) Gross Profit ($ in millions) Gross Margin Aggregates $ 547.9 15.8 % Aggregates $ 109.7 20.0 % Ready-mix concrete 653.9 18.9 % Ready-mix concrete 101.2 15.5 % Asphalt 452.4 13.1 % Asphalt 61.5 13.6 % Liquid asphalt 253.2 7.3 % Liquid asphalt 69.7 27.5 % Other 249.0 7.2 % Other 47.9 19.2 % Contracting services 1,307.3 37.7 % Contracting services 148.9 11.4 % Total gross revenue $ 3,463.7 100 % Internal sales (633.4) Total revenue $ 2,830.3 Total gross profit $ 538.9 19.0 % (1) Aggregates Knife River supplies high-quality aggregates through its 1.1 billion tons of permitted aggregate reserves, which are sourced from its aggregate sites across 11 states.
For the year ended December 31, 2024, our revenue and gross profit by products and services were as follows: Revenue ($ in millions) (% of total) Gross Profit ($ in millions) Margin Aggregates $ 556.1 15.8 % Aggregates $ 114.3 20.6 % Ready-mix concrete 655.5 18.6 % Ready-mix concrete 106.0 16.2 % Asphalt 441.5 12.6 % Asphalt 68.2 15.4 % Liquid asphalt 238.9 6.8 % Liquid asphalt 51.5 21.6 % Other 265.8 7.6 % Other 53.3 20.1 % Contracting services 1,358.2 38.6 % Contracting services 176.5 13.0 % Total gross revenue $ 3,516.0 100 % Internal sales (617.0) Total revenue $ 2,899.0 Total gross profit $ 569.8 19.7 % (1) Aggregates We supply high-quality aggregates through our 1.2 billion tons of permitted aggregate reserves, which are sourced from our aggregate sites across 11 states.
Knife River strives to meet or exceed all EEO and affirmative action laws, directives and legislation. The Company’s EEO/Affirmative Action Policy ensures employees are not discriminated against. (3) Employee Trainings Knife River is committed to the development and training of its employees and has taken significant steps to showcase construction as a career of choice.
Our EEO/Affirmative Action Policy ensures employees are not discriminated against. We are committed to the development and training of our employees and have taken significant steps to showcase construction as a career of choice.
The mix of customers varies by region and economic conditions. The main factors and trends in the United States construction materials and related contracting services industry include: • Key economic factors .
The United States construction materials industry serves a diverse customer base that includes federal, state and municipal governmental agencies, commercial and residential developers and private parties. The mix of customers varies by region and economic conditions. 3 Index The main factors and trends in the United States construction materials and related contracting services industry include: • Key economic factors .
The reports generally include suggested actions to mitigate the projected adverse impacts. Nonetheless, Knife River has been successful in obtaining mining and other land-use permits that provide for sufficient permitted reserves to support its operations.
The reports generally include suggested actions to mitigate the projected adverse impacts. Nonetheless, we have been successful in obtaining mining and other land-use permits that provide for sufficient permitted reserves to support our operations. Individual permits applicable to our various operations are managed and tracked as they relate to the statuses of the application, modification, renewal, compliance and reporting procedures.
Asphalt plants The following table sets forth details applicable to Knife River’s non-portable and portable asphalt plants as of December 31, 2023: Segment Non-portable Asphalt Plants Portable Asphalt Plants Total Asphalt Plants Pacific 4 — 4 Northwest 11 1 12 Mountain 11 8 19 Central 8 13 21 Total 34 22 56 (4) Liquid asphalt Knife River distributes liquid asphalt through its Energy Services sites and has the capacity to service neighboring states through storage facilities capable of storing approximately 275,000 tons of liquid asphalt across multiple states.
Asphalt plants The following table sets forth details applicable to our non-portable and portable asphalt plants as of December 31, 2024: Segment Non-portable Asphalt Plants Portable Asphalt Plants Total Asphalt Plants Pacific 4 — 4 Northwest 11 1 12 Mountain 8 7 15 Central 8 12 20 Total 31 20 51 (4) Liquid asphalt We distribute liquid asphalt through our Energy Services sites and have the capacity to service neighboring states through storage facilities capable of storing approximately 413,000 tons of liquid asphalt across multiple states, a 50 percent increase over the prior year primarily due to the acquisition of Albina Asphalt in the fourth quarter of 2024.
Knife River’s top 15 customers accounted for about 20 percent of its 2023 revenue, of which nine were state-level departments of transportation. The Company is not dependent on any single customer or group of customers for sales of its products and services, where the loss of which would have a material adverse effect on its business.
We are not dependent on any single customer or group of customers for sales of our products and services, where the loss of which would have a material adverse effect on our business. No individual customer accounted for more than 10 percent of our 2024 revenue.
End Markets Public-Sector Customers . The Company’s public-sector customers include federal, state and municipal governments for various projects, such as highways, bridges, airports, schools, public buildings and other public-infrastructure projects.
Funding for public projects is dependent on federal, state and municipal government budget appropriations for various projects, such as highways, bridges, airports, schools, public buildings and other public-infrastructure projects.
Industry participants typically range from small, private companies focused on a single material, product or area to large, publicly traded corporations that provide a broad suite of materials and services. Companies compete on a variety of factors, including price, service, quality, delivery time and proximity to the customer.
Management’s Discussion and Analysis of Financial Condition and Results of Operations-Non-GAAP Financial Measures.” Industry The United States construction materials industry is highly fragmented. Industry participants typically range from small, private companies focused on a single material, product or area to large, publicly traded corporations that provide a broad suite of materials and services.
However, limitations on the distance that materials can be transported efficiently results in primarily local or regional operations. Accordingly, the number and size of competitors varies by geography and product lines. The United States construction materials industry serves a diverse customer base that includes federal, state and municipal governmental agencies, commercial and residential developers and private parties.
Companies compete on a variety of factors, including price, service, quality, delivery time and proximity to the customer. However, limitations on the distance that materials can be transported efficiently results in primarily local or regional operations. Accordingly, the number and size of competitors varies by geography and product lines.
Mandates from governmental agencies largely depend on federal, state and municipal budgets allocated to expansion and improvement of national infrastructure. The private side includes a broad spectrum of customers across industrial, commercial and residential developers and other private parties. The mix of sales by customer class varies year to year depending on the variability in type of work.
The private side includes a broad spectrum of customers across industrial, commercial and residential developers and other private parties. The mix of sales by customer class varies year to year depending on the variability in type of work. 8 Index Our top 15 customers accounted for about 22 percent of our 2024 revenue, of which seven were state-level DOTs.
Knife River’s strategically located aggregate sites, ready-mix plants and asphalt plants, along with its fleet of ready-mix and dump trucks, enable the Company to better serve its customers.
We also transport our products by truck, rail and barge, depending on the particular market, to complete the vertical value chain. Our strategically located aggregate sites, ready-mix plants and asphalt plants, along with our fleet of ready-mix and dump trucks, enable us to better serve our customers.
This training developed by Knife River is made available through the National Ready Mixed Concrete Association to its members. 11 The following table sets forth details applicable to Knife River’s ready-mix concrete plants and related fleet as of December 31, 2023: Segment Plants Mixer Trucks Pacific 18 187 Northwest 26 229 Mountain 17 206 Central 41 324 Total 102 946 (3) Asphalt Knife River produces and delivers asphalt from 56 plants across 10 states, most often utilizing the Company’s own aggregates in the production process.
The following table sets forth details applicable to our ready-mix concrete plants and related fleet as of December 31, 2024: Segment Plants Mixer Trucks Pacific 21 197 Northwest 27 244 Mountain 17 210 Central 41 340 Total 106 991 6 Index (3) Asphalt We produce and deliver asphalt from 51 plants across 10 states, most often utilizing our own aggregates in the production process.
For additional information related to employee demographics, Knife River’s diversity, equity and inclusion efforts and other information, refer to the Company’s 2023 Sustainability Report, which is expected to be published to the Company’s website in the first quarter of 2024, and is not incorporated by reference herein.
We are also currently rolling out Coaches Clinics for mid-level management and have expanded our internship program. For additional information related to human capital and other information, refer to our 2024 Sustainability Report, which is expected to be published to our website in the first quarter of 2025, and is not incorporated by reference herein.
Residential construction typically includes single-family homes and multi-family units, such as apartments and condominiums. Demand for residential construction is influenced primarily by population growth, employment prospects and mortgage interest rates. While growth rates vary across the United States, overall residential construction demand decreased during 2023, due in part to higher interest rates and construction costs.
Demand for residential construction is influenced primarily by population growth, employment prospects and mortgage interest rates. While growth rates vary across the United States, overall residential construction demand increased during 2024. According to the United States Census Bureau, residential construction in 2024 was $917.9 billion, which was 5.9 percent above 2023 amounts.
Knife River believes it is in compliance with all applicable environmental laws and regulations and that any existing non-compliance is not likely to have a material adverse effect on the Company’s results of operations. However, there can be no assurance that future compliance costs or liabilities associated with such laws and regulations or activities will not be significant.
Additionally, we have recorded asset retirement liabilities on our balance sheet related to the reclamation obligations for our mining activities. We believe we are in compliance with all applicable environmental laws and regulations and that any existing non-compliance is not likely to have a material adverse effect on our results of operations.
The following table sets forth revenue details applicable to Knife River’s contracting services for the year ended December 31, 2023: Public Projects Private Projects Streets & Highways 64 % Buildings/Sitework 8 % Airports 4 % Residential 6 % Bridges 2 % Streets & Highways 1 % Marine 2 % Other 8 % Other 5 % Total 77 % Total 23 % Seasonality Results are affected by seasonal fluctuations, with the second and third quarters historically being the quarters with the highest activity.
In the private sector, our contracting services projects were within the residential, commercial and industrial markets. 7 Index The following table sets forth revenue details applicable to our contracting services for the year ended December 31, 2024: Public Projects Private Projects Streets & Highways 66 % Buildings/Sitework 3 % Airports 5 % Residential 6 % Bridges 4 % Streets & Highways 2 % Marine 2 % Other 6 % Other 6 % Total 83 % Total 17 % End Markets Public Sector .
The Company has incurred, and may incur in the future, significant operating and capital expenditures to comply with environmental laws and regulations. During 2023, Knife River incurred $4.5 million related to compliance with current environmental laws and regulations.
We regularly monitor and review our operations, which includes reviewing procedures and policies for compliance with our operating permits and related laws and regulations. We have incurred, and may incur in the future, significant operating and capital expenditures to comply with environmental laws and regulations. During 2024, we incurred $3.1 million related to compliance.
No individual customer accounted for more than 10 percent of its 2023 revenue. Competition Knife River operates in a largely fragmented industry, including large, public companies and many small, privately held companies.
Competition We operate in a largely fragmented industry, including large, public companies and many small, privately held companies.
Customers Knife River’s customers can be segmented into public and private-sector customers, with public-sector customers contributing about 77 percent of the Company’s revenues from contracting services. The public side includes federal, state and municipal governmental agencies with contracting services projects related to highways, streets and other public infrastructure.
The public side includes federal, state and municipal governmental agencies with contracting services projects related to highways, streets and other public infrastructure. Funding available for construction from governmental agencies largely depends on federal, state and municipal budgets allocated to the expansion and improvement of national infrastructure.
According to the United States Census Bureau, residential construction in 2023 was $864.9 billion, which was 5.8 percent below 2022 amounts. Alternatively, nonresidential construction includes all privately financed construction other than residential structures, such as data centers, warehouses, office buildings, factories, shopping malls, restaurants and other commercial structures.
Alternatively, nonresidential construction includes all privately financed construction other than residential structures, such as data centers, warehouses, office buildings, factories, shopping malls, restaurants and other commercial structures. Nonresidential construction tends to lag residential activity and is mostly driven by population and economic growth trends and activity levels.
The Company’s safety program utilizes the three T’s: Tools, Training and Time, as a structure for Knife River to provide its employees with the proper tools and training to safely and successfully perform their jobs and asks that employees take the time to use those tools and training to do their jobs safely.
Our safety program utilizes the three Ts: Tools, Training and Time, as a structure for us to provide our employees with the proper tools and training to safely and successfully perform their jobs. We continuously promote our commitment to the safety and health of our employees through a variety of resources, including continual training, education programs, and benefit offerings.
Aggregate sources can be found in 9 relatively uniform sediments in certain regions of each state throughout the United States. Generally extracted through open pits at the surface of a site, aggregates are typically produced by blasting hard rock from quarries and then crushing and screening it to various sizes according to customer needs.
Generally extracted through open pits at the surface of a site or produced by blasting hard rock from quarries, aggregates are then crushed and screened to customer needs. The United States aggregates industry is highly fragmented, with many participants operating primarily in local and regional areas.
The Company operates under a philosophy to promote from within and offer advancement opportunities at all levels of employment, which helps retain talented employees. The Company engages in talent and succession planning processes and reviews succession plans with senior leaders at least annually, focusing on high-performing and high-potential talent, diverse talent, and succession for critical roles.
We prioritize providing opportunities for advancement through job mobility, mentorships, succession planning and promotions. We operate under a philosophy to promote from within and offer advancement opportunities at all levels of employment, which helps retain talented employees.
The Knife River Training Center offers hands-on training for construction-related careers, including heavy-equipment operators and truck drivers, in addition to safety and leadership training. The training center is used corporate-wide to enhance the skills of current employees as well as to recruit and teach skills to new employees through both classroom education and hands-on experience.
We own and operate a state-of-the-art training facility, the Knife River Training Center, which is used corporate-wide to enhance the skills of both our new, and existing employees through both classroom education and hands on experience. The training facility also offers a variety of courses around leadership development available for all employees.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf the Separation, together with related transactions, were to fail to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Internal Revenue Code, in general, for U.S. federal income tax purposes, MDU Resources would recognize taxable gain as if it had sold Knife River common stock in a taxable sale for its fair market value, and MDU Resources stockholders who receive such Knife River shares in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. ” Under the tax matters agreement, the Company may be required to indemnify MDU Resources against any additional taxes and related amounts resulting from the Separation (and any related costs and other damages) to the extent such amounts resulted from (a) an acquisition of all or a portion of its equity securities or assets, whether by merger or otherwise (and regardless of whether Knife River participated in or otherwise facilitated the acquisition), (b) other actions or failures to act by Knife River or (c) any inaccuracy or breach of the Company’s representations, covenants or undertakings contained in any of the Separation-related agreements and documents or in any documents relating to the IRS private letter ruling and/or the opinion(s) of tax advisors.
Biggest changeUnder the tax matters agreement, we may be required to indemnify MDU Resources against any additional taxes and related amounts resulting from the Separation (and any related costs and other damages) to the extent such amounts resulted from (a) an acquisition of all or a portion of its equity securities or assets, whether by merger or otherwise (and regardless of whether we participated in or otherwise facilitated the acquisition), (b) other actions or 26 Index failures to act by us or (c) any inaccuracy or breach of our representations, covenants or undertakings contained in any of the Separation-related agreements and documents or in any documents relating to the IRS private letter ruling and/or the opinion(s) of tax advisors.
Public concern over climate change has resulted in, and may continue to result in, new or increased regional, federal and global legal and regulatory requirements, including taxation, to reduce or mitigate carbon emissions and to limit or impose additional costs on carbon and water usage or other climate-related objectives.
Public concern over climate change has resulted in, and may continue to result in, new or increased regional, federal and global legal and regulatory requirements, including taxation, to reduce or mitigate carbon emissions and to limit or impose additional costs on hydrocarbon and water usage or other climate-related objectives.
Competition for these employees is high, due in part to changing workforce demographics, a shortage of younger employees who are qualified to replace employees as they retire, and remote work opportunities, among other things. In some cases, competition for these employees is on a regional or national basis.
Competition for these employees is high, due in part to changing workforce demographics, a shortage of younger employees who are qualified to replace employees as they retire, seasonality, and remote work opportunities, among other things. In some cases, competition for these employees is on a regional or national basis.
The amount and timing of any increase in its required contributions to MEPPs may depend upon one or more factors, including the outcome of collective bargaining; actions taken by trustees who manage the plans; actions taken by the plans’ other participating employers; the industry for which contributions are made; future determinations that additional plans reach endangered, seriously endangered or critical status; newly enacted government laws or regulations and the actual return on assets held in the plans; among others.
The amount and timing of any increase in our required contributions to MEPPs may depend upon one or more factors, including the outcome of collective bargaining; actions taken by trustees who manage the plans; actions taken by the plans’ other participating employers; the industry for which contributions are made; future determinations that additional plans reach endangered, seriously endangered or critical status; newly enacted government laws or regulations and the actual return on assets held in the plans; among others.
If a proposed acquisition is not completed for any reason, including events beyond the Company’s control, the costs incurred up to that point for the transaction likely would not be recoverable. Acquisitions typically require integration of the acquired company’s project management, finance, information technology, risk management, purchasing, human resources and fleet management functions.
If a proposed acquisition, including the pending Acquisition, is not completed for any reason, including events beyond our control, the costs incurred up to that point for the transaction likely would not be recoverable. Acquisitions typically require integration of the acquired company’s project management, finance, information technology, risk management, purchasing, human resources and fleet management functions.
The Company’s amended and restated certificate of incorporation and amended and restated bylaws, and Delaware law, contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids more expensive to the acquiror and to encourage prospective acquirors to negotiate with the Company’s board of directors rather than to attempt a hostile takeover.
Our amended and restated certificate of incorporation and amended and restated bylaws, and Delaware law, contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids more expensive to the acquiror and to encourage prospective acquirors to negotiate with our board of directors rather than to attempt a hostile takeover.
These laws and regulations could require the Company to limit the use or output of certain facilities; restrict the use of certain fuels; prohibit or restrict new or existing services; replace certain fuels with renewable fuels; retire and replace certain facilities and equipment; install pollution controls; remediate environmental impacts; remove or reduce environmental hazards; or forego or limit the development of resources.
These laws and regulations could require us to limit the use or output of certain facilities; restrict the use of certain fuels; prohibit or restrict new or existing services; replace certain fuels with renewable fuels; retire and replace certain facilities and equipment; install pollution controls; remediate environmental impacts; remove or reduce environmental hazards; or forego or limit the development of resources.
The cost of additional regulatory requirements related to climate change, such as regulation of carbon dioxide emissions under the federal Clean Air Act, requirements to replace fossil fuels with renewable energy or to obtain emissions credits, or other environmental regulation or taxes could impact the availability of goods and the prices charged by suppliers, which would normally be borne by consumers through higher prices for energy and purchased goods, and could adversely impact economic conditions of areas served by Knife River.
The cost of additional regulatory requirements related to climate change, such as regulation of carbon dioxide emissions under the federal Clean Air Act, requirements to replace fossil fuels with renewable energy or to obtain emissions credits, or other environmental regulation or taxes could impact the availability of goods and the prices charged by suppliers, which would normally be borne by consumers through higher prices for energy and purchased goods, and could adversely impact economic conditions of areas served by us.
In addition, the Company’s amended and restated bylaws further provide that, unless the board of directors otherwise determines, the federal district courts of the United States of America shall be the sole and exclusive forum for any action asserting a claim arising under the Securities Act.
In addition, our amended and restated bylaws further provide that, unless the board of directors otherwise determines, the federal district courts of the United States of America shall be the sole and exclusive forum for any action asserting a claim arising under the Securities Act.
Other factors associated with a pandemic that could impact Knife River’s businesses and future operating results, revenues and liquidity include impacts related to the health, safety, and availability of employees and contractors; extended rise in unemployment; public and private-sector budget changes and constraints; counterparty credit; costs and availability of supplies; capital construction and infrastructure operation and maintenance programs; financing plans; pension valuations; travel restrictions; and legal matters.
Other factors associated with a pandemic that could impact our businesses and future operating results, revenues and liquidity include impacts related to the health, safety, and availability of employees and contractors; extended rise in unemployment; public and private-sector budget changes and constraints; counterparty credit; costs and availability of supplies; capital construction and infrastructure operation and maintenance programs; financing plans; pension valuations; travel restrictions; and legal matters.
Factors affecting the successful integration of an acquired business include, but are not limited to, the following: • Responsibility for certain liabilities of an acquired business, whether or not known, which could include, among other things, tax liabilities, product and other tort liabilities, breach of contract claims, environmental liabilities, permitting and regulatory compliance issues and liabilities for employment practices. • Ability to retain local managers, key employees and customers who are important to the operations of the acquired business. • Implementation of financial and management information systems, business practices and policies. • Conforming standards, controls, procedures and policies, business cultures and compensation structures among Knife River and the acquired company. • Pursuit of multiple acquisition opportunities simultaneously. • Unforeseen expenses, complications and delays, including difficulties in employing sufficient staff and maintaining operational and management oversight.
Factors affecting the successful integration of an acquired business include, such as the pending Acquisition, but are not limited to, the following: • Responsibility for certain liabilities of an acquired business, whether or not known, which could include, among other things, tax liabilities, product and other tort liabilities, breach of contract claims, environmental liabilities, permitting and regulatory compliance issues and liabilities for employment practices. • Ability to retain local managers, key employees and customers who are important to the operations of the acquired business. • Implementation of financial and management information systems, business practices and policies. 14 Index • Conforming standards, controls, procedures and policies, business cultures and compensation structures among Knife River and the acquired company. • Pursuit of multiple acquisition opportunities simultaneously. • Unforeseen expenses, complications and delays, including difficulties in employing sufficient staff and maintaining operational and management oversight.
A number of factors may increase Knife River’s future effective income tax rate, including; governmental authorities increasing taxes or eliminating deductions, particularly the depletion deduction, the mix of earnings from depletable versus non-depletable businesses, the jurisdictions in which earnings and/or revenues are taxed, the resolution of issues arising from tax audits with various tax authorities, changes in the valuation of our deferred tax assets and liabilities, adjustments to estimated taxes upon finalization of various tax returns, changes in available tax credits, changes in stock-based compensation, other changes in tax laws and the interpretation of tax laws and/or administrative practices.
A number of factors may increase our future effective income tax rate, including: governmental authorities increasing taxes or eliminating deductions, particularly the depletion deduction the mix of earnings from depletable versus non-depletable businesses, the jurisdictions in which earnings and/or revenues are taxed, the resolution of issues arising from tax audits with various tax authorities, changes in the valuation of our deferred tax assets and liabilities, adjustments to estimated taxes upon finalization of various tax returns, changes in available tax credits, changes in 21 Index stock-based compensation, other changes in tax laws and the interpretation of tax laws and/or administrative practices.
In addition, construction aggregates are difficult to transport efficiently and freight costs can make certain deposits uneconomical to mine if located in areas of little growth or without the ability to supply growing markets served by rail or barge. Failure to secure, permit and mine such reserves could negatively impact Knife River’s business, financial condition and results of operations.
In addition, construction aggregates are difficult to transport efficiently and freight costs can make certain deposits uneconomical to mine if located in areas of little growth or without the ability to supply growing markets served by rail or barge. Failure to secure, permit and mine such reserves could negatively impact our business, financial condition and results of operations.
The timing, declaration, amount and payment of any dividends are within the discretion of the Company’s board of directors, and will depend upon many factors, including its financial condition, earnings, capital requirements of its operating subsidiaries, covenants associated with certain of the Company’s debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets, and other factors deemed relevant by the Company’s board of directors.
The timing, declaration, amount and payment of any dividends are within the discretion of our board of directors, and will depend upon many factors, including our financial condition, earnings, capital requirements of our operating subsidiaries, covenants associated with certain of our debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets, and other factors deemed relevant by our board of directors.
Plans classified as being in one of these statuses are required to adopt Rehabilitation Plans or Funding Improvement Plans to improve their funded status through increased contributions, reduced benefits or a combination of the two.
Plans 23 Index classified as being in one of these statuses are required to adopt Rehabilitation Plans or Funding Improvement Plans to improve their funded status through increased contributions, reduced benefits or a combination of the two.
Accordingly, notwithstanding receipt by MDU Resources of the IRS private letter ruling and the opinion(s) of tax advisors, there can be no assurance that the IRS will not assert that the Separation and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge.
Accordingly, notwithstanding receipt by MDU Resources of the IRS private letter ruling and the opinion(s) of tax advisors, there can be no assurance that the IRS will not assert that the Separation and/or certain related transactions do not qualify for tax-free treatment for United States federal income tax purposes or that a court would not sustain such a challenge.
To the extent price increases or other mitigating factors are not sufficient to offset these increased costs adequately or timely, and/or if the price increases result in a significant decrease in sales volumes, Knife River’s results of operations, financial position and cash flows could be negatively impacted. Supply chain disruptions may adversely affect Knife River’s operations.
To the extent price increases or other mitigating factors are not sufficient to offset these increased costs adequately or timely, and/or if the price increases result in a significant decrease in sales volumes, our results of operations, financial position and cash flows could be negatively impacted. Supply chain disruptions may adversely affect our operations.
These provisions include rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings and the right of the Company’s board of directors to issue preferred stock without stockholder approval.
These provisions include rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings and the right of our board of directors to issue preferred stock without stockholder approval.
Such risks could have an adverse effect on Knife River’s financial condition, results of operations and cash flows. Increases in severe weather conditions or extreme temperatures may cause infrastructure construction projects to be delayed or canceled and limit resources available for such projects resulting in decreased revenue or increased project costs.
Such risks could have an adverse effect on our financial condition, results of operations and cash flows. Increases in severe weather conditions or extreme temperatures may cause infrastructure construction projects to be delayed or canceled and limit resources available for such projects resulting in decreased revenue or increased project costs.
The degree to which a pandemic will impact Knife River depends on future developments, including the resurgence of COVID-19 and its variants, federal and state mandates, actions taken by governmental authorities, effectiveness of vaccines being administered, and the pace and extent to which the economy recovers and remains under relatively normal operating conditions.
The degree to which a pandemic will impact us depends on future developments, including the resurgence of COVID-19 and its variants, federal and state mandates, actions taken by governmental authorities, effectiveness of vaccines being administered, and the pace and extent to which the economy recovers and remains under relatively normal operating conditions.
These changes could impact the assumptions and negatively affect the value of assets held in Knife River’s pension plans and may increase the amount and accelerate the timing of required funding contributions for those plans. Costs related to obligations under MEPPs could have a material negative effect on Knife River’s results of operations and cash flows.
These changes could impact the assumptions and negatively affect the value of assets held in our pension plans and may increase the amount and accelerate the timing of required funding contributions for those plans. Costs related to obligations under MEPPs could have a material negative effect on our results of operations and cash flows.
This amount of debt could potentially have important consequences to Knife River and its investors, including: • Requiring a substantial portion of its cash flow from operations to make interest payments on this debt following the Separation. • Making it more difficult to satisfy debt service and other obligations. • Increasing the risk of a future credit ratings downgrade of its debt, which could increase future debt costs and limit the future availability of debt financing. • Increasing its vulnerability to general adverse economic and industry conditions. • Reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow its business. • Limiting its flexibility in planning for, or reacting to, changes in its business and the industry. • Placing it at a competitive disadvantage relative to its competitors that may not be as highly leveraged with debt. • And limiting its ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase ordinary shares.
This amount of debt could potentially have important consequences to us and our investors, including: • Requiring a substantial portion of our cash flow from operations to make interest payments on this debt. • Making it more difficult to satisfy debt service and other obligations. • Increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs and limit the future availability of debt financing. • Increasing our vulnerability to general adverse economic and industry conditions. • Reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business. • Limiting our flexibility in planning for, or reacting to, changes in our business and the industry. • Placing us at a competitive disadvantage relative to our competitors that may not be as highly leveraged with debt. • And limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase ordinary shares.
In addition, the IRS private letter ruling does not address and the opinion(s) of tax advisors do not address all of the issues that are relevant to determining whether the Separation, together with certain related transactions, qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes.
In addition, the IRS private letter ruling does not address and the opinion(s) of tax advisors do not address all of the issues that are relevant to determining whether the Separation, together with certain related transactions, qualifies as a transaction that is generally tax-free for United States federal income tax purposes.
In addition, the investigation of potential acquisitions and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments require substantial management time and attention and costs for third-party consultants.
In addition, the investigation of potential acquisitions and the negotiation, drafting and execution of relevant agreements, disclosure documents, regulatory filings and other instruments require substantial management time and attention and costs for third-party consultants.
Provisions in the Company’s amended and restated certificate of incorporation and amended and restated bylaws and Delaware law may prevent or delay an acquisition of Knife River, which could decrease the trading price of Knife River common stock.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws and Delaware law may prevent or delay an acquisition of Knife River, which could decrease the trading price of our common stock.
In addition, pursuant to the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act, the Company could incur a partial or complete withdrawal liability 28 upon withdrawing from a plan, exiting a market in which it does business with a union workforce or upon termination of a plan.
In addition, pursuant to the Employee Retirement Income Security Act of 1974, as amended by the Multiemployer Pension Plan Amendments Act, we could incur a partial or complete withdrawal liability upon withdrawing from a plan, exiting a market in which it does business with a union workforce or upon termination of a plan.
While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce Knife River’s federal forum provision described above.
While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our federal forum provision described above.
There has been an increased focus from stakeholders and regulators related to ESG matters across all industries in recent years, with investors (including institutional investors), proxy advisory firms, customers, employees and lenders, placing increasing importance on the impacts and social cost associated with climate change as well as ESG practices and policies of companies, including sustainability performance and risk mitigation efforts.
There has been an increased focus from stakeholders and regulators related to these matters across all industries in recent years, with investors (including institutional investors), activists, proxy advisory firms, customers, employees and lenders, placing increasing importance on the impacts and social cost associated with climate change as well as these types of practices and policies of companies, including sustainability performance and risk mitigation efforts.
Although Knife River entered into a transition services agreement with MDU Resources following the Separation, these arrangements may not retain or fully capture the benefits that Knife River had enjoyed as a result of being integrated with MDU Resources and may result in paying higher charges than in the past for these services.
Although we entered into a transition services agreement with MDU Resources following the Separation, these arrangements may not retain or fully capture the benefits that we had enjoyed as a result of being integrated with MDU Resources and may result in paying higher charges than in the past for these services.
These and other provisions of the Company’s amended and restated certificate of incorporation, amended and restated bylaws and the DGCL could have the effect of delaying, deferring or preventing a proxy contest, tender offer, merger or other change in control, which may have a material adverse effect on its business, financial condition and results of operations.
These and other provisions of our amended and restated certificate of incorporation, amended and restated bylaws and the DGCL could have the effect of delaying, deferring or preventing a proxy contest, tender offer, merger or other change in control, which may have a material adverse effect on our business, financial condition and results of operations.
Disruptions, shortages or delays in the transportation of materials; price increases from suppliers or manufacturers; or inability to source needed materials have occurred and may continue to occur, which could adversely affect Knife River’s results of operations, financial condition, cash flows and harm customer relationships.
Disruptions, shortages or delays in the transportation of materials; price increases from suppliers or manufacturers; or inability to source needed materials have occurred and may continue to occur, which could adversely affect our results of operations, financial condition, cash flows and harm customer relationships.
Contracts are subject to delay, default or cancellation, and contracts in the Company’s backlog are subject to changes in the scope of services to be provided, as well as adjustments to the costs relating to the applicable contracts.
Contracts are subject to delay, default or cancellation, and contracts in our backlog are subject to changes in the scope of services to be provided, as well as adjustments to the costs relating to the applicable contracts.
Although the Company’s amended and restated bylaws include the exclusive forum provision described above, it is possible that a court could rule that this provision is inapplicable or unenforceable.
Although our amended and restated bylaws include the exclusive forum provision described above, it is possible that a court could rule that this provision is inapplicable or unenforceable.
Knife River could be negatively impacted by freight costs due to rising fuel costs; rate increases for third-party freight; truck, railcar or barge shortages, including shortages of truck drivers and rail crews; rail service interruptions; and minimum tonnage requirements, among other things.
We could be negatively impacted by freight costs due to rising fuel costs; rate increases for third-party freight; truck, railcar or barge shortages, including shortages of truck drivers and rail crews; rail service interruptions; and minimum tonnage requirements, among other things.
The Company may be unable to achieve the full strategic and financial benefits expected to result from the Separation, or such benefits may be delayed or not occur at all for a variety of reasons, including, among others, that: (a) management may be required to spend significant amounts of time and effort on post Separation activities, which may divert management’s attention from operating and growing Knife River’s business; (b) Knife River may be more susceptible to market fluctuations and other adverse events than if it was still a part of MDU Resources; (c) Knife River’s business is less diversified than MDU Resources’ business prior to the Separation; and (d) the other actions required to separate MDU Resources’ and Knife River’s respective businesses could disrupt its operations.
We may be unable to achieve the full strategic and financial benefits expected to result from the Separation, or such benefits may be delayed or not occur at all for a variety of reasons, including, among others, that: (a) management may be required to spend significant amounts of time and effort on post Separation activities, which may divert management’s attention from operating and growing our business; (b) we may be more susceptible to market fluctuations and other adverse events than if it was still a part of MDU Resources; (c) our business is less diversified than MDU Resources’ business prior to the Separation; and (d) the other actions required to separate MDU Resources’ and our respective businesses could disrupt our operations.
High energy prices, specifically for diesel fuel, natural gas and liquid asphalt, have impacted and could further affect the margins realized, as well as demand for construction materials and related contracting services. Increased labor costs, due to labor shortages, competition from other industries, or other factors, could also negatively affect Knife River’s results of operations.
High energy prices, specifically for diesel fuel, natural gas and liquid asphalt, have impacted and could affect the margins realized, as well as demand for construction materials and related contracting services. Increased labor costs, due to labor shortages, competition from other industries, or other factors, could also negatively affect our results of operations.
There can be no assurances that governments will sustain or increase current infrastructure spending and tax incentive and other subsidy levels, and any reductions thereto or delays therein could affect Knife River’s business, liquidity and financial condition, and results of operations. Economic volatility affects Knife River’s operations, as well as the demand for its products and services.
There can be no assurances that governments will sustain or increase current infrastructure spending and tax incentive and other subsidy levels, and any reductions thereto or delays therein could affect our business, liquidity and financial condition, and results of operations. Economic volatility affects our operations, as well as the demand for our products and services.
In connection with the Separation, MDU Resources received a private letter ruling from the IRS and one or more opinion(s) of its tax advisors, regarding certain U.S. federal income tax matters relating to the Separation and the Distribution.
In connection with the Separation, MDU Resources received a private letter ruling from the IRS and one or more opinion(s) of its tax advisors, regarding certain United States federal income tax matters relating to the Separation and the Distribution.
Further, supply chain disruptions can occur from events out of Knife River’s control such as fires, floods, severe weather, natural disasters, environmental incidents or other catastrophes. National and regional demand for cement and liquid asphalt may at times outpace the supply in the market. This imbalance creates a temporary shortage which may cause prices to increase faster than downstream products.
Further, supply chain disruptions can occur from events out of our control such as fires, floods, severe weather, natural disasters, environmental incidents or other catastrophes. National and regional demand for cementitious and liquid asphalt may at times outpace the supply in the market. This imbalance creates a temporary shortage which may cause prices to increase faster than downstream products.
If any of the risks described below actually occur, Knife River’s business, prospects, financial condition or financial results could be materially impacted and the trading price of Knife River’s common stock could decline, and investors could lose all or part of their investment.
If any of the risks described below actually occur, our business, prospects, financial condition or financial results could be materially impacted and the trading price of our common stock could decline, and investors could lose all or part of their investment.
Third-party service providers that perform critical business functions for Knife River or have access to sensitive information within Knife River also may be vulnerable to security breaches and information technology risks that could adversely affect the Company.
Third-party service providers that perform critical business functions for us or have access to sensitive information within Knife River also may be vulnerable to security breaches and information technology risks that could adversely affect us.
The historical information included in this Annual Report refers to Knife River’s business (i) as operated by and integrated with MDU Resources for periods prior to the Separation and (ii) as a stand-alone company for the period after the Separation.
The historical information included in this Annual Report refers to our business (i) as operated by and integrated with MDU Resources for periods prior to the Separation and (ii) as a stand-alone company for the period after the Separation.
The successful assertion of one or more large claims against Knife River that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on its results of operations, financial condition and cash flows.
The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our results of operations, financial condition and cash flows.
Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of personal information, confidential information and intellectual property. Any of these outcomes could damage Knife River’s reputation, result in the loss of valuable property and information, and adversely impact its business.
Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of personal information, confidential information and intellectual property. Any of these outcomes could damage our reputation, result in the loss of valuable property and information, and adversely impact our business.
The Company’s amended and restated bylaws provides that, unless the board of directors otherwise determines, the Court of Chancery of the State of Delaware or, if the Court of Chancery of the State of Delaware does not have jurisdiction, another state court of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Knife River, any action asserting a claim of breach of a fiduciary duty owed by any director or officer to Knife River or its stockholders, creditors or other constituents, any action asserting a claim against Knife River or any director or officer arising pursuant to any provision of the DGCL or the Company’s amended and restated certificate of incorporation or amended and restated bylaws, or any action asserting a claim against Knife River or any director or officer governed by the internal affairs doctrine.
Our amended and restated bylaws provides that, unless the board of directors otherwise determines, the Court of Chancery of the State of Delaware or, if the Court of Chancery of the State of Delaware does not have jurisdiction, another state court of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of our company, any action asserting a claim of breach of a fiduciary duty owed by any director or officer to our company or our stockholders, creditors or other constituents, any action asserting a claim against us or any director or officer arising pursuant to any provision of the DGCL or our amended and restated certificate of incorporation or amended and restated bylaws, or any action asserting a claim against us or any director or officer governed by the internal affairs doctrine.
In particular, proposed, new or inconsistent regulation and taxation of fuel and energy could increase the cost of complying with such laws and regulations as well as the cost of operation, including fuel required to operate its facilities or transport and distribute its products, thereby increasing the distribution and supply chain costs associated with Knife River’s products.
In particular, proposed, new or inconsistent regulation and taxation of fuel and energy could increase the cost of complying with such laws and regulations as well as the cost of operation, including fuel required to operate our facilities or transport and distribute our products, thereby increasing the distribution and supply chain costs associated with our products.
Accordingly, the 29 historical financial information included in this Annual Report does not necessarily reflect the financial condition, results of operations and cash flows that Knife River would have achieved as a separate, publicly traded company during the periods presented prior to the Separation or those that Knife River will achieve in the future, primarily as a result of the factors described below: • Prior to the Separation, Knife River’s business was operated by MDU Resources as part of its broader corporate organization, rather than as an independent company, and MDU Resources or one of its affiliates performed certain corporate functions for Knife River.
Accordingly, the historical financial information included in this Annual Report does not necessarily reflect the financial condition, results of operations and cash flows that we would have achieved as a separate, publicly traded company during the periods presented prior to the Separation or those that we will achieve in the future, primarily as a result of the factors described below: • Prior to the Separation, our business was operated by MDU Resources as part of its broader corporate organization, rather than as an independent company, and MDU Resources or one of its affiliates performed certain corporate functions for us.
To the extent financial markets view climate change and emissions of GHG as a financial risk, this could negatively affect Knife River’s ability to access capital markets or result in less competitive terms and conditions.
To the extent financial markets view climate change and emissions of GHG as a financial risk, this could negatively affect our ability to access capital markets or result in less competitive terms and conditions.
The Company’s amended and restated bylaws designates the Court of Chancery of the State of Delaware or, if the Court of Chancery of the State of Delaware does not have jurisdiction, another state court of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Knife River’s stockholders, which could discourage lawsuits against the Company and its directors and officers.
Our amended and restated bylaws designates the Court of Chancery of the State of Delaware or, if the Court of Chancery of the State of Delaware does not have jurisdiction, another state court of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Knife River’s stockholders, which could discourage lawsuits against us and our directors and officers.
In August of 2023 Hawaii experienced a series of wildfires across the island of Maui which impacted the Company’s operations, however, not materially.
In August of 2023, Hawaii experienced a series of wildfires across the island of Maui which impacted our operations, however, not materially.
Complying with these requirements has resulted in significant costs and could require the Company to divert substantial resources, including management time, from other activities. Other significant changes have occurred in the Company’s cost structure, management, financing and business operations as a result of operating as a company separate from MDU Resources.
Complying with these requirements has resulted in significant costs and could require us to divert substantial resources, including management time, from other activities. Other significant changes have occurred in our cost structure, management, financing and business operations as a result of operating as a company separate from MDU Resources.
Following the Separation, Knife River’s results of operations and cash flows are now likely to be more volatile, and Knife River may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, which may or may not be available and may be more costly. • The cost of capital for Knife River’s business as a stand-alone company may be higher than MDU Resources’ cost of capital prior to the Separation. • As a public company, Knife River is subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act and is required to prepare its financial statements according to the rules and regulations required by the SEC.
Following the Separation, our results of operations and cash flows are now likely to be more volatile, and we may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, which may or may not be available and may be more costly. 25 Index • The cost of capital for our business as a stand-alone company may be higher than MDU Resources’ cost of capital prior to the Separation. • As a public company, we are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act and is required to prepare our financial statements according to the rules and regulations required by the SEC.
The debt capital market environment could impact Knife River’s ability to borrow money in the future. Additional financing or refinancing might not be available and, if available, may not be at economically favorable terms. Further, an increase in Knife River’s leverage could lead to deterioration in its credit ratings.
The debt capital market environment could impact our ability to borrow money in the future. Additional financing or refinancing might not be available and, if available, may not be at economically favorable terms. Further, an increase in our leverage could lead to deterioration in our credit ratings.
The exclusive forum provision does not apply to actions arising under the Exchange Act or the rules and regulations thereunder.
The exclusive forum provision does not apply to actions 28 Index arising under the Exchange Act or the rules and regulations thereunder.
Backlog may also be affected by project delays or cancellations resulting from weather conditions, external market factors and economic factors beyond Knife River’s control, among other things. Accordingly, there is no assurance that backlog will be realized. The timing of contract awards and duration of large new contracts can significantly affect backlog.
Backlog may also be affected by project delays or cancellations resulting from weather conditions, external market factors and economic 22 Index factors beyond our control, among other things. Accordingly, there is no assurance that backlog will be realized. The timing of contract awards and duration of large new contracts can significantly affect backlog.
This could have a material adverse effect on the Company’s business, financial position, results of operations and cash flows as a stand-alone company. • Generally, Knife River’s working capital requirements and capital for its general corporate purposes, including acquisitions and capital expenditures, had, prior to the Separation, been satisfied as part of the corporate-wide cash management policies of Centennial.
This could have a material adverse effect on our business, financial position, results of operations and cash flows as a stand-alone company. • Generally, our working capital requirements and capital for our general corporate purposes, including acquisitions and capital expenditures, had, prior to the Separation, been satisfied as part of the corporate-wide cash management policies of Centennial.
As a result, Knife River’s ability to maintain productivity, relationships with customers, competitive costs, and quality services is limited by the ability to employ, retain and train the necessary skilled personnel and could negatively affect its results of operations, financial position and cash flows.
As a result, our ability to maintain productivity, relationships with customers, competitive costs, and quality services is limited by the ability to employ, retain and train the necessary skilled personnel and could negatively affect our results of operations, financial position and cash flows.
ITEM 1A. RISK FACTORS Investing in Knife River common stock involves a number of risks and uncertainties. The factors and other matters discussed herein are important factors that could cause actual results or outcomes for the Company to differ materially from those discussed in the forward-looking statements included elsewhere in this Annual Report.
ITEM 1A. RISK FACTORS Investing in our common stock involves a number of risks and uncertainties. The factors and other matters discussed herein are important factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements included elsewhere in this Annual Report.
Prices are generally subject to change in response to fluctuations in supply and demand and other general economic and market conditions beyond Knife River’s control. The global political environment is a primary driver in price changes to commodities and inputs out of the Company’s control.
Prices are generally subject to change in response to fluctuations in supply and demand and other general economic and market conditions beyond our control. The global political environment is a primary driver in price changes to commodities and inputs out of our control.
A recessionary construction economy can increase the likelihood that Knife River will not be able to collect on all accounts receivable or may experience a delay in payment from some customers. If its customers or counterparties experience financial difficulties, which has occurred and may reoccur, Knife River could experience difficulty in collecting receivables.
A recessionary construction economy can increase the likelihood that we will not be able to collect on all accounts receivable or may experience a delay in payment from some customers. If our customers or counterparties experience financial difficulties, which has occurred and may reoccur, we could experience difficulty in collecting receivables.
Artificial intelligence presents risks and challenges that can impact Knife River’s business by posing security risks to its confidential information, proprietary information and personal data. Issues in the development and use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability or other adverse consequences to the Company’s business operations.
Artificial intelligence presents risks and challenges that can impact our business by posing security risks to our confidential information, proprietary information and personal data. Issues in the development and use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability or other adverse consequences to our business operations.
A downgrade in Knife River’s credit ratings, regardless of the cause, could also limit the ability to obtain additional financing and/or increase the cost of obtaining financing. There is no guarantee Knife River will be able to access the capital markets at financially economical interest rates, which could negatively affect Knife River’s business.
A downgrade in our credit ratings, regardless of the cause, could also limit the ability to obtain additional financing and/or increase the cost of obtaining financing. There is no guarantee we will be able to access the capital markets at financially economical interest rates, which could negatively affect our business.
Unfavorable economic conditions can negatively affect the level of public and private expenditures on projects and the timing of these projects which, in turn, can negatively affect demand for Knife River’s products and services.
Unfavorable economic conditions can negatively affect the level of public and private expenditures on projects and the timing of these projects which, in turn, can negatively affect demand for our products and services.
At times of low unemployment, it can be difficult for Knife River to attract and retain qualified and affordable personnel. A shortage in the supply of skilled personnel creates competitive hiring markets, increased labor expenses, decreased productivity and potentially lost business opportunities to support its operating and growth strategies.
At times of low unemployment, it can be difficult for us to attract and retain qualified and affordable personnel. A shortage in the supply of skilled personnel creates competitive hiring markets, increased labor expenses, decreased productivity and potentially lost business opportunities to support our operating and growth strategies.
For additional information about the past financial performance of Knife River’s business and the basis of presentation of the historical audited consolidated financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8 - Financial Statements and Supplementary Data.” If the Separation, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, the Company could be subject to significant tax liabilities and, in certain circumstances, the Company could be required to indemnify MDU Resources for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.
For additional information about the past financial performance of our business and the basis of presentation of the historical audited consolidated financial statements, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8 - Financial Statements and Supplementary Data.” If the Separation, together with certain related transactions, does not qualify as a transaction that is generally tax-free for United States federal income tax purposes, we could be subject to significant tax liabilities and, in certain circumstances, we could be required to indemnify MDU Resources for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.
Any such indemnity obligations could be material. U.S. federal income tax consequences may restrict the Company’s ability to engage in certain desirable strategic or capital-raising transactions after the Separation. Under current law, a separation can be rendered taxable to the parent corporation and its stockholders as a result of certain post-separation acquisitions of shares or assets of the spun-off corporation.
Any such indemnity obligations could be material. United States federal income tax consequences may restrict our ability to engage in certain desirable strategic or capital-raising transactions after the Separation. Under current law, a separation can be rendered taxable to the parent corporation and its stockholders as a result of certain post-separation acquisitions of shares or assets of the spun-off corporation.
Alternatively, if a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, Knife River may incur additional costs 35 associated with resolving such matters in other jurisdictions, which could adversely affect its business, financial condition or results of operations.
Alternatively, if a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations.
The Company’s efforts to protect its intellectual property rights may not be sufficient or effective to prevent misappropriation or infringement of its intellectual property, which could result in a loss of its competitive advantage. In addition, any of its intellectual property rights may be challenged, which could result in being declared invalid or unenforceable.
Our efforts to protect our intellectual property rights may not be sufficient or effective to prevent misappropriation or infringement of our intellectual property, which could result in a loss of our competitive advantage. In addition, any of our intellectual property rights may be challenged, which could result in being declared invalid or unenforceable.
The following are the most material risk factors applicable to Knife River and are not necessarily listed in order of importance or probability of occurrence and not necessarily inclusive of all risks.
The following are the most material risk factors applicable to us and are not necessarily listed in order of importance or probability of occurrence and not necessarily inclusive of all risks.
If government funding is not approved or funding is lowered as a result of poor economic conditions, lower than expected revenues, competing spending priorities, or other factors, it could limit infrastructure projects available, increase competition for projects, result in excess inventory, and decrease sales, all of which could adversely affect the profitability of Knife River’s business.
If government funding is not approved or funding is lowered as a result of poor economic conditions, lower than expected revenues, competing spending priorities, or other factors, it could limit infrastructure projects available, increase competition for projects, result in excess inventory, and decrease sales, all of which could adversely affect the financial condition of our business.
Knife River’s historical results reflect allocations of corporate expenses from MDU Resources for such functions prior to the Separation, which are likely to be less than the expenses Knife River would have incurred had it operated as a separate publicly traded company. • Prior to the Separation, the Company shared economies of scope and scale in costs, employees and vendor relationships.
Our historical results reflect allocations of corporate expenses from MDU Resources for such functions prior to the Separation, which are likely to be less than the expenses we would have incurred had we operated as a separate publicly traded company. • Prior to the Separation, we shared economies of scope and scale in costs, employees and vendor relationships.
Knife River’s vendors may incorporate generative artificial intelligence tools into their offerings without disclosing this use to the Company, and the providers of these generative artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data protection and may inhibit Knife River’s or its vendors’ ability to maintain an adequate level of service and experience.
Our vendors may incorporate generative artificial intelligence tools into their offerings without disclosing this use to us, and the providers of these generative artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data protection and may inhibit us or our vendors’ ability to maintain an adequate level of service and experience.
The historical financial information included in this Annual Report is derived from the audited consolidated financial statements and accounting records of MDU Resources and Knife River.
The historical financial information included in this Annual Report is derived from the audited consolidated financial statements and accounting records of MDU Resources and us.
If one or more of the analysts ceases coverage of Knife River common stock or fails to publish reports on the Company regularly, demand for Knife River common stock could decrease, which could cause Knife River common stock price or trading volume to decline. Stockholder percentage of ownership in Knife River may be diluted in the future.
If one or more of the analysts ceases coverage of our common stock or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our common stock price or trading volume to decline. Stockholder percentage of ownership in us may be diluted in the future.
The inability to successfully integrate new businesses in a timely and orderly manner could increase costs and result in dis-synergies and negatively impact the Company’s results of operations and prevent Knife River from realizing expected rates of return on the acquired business.
The inability to successfully integrate new businesses in a timely and orderly manner could increase costs and result in dis-synergies and negatively impact our results of operations and prevent us from realizing expected rates of return on the acquired business.
In addition, Knife River’s amended and restated certificate of incorporation authorizes it to issue, without the approval of its stockholders, one or more classes or series of preferred stock that have such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over Knife River common stock respecting dividends and distributions, as its board of directors generally may determine.
In addition, our amended and restated certificate of incorporation authorizes us to issue, without the approval of our stockholders, one or more classes or series of preferred stock that have such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over our common stock respecting dividends and distributions, as our board of directors generally may determine.
This may include interruption of facilities for delivery of construction materials or other products and services, any of which could adversely affect its reputation, business, cash flows and results of operations or subject Knife River to legal costs. Knife River’s accounting systems and its ability to collect information and invoice customers for products and services could be disrupted.
This may include interruption of facilities for delivery of construction materials or other products and services, any of which could adversely affect our reputation, business, cash flows and results of operations or subject us to legal costs. Our accounting systems and our ability to collect information and invoice customers for products and services could be disrupted.
In addition, the increasing focus on climate change and stricter regulatory requirements may result in the Company facing adverse reputational risks associated with certain of its operations producing GHG emissions.
In addition, the increasing focus on climate change and stricter regulatory requirements may result in us facing adverse reputational risks associated with certain of our operations producing GHG emissions.
Accordingly, in the event that the Company’s board of directors determines that a potential business combination transaction is not in the best interests of Knife River and its stockholders but certain stockholders believe that such a transaction would be beneficial to Knife River and its stockholders, such stockholders may elect to sell their shares in Knife River and the trading price of Knife River common stock could decrease.
Accordingly, in the event that our board of directors determines that a potential business combination transaction is not in the best interests of our company and our stockholders but certain stockholders believe that such a transaction would be beneficial to our company and our stockholders, such stockholders may elect to sell their shares in our company and the trading price of our common stock could decrease.
Knife River may also be required to increase its contributions to MEPPs if the other participating employers in such plans withdraw from the plans and are not able to contribute amounts sufficient to fund the unfunded liabilities associated with their participation in the plans.
We may also be required to increase our contributions to MEPPs if the other participating employers in such plans withdraw from the plans and are not able to contribute amounts sufficient to fund the unfunded liabilities associated with their participation in the plans.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeThe Company has a third-party management risk program to help monitor and reduce risks associated with the Company's vendors, which includes processes such as completing due diligence on third party service providers before engaging with them for their services; assessing the third party’s cybersecurity posture by reviewing audit reports of the third party, completing cyber questionnaires, and reviewing applicable certification; including cybersecurity contractual language in contracts to limit risk; and monitoring and reassessing third party’s to ensure ongoing compliance with their cybersecurity obligations.
Biggest changeWe monitor risks associated with our vendors, which include processes such as completing due diligence on third party service providers before engaging with them for their services; assessing the third party’s cybersecurity posture by reviewing audit reports of the third party, completing cyber questionnaires, and reviewing applicable certification; including cybersecurity contractual language in contracts to limit risk; and monitoring and reassessing third party’s to ensure ongoing compliance with their cybersecurity obligations.
Through training and compliance programs, the concept that all employees are responsible for the data and critical systems they access is reinforced. The information technology department for the Company has the responsibility to implement cybersecurity controls under the overall guidance of the cybersecurity team.
Through training and compliance programs, the concept that all employees are responsible for the data and critical systems they access is reinforced. The information technology department has the responsibility to implement cybersecurity controls under the overall guidance of the cybersecurity team.
The information technology department, including the cybersecurity team, reports to the vice president of support services, who has 17 years of information technology leadership and operational leadership experience with Knife River and over 30 years of total information technology experience. The vice president of support services reports to the chief executive officer. Cyber Risk Oversight Committee.
The information technology department, including the cybersecurity team, reports to the vice president of support services, who has 18 years of information technology leadership and operational leadership experience with Knife River and over 30 years of total information technology experience. The vice president of support services reports to the chief executive officer. Cyber Risk Oversight Committee.
Periodic external reviews, including penetration tests and security framework assessments, are conducted by auditors, external assessors, and/or consultants to assess and ensure compliance with the Company’s information security programs and practices. Internal and external auditors assess the Company’s information technology general controls on an annual basis. Oversee Third-party Risk.
Periodic external reviews, including penetration tests and security framework assessments, are conducted by auditors, external assessors, and/or consultants to assess and ensure compliance with our information security programs and practices. Internal and external auditors assess our information technology general controls on an annual basis. Oversee Third-party Risk.
In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management processes designed and implement by management are adequate for identifying, assessing, and managing risk. The audit committee of the board of directors of the Company is responsible for oversight of risks from cybersecurity threats. Management's Role Managing Risk.
In its risk oversight role, the board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate for identifying, assessing, and managing risk. The audit committee of the board of directors of our company is responsible for oversight of risks from cybersecurity threats. Management's Role Managing Risk.
There are 37 processes around access management, data security, encryption, asset management, secure system development, security operations, network and device security to provide safeguards from a cybersecurity incident along with continual monitoring of various threat intelligence feeds. Cyber Risk Management Personnel.
There are processes around access management, data security, encryption, asset management, secure system development, security operations, network and device security to provide safeguards from a cybersecurity incident along with continual monitoring of various threat intelligence feeds. 32 Index Cyber Risk Management Personnel.
In addition to scheduled meetings, the vice president of support services and audit committee maintain an ongoing dialogue regarding emerging or potential cybersecurity risks. Cybersecurity Incident Response. The Company has an incident response plan to identify, protect, detect, respond to, and recover from cybersecurity threats and incidents that is also tested on an annual basis.
In addition to scheduled meetings, the vice president of support services and audit committee maintain an ongoing dialogue regarding emerging or potential cybersecurity risks. Cybersecurity Incident Response. We have an incident response plan to identify, protect, detect, respond to, and recover from cybersecurity threats and incidents that is also tested on an annual basis.
The CyROC is chaired by the Company's supervisor of cybersecurity and is comprised of members from financial and operations management, as well as technology leaders.
The CyROC is chaired by our supervisor of cybersecurity and is comprised of members from financial and operations management, as well as technology leaders.
Additionally, the Company established CyROC to provide executive management and the audit committee with analyses, appraisals, recommendations, and pertinent information concerning cyber defense of the Company's electronic information, information technology and operation technology systems. The CyROC is responsible for guiding the Company's comprehensive cybersecurity policies.
Additionally, we established CyROC to provide executive management and the audit committee with analyses, appraisals, recommendations, and pertinent information concerning cyber defense of our electronic information, information technology and operation technology systems. The CyROC is responsible for guiding our comprehensive cybersecurity policies.
Although risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations or financial condition, such incidents could have a material adverse effect in the future as cyberattacks continue to increase in frequency and sophistication. Employee Cybersecurity Training.
Although risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition, such incidents could have a material adverse effect in the future as cyberattacks continue to increase in frequency and sophistication. 31 Index Employee Cybersecurity Training.
This cybersecurity team includes internal cybersecurity experts that have a combined 55 years of general information technology experience and 37 years of cyber specific related experience. The internal cyber team have obtained various degrees and certificates in network administration, security administration and information system management.
This cybersecurity team includes internal cybersecurity experts that have a combined 28 years of general information technology experience and 18 years of cyber specific related experience. The internal cyber team members have obtained various degrees and certificates in network administration, security administration and information system management.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Overall Risk Management. The Company has implemented a cyber risk management program to help ensure that the Company's electronic information and information systems are protected from various threats and are built on and follow the Cybersecurity Maturity Model Certification for information security requirements and the protection of sensitive information.
ITEM 1C. CYBERSECURITY Risk Management and Strategy Overall Risk Management. We have implemented a cyber risk management program to help ensure that our electronic information and information systems are protected from various threats and are built on and follow the Cybersecurity Maturity Model Certification for information security requirements and the protection of sensitive information.
The Company provides ongoing cybersecurity training and compliance programs to facilitate education for employees who may have access to the Company's data and critical systems. Employee phishing tests are conducted on a monthly basis. Engage Third-parties on Risk Management.
We provide ongoing cybersecurity training and compliance programs to facilitate education for employees who may have access to our data and critical systems. Employee phishing tests are conducted on a monthly basis. Engage Third-parties on Risk Management.
The Company's vice president of support services, along with the supervisor of cybersecurity, a designated security team of professionals and third-party cybersecurity experts are responsible for assessing and managing risks as well as developing and implementing policies, procedures, and practices based on the range of threats faced by the Company.
Our vice president of support services, along with the supervisor of cybersecurity, a designated security team of professionals and third-party cybersecurity experts are responsible for monitoring, assessing and managing risks as well as developing and implementing policies, procedures, and practices based on the range of threats we face.
The cyber risk management program is maintained as part of the Company's overall governance, enterprise risk management program and compliance program. The Company's information systems experience ongoing and often sophisticated cyberattacks by a variety of sources with the apparent aim to breach the Company's cyber-defenses.
The cyber risk management program is maintained as part of our overall governance, enterprise risk management program and compliance program. Our information systems experience ongoing and often sophisticated cyberattacks by a variety of sources with the apparent aim to breach our cyber-defenses. We also have cyber event related insurance.
The Company is continuously reevaluating the need to upgrade and/or replace systems and network infrastructure. 36 These upgrades and/or replacements could adversely impact operations by imposing substantial capital expenditures, creating delays or outages, or experiencing difficulties transitioning to new systems. System disruptions, if not anticipated and appropriately mitigated, could adversely affect the Company.
We are continuously reevaluating the need to upgrade and/or replace systems and network infrastructure. These upgrades and/or replacements could adversely impact operations by imposing increased expenses, creating delays or outages, or experiencing difficulties transitioning to new systems. System disruptions, if not anticipated and appropriately mitigated, could adversely affect our company.
The information technology department is led by two directors, one with over 20 years experience in information technology leadership roles at Knife River and the other with 14 years of combined experience in information technology roles at MDU Resources and Knife River.
Our internal information technology department is led by two directors, one with 25 years of experience in information technology leadership roles at Knife River and the other with 15 years of experience in information technology roles at MDU Resources and Knife River combined.
The Company also partners with a third-party cybersecurity firm that assists the Company and many other clients in setting direction, implementing cybersecurity technology and supporting the Company’s security operations center.
We also partner with a third-party cybersecurity firm that assists us and many other clients in setting direction, implementing cybersecurity technology and supporting our security operations center.
The Company continually assesses risks from cybersecurity threats and adapts and enhances its controls accordingly. Risks from Cybersecurity Threats.
We continually assess risks from cybersecurity threats and adapt and enhance our controls accordingly. Risks from Cybersecurity Threats.
Removed
The Company may face increased cyber risk due to the increased use of employee-owned devices and work from home arrangements. The Company also has cyber event related insurance.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeAdditionally, management assesses the risks associated in obtaining and maintaining the various land use, mining and environmental permits necessary for the properties to operate as mines. Annual reviews of mining reserves are conducted by the qualified individual and 39 include procedures such as ensuring financial assumptions related to life of mine expenses are based on the most accurate estimates available.
Biggest changeAnnual reviews of mining reserves are conducted by the qualified individual and include procedures such as ensuring financial assumptions related to life of mine expenses are based on the most accurate estimates available. 34 Index We have reviewed our properties and have determined we do not have any individual sites that are material.
Knife River’s reserves and resources are on properties that are permitted, or are expected to be permitted, for mining under current regulatory requirements. The data used to calculate reserve and resource estimates may require revisions in the future to account for changes in customer requirements, regulatory requirements and unknown geological occurrences.
Our reserves and resources are on properties that are permitted, or are expected to be permitted, for mining under current regulatory requirements. The data used to calculate reserve and resource estimates may require revisions in the future to account for changes in customer requirements, regulatory requirements and unknown geological occurrences.
Knife River classifies the applicable quantity of a particular deposit as a reserve or resource by reviewing and analyzing, independently, each geological formation, testing results and production processes, along with other modifying factors, to determine an expected yield of recoverable tonnage an area will produce. These results may have an effect on mine plans and the selection of processing equipment.
We classify the applicable quantity of a particular deposit as a reserve or resource by reviewing and analyzing, independently, each geological formation, testing results and production processes, along with other modifying factors, to determine an expected yield of recoverable tonnage an area will produce. These results may have an effect on mine plans and the selection of processing equipment.
Knife River’s reserve estimates include only salable tonnage and thus exclude waste materials that are generated in the crushing and processing phases of the operation. The reserves are based on estimates of volumes that can be economically extracted and sold to meet current market and product applications.
Our reserve estimates include only salable tonnage and thus exclude waste materials that are generated in the crushing and processing phases of the operation. The reserves are based on estimates of volumes that can be economically extracted and sold to meet current and anticipated market and product applications.
Volumes are then converted to tons using appropriate conversion factors. Property setbacks and other regulatory restrictions and limitations are identified to determine the total area available for mining. Knife River also considers mine plans, economic viability and production history in the aggregate reserve and resource estimates.
Volumes are then converted to tons using appropriate conversion factors. Property setbacks and other regulatory restrictions and limitations are identified to determine the total area available for mining. We also consider mine plans, economic viability and production history in the aggregate reserve and resource estimates.
Our mining properties are categorized as follows: (1) Production Stage – properties with reported proven or probable reserves where the Company is actively mining aggregates, (2) Development Stage – properties with reported proven or probable reserves where the Company is not actively mining aggregates, and (3) Exploration Stage – properties with no reported reserves.
Our mining properties are categorized as follows: (1) Production Stage – properties with reported proven or probable reserves where we are actively mining aggregates, (2) Development Stage – properties with reported proven or probable reserves where we are not actively mining aggregates, and (3) Exploration Stage – properties with no reported reserves.
The average selling price includes freight and delivery and other revenues. ** The aggregates mined are of suitable grade and quality to be used as construction materials and no further grade or quality disclosure is applicable. The following table sets forth details applicable to Knife River’s aggregate resources as of December 31, 2023.
The average selling price includes freight and delivery and other revenues. 2 The aggregates mined are of suitable grade and quality to be used as construction materials and no further grade or quality disclosure is applicable. The following table sets forth details applicable to our aggregate resources as of December 31, 2024.
The average time necessary to produce remaining aggregate reserves from its leased sites is approximately 47 years. Some sites have leases that expire prior to the exhaustion of the estimated reserves. The estimated reserve life assumes, based on Knife River’s experience, that leases will be renewed to allow sufficient time to fully recover these reserves.
The average time necessary to produce remaining aggregate reserves from our leased sites is approximately 45 years. Some sites have leases that expire prior to the exhaustion of the estimated reserves. The estimated reserve life assumes, based on our experience, that leases will be renewed to allow sufficient time to fully recover these reserves.
Knife River maintains a database of all aggregate reserves, which is reconciled at least annually and reviewed and approved by the qualified person. The evaluation, classification and estimation of reserves has inherent risks, including changing geotechnical, market and permitting conditions.
We maintain a database of all aggregate reserves, which is reconciled at least annually and reviewed and approved by the qualified person. The evaluation, classification and estimation of reserves has inherent risks, including changing geotechnical, market and permitting conditions.
The average selling price per ton for crushed stone and sand and gravel was $17.60 and $12.34, respectively, in 2023. Actual pricing varies by location and market. The price for each commodity was calculated by dividing 2023 revenues by tons sold. The average pricing is based on salable product, or materials that are ready for sale.
The average selling price per ton for crushed stone and sand and gravel was $19.59 and $12.80, respectively, in 2024. Actual pricing varies by location and market. The price for each commodity was calculated by dividing 2024 revenues by tons sold. The average pricing is based on salable product, or materials that are ready for sale.
The aggregates produced by Knife River are utilized in general construction and are a major component in the production of ready-mix concrete and asphalt. Knife River’s aggregate sites contain both reserves and resources.
The aggregates produced are utilized in general construction and are a major component in the production of ready-mix concrete and asphalt. Our aggregate sites contain both reserves and resources.
ITEM 2. PROPERTIES Knife River currently maintains its principal executive office at 1150 W. Century Ave., Bismarck, North Dakota 58503. In addition to the principal office, Knife River maintains and operates physical locations in 14 states throughout the United States.
ITEM 2. PROPERTIES We currently maintain our principal executive office at 1150 W. Century Ave., Bismarck, North Dakota 58503. In addition to the principal office, we maintain and operate physical locations in 14 states throughout the United States.
Its reserves are comprised of 506 million tons on properties that are owned and 596 million tons that are leased. The remaining reserve life in years was calculated by 41 dividing remaining reserves by the three-year average production from 2021 through 2023.
Our reserves are comprised of 630 million tons on properties that are owned and 532 million tons that are leased. The remaining reserve life in years was calculated by dividing remaining reserves by the three-year average production from 2022 through 2024.
The grade and quality of those reserves are computed from the results of detailed sampling, and the sampling and measurement data are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established.
The grade and quality of those reserves are computed from the results of detailed sampling, and the sampling and measurement data are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established. 33 Index Probable — those reserves for which quantity, grade and quality are computed partly from specific measurements and partly from projections based on reasonable geologic evidence.
Reported proven and probable reserves include only quantities that are owned in fee or under lease and for which all 38 appropriate zoning and permitting have been obtained or are expected to be obtained through permit, contract or grandfathered status.
The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. Reported proven and probable reserves include only quantities that are owned in fee or under lease and for which all appropriate zoning and permitting have been obtained or are expected to be obtained through permit, contract or grandfathered status.
Knife River believes the current sales price is reasonable and justifiable to estimate the aggregates’ current fair value, while the Consolidated Balance Sheets reflect the historical costs. Knife River conducts its mining operations across 114 owned properties, of which 109 are active sites, and another 72 leased properties, of which 71 are active sites.
We believe the current sales price is reasonable and justifiable to estimate the aggregates’ current fair value, while the Consolidated Balance Sheets reflect the historical costs. 36 Index We conduct our mining operations across 116 owned properties, of which 113 are active sites, and another 70 leased properties, of which 69 are active sites.
Approximately 36 percent of the reserves under lease have lease expiration dates of more than 20 years and the weighted average years remaining on all leases containing estimated proven aggregate reserves is approximately 19 years, including options for renewal that are at Knife River’s discretion.
We estimate the useful life of our owned reserves are approximately 36 years based on the most recent three-year production average. Approximately 36 percent of the reserves under lease have lease expiration dates of more than 20 years and the weighted average years remaining on all leases containing estimated proven aggregate reserves is approximately 16 years.
Knife River has reviewed its properties and has determined it does not have any individual sites that are material. The following tables set forth details applicable to Knife River’s aggregate production and aggregate sites as of December 31, 2023, by the various regions where the sites are located.
The following tables set forth details applicable to our aggregate production and aggregate sites as of December 31, 2024, by the various regions where the sites are located.
Of Knife River’s 180 active properties, 138 are in a production stage and 42 are in a development stage. Additionally, the Company has six properties in the exploration stage. As of December 31, 2023, 1.0 billion tons of estimated proven and probable reserves are located on production stage properties and 95 million tons on developmental stage properties.
Of our 182 active properties, 144 are in a production stage and 38 are in a development stage. As of December 31, 2024, 1.04 billion tons of estimated proven and probable reserves are located on production stage properties and 119 million tons on developmental stage properties. We classify aggregates located on exploration stage properties as resources.
Total Annual Aggregate Production Production Area Crushed Stone Sand & Gravel (Tons in thousands) Pacific 2,009 2,821 Northwest 5,473 3,771 Mountain 771 6,384 Central 3,089 3,821 Total 11,342 16,797 Aggregate Sites Production Area Crushed Stone Sand & Gravel Owned Leased Owned Leased Pacific — 6 9 1 Northwest 11 12 14 12 Mountain 2 7 17 8 Central 9 2 52 24 Total 22 27 92 45 40 The following table sets forth details applicable to Knife River’s aggregate reserves as of December 31, 2023.
Total Annual Aggregate Production Production Area Crushed Stone Sand & Gravel (Tons in thousands) Pacific 1,991 2,950 Northwest 6,108 3,430 Mountain 1,173 5,420 Central 3,110 3,568 Total 12,382 15,368 Aggregate Sites Production Area Crushed Stone Sand & Gravel Owned Leased Owned Leased Pacific — 6 10 1 Northwest 12 16 16 10 Mountain 2 7 15 9 Central 9 2 52 19 Total 23 31 93 39 35 Index The following table sets forth details applicable to our aggregate reserves as of December 31, 2024.
The Company classifies aggregates located on exploration stage properties as resources. Knife River’s aggregate annual production in tons for all aggregate mining properties was 30.7 million, 32.2 million and 31.1 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Our aggregate annual production in tons for all aggregate mining properties, including project specific sites and sites with short-term leases that are not included in the previous tables, was 30.3 million, 30.7 million and 32.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Sand & Gravel Production Area Aggregate Sites Measured Mineral Resources Indicated Mineral Resources Measured + Indicated Mineral Resources Inferred Mineral Resources (Tons in thousands) Pacific 2 14,673 — 14,673 54,660 Northwest 2 18,237 11,706 29,943 23,033 Mountain 2 11,500 3,029 14,529 — Central — — — — — Total 6 44,410 14,735 59,145 77,693 __________________ * Pacific, Northwest and Mountain all have sites that include both reserves and resources, which are included in the aggregate sites for reserves.
Crushed Stone Sand & Gravel Production Area Aggregate Sites Measured Mineral Resources Indicated Mineral Resources Measured + Indicated Mineral Resources Measured Mineral Resources Indicated Mineral Resources Measured + Indicated Mineral Resources Inferred Mineral Resources (Tons in thousands) Pacific 1 — — — 4,673 — 4,673 54,660 Northwest 2 128,613 105,112 233,725 44,715 20,976 65,691 209,162 Mountain 1 — 47,749 47,749 27,628 9,765 37,393 1,733 Central 0 — — — — — — — Total 4 128,613 152,861 281,474 77,016 30,741 107,757 265,555 __________________ * Pacific, Northwest and Mountain all have sites that include both reserves and resources, which are included in the number of aggregate sites for reserves.
Removed
Knife River’s operations include 180 active aggregate sites, 102 ready-mix plants, 56 asphalt plants, eight cement terminals, five liquid-asphalt terminal sites and six petroleum recovery collection points, as discussed in the section entitled “Item 1. Business.” Aggregate sites and reserves Knife River mines crushed stone and sand and gravel at its 180 active aggregate sites across its operating segments.
Added
Our operations include the following properties: Pacific Northwest Mountain Central Energy Services Consolidated Knife River Active Aggregate Sites 16 52 32 82 — 182 Ready-Mix Plants 21 27 17 41 — 106 Asphalt Plants 4 12 15 20 — 51 Liquid Asphalt Terminals — — — — 9 9 Cement Terminals 8 — — — — 8 Aggregate sites and reserves We mine crushed stone and sand and gravel at our active aggregate sites across our segments.
Removed
Probable — those reserves for which quantity, grade and quality are computed partly from specific measurements and partly from projections based on reasonable geologic evidence. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.
Added
Additionally, management assesses the risks associated in obtaining and maintaining the various land use, mining and environmental permits necessary for the properties to operate as mines.
Removed
Crushed Stone Sand & Gravel Production Area Aggregate Sites Proven Mineral Reserves Probable Mineral Reserves Total Mineral Reserves Proven Mineral Reserves Probable Mineral Reserves Total Mineral Reserves Total Mineral Reserves (Tons in thousands) Pacific 14 94,737 39,064 133,801 27,461 — 27,461 161,262 Northwest 47 356,912 4,660 361,572 101,230 36,872 138,102 499,674 Mountain 32 92,820 11,582 104,402 87,787 34,032 121,819 226,221 Central 87 104,638 22,108 126,746 82,633 6,392 89,025 215,771 Total 180 649,107 77,414 726,521 299,111 77,296 376,407 1,102,928 __________________ * The average selling price per ton for crushed stone and sand and gravel was $17.60 and $12.34, respectively, in 2023.
Added
Crushed Stone Sand & Gravel Production Area Aggregate Sites Proven Mineral Reserves Probable Mineral Reserves Total Mineral Reserves Proven Mineral Reserves Probable Mineral Reserves Total Mineral Reserves Total Mineral Reserves (Tons in thousands) Pacific 16 78,899 39,064 117,963 39,253 — 39,253 157,216 Northwest 52 384,064 17,083 401,147 71,369 21,512 92,881 494,028 Mountain 32 79,822 — 79,822 131,205 9,884 141,089 220,911 Central 82 110,081 86,581 196,662 86,460 6,528 92,988 289,650 Total 182 652,866 142,728 795,594 328,287 37,924 366,211 1,161,805 __________________ 1 The average selling price per ton for crushed stone and sand and gravel was $19.59 and $12.80, respectively, in 2024.
Removed
Knife River estimates the useful life of its owned reserves are approximately 28 years based on the most recent three-year production average.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS SEC regulations require Knife River to disclose certain information about proceedings arising under federal, state or local environmental provisions if Knife River reasonably believes that such proceedings may result in monetary sanctions above a stated threshold.
Biggest changeITEM 3. LEGAL PROCEEDINGS SEC regulations require us to disclose certain information about proceedings arising under federal, state or local environmental provisions if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold.
Pursuant to SEC regulations, Knife River has adopted a threshold of $1.0 million for purposes of determining whether disclosure of any such proceedings is required. For information regarding legal proceedings required by this item, see Item 8 - Note 18, which is incorporated herein by reference.
Pursuant to SEC regulations, we have adopted a threshold of $1.0 million for purposes of determining whether disclosure of any such proceedings is required. For information regarding legal proceedings required by this item, see Item 8 - Note 18, which is incorporated herein by reference.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES For information regarding mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, see Exhibit 95 to this Form 10-K, which is incorporated herein by reference. 42 PART II
Biggest changeITEM 4. MINE SAFETY DISCLOSURES For information regarding mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Act and Item 104 of Regulation S-K, see Exhibit 95 to this Form 10-K, which is incorporated herein by reference. 37 Index PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company's common stock is listed on the New York Stock Exchange under the ticker symbol "KNF,” which began “regular-way” trading on June 1, 2023, immediately following the Separation.
Biggest changeITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders Our common stock is listed on the New York Stock Exchange under the ticker symbol "KNF.” As of February 13, 2025, our common stock was held by approximately 7,900 stockholders of record.
Any future determination as to the declaration and payment of dividends will be at the discretion of the board of directors and will depend on then-existing conditions, including financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors the board of directors considers relevant.
Any future determination as to the declaration and payment of dividends will be at the discretion of the board of directors and will depend on then-existing conditions, including financial condition, results of operations, contractual restrictions, capital requirements, business prospects and other factors the board of directors considers relevant. Purchases of Equity Securities by the Issuer None.
As of December 31, 2023, the Company's common stock was held by approximately 8,485 stockholders of record. The Company has not paid cash dividends on its common stock and does not anticipate declaring or paying dividends in the foreseeable future.
Dividends We have not paid cash dividends on our common stock and do not anticipate declaring or paying dividends in the foreseeable future.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

144 edited+80 added−79 removed17 unchanged
Biggest changeRevenues Gross profit Gross margin 2023 2022 2021 2023 2022 2021 2023 2022 2021 (In millions) Pacific $ 462.2 $ 418.1 $ 396.8 $ 77.4 $ 54.5 $ 63.4 16.8 % 13.0 % 16.0 % Northwest 666.1 600.2 478.0 133.4 106.4 87.5 20.0 % 17.7 % 18.3 % Mountain 634.0 542.0 479.6 109.1 77.5 71.2 17.2 % 14.3 % 14.8 % Central 825.0 779.8 720.9 134.8 90.5 90.0 16.3 % 11.6 % 12.5 % Energy Services 292.3 238.4 192.8 83.1 31.4 34.9 28.4 % 13.2 % 18.1 % Segment totals 2,879.6 2,578.5 2,268.1 537.8 360.3 347.0 18.7 % 14.0 % 15.3 % Corporate Services and Eliminations (49.3) (43.8) (39.2) 1.1 .6 — (2.2) % (1.5) % .1 % Total $ 2,830.3 $ 2,534.7 $ 2,228.9 $ 538.9 $ 360.9 $ 347.0 19.0 % 14.2 % 15.6 % 48 Revenues EBITDA* EBITDA margin* 2023 2022 2021 2023 2022 2021 2023 2022 2021 (In millions) Pacific $ 462.2 $ 418.1 $ 396.8 $ 56.2 $ 44.0 $ 57.9 12.2 % 10.5 % 14.6 % Northwest 666.1 600.2 478.0 121.1 103.9 80.6 18.2 % 17.3 % 16.9 % Mountain 634.0 542.0 479.6 103.2 72.6 65.0 16.3 % 13.4 % 13.6 % Central 825.0 779.8 720.9 116.6 86.6 81.5 14.1 % 11.1 % 11.3 % Energy Services 292.3 238.4 192.8 78.1 28.3 31.5 26.7 % 11.9 % 16.4 % Segment totals 2,879.6 2,578.5 2,268.1 475.2 335.4 316.5 16.5 % 13.0 % 14.0 % Corporate Services and Eliminations (49.3) (43.8) (39.2) (53.2) (28.7) (23.1) 108.0 % 65.4 % 59.2 % Total $ 2,830.3 $ 2,534.7 $ 2,228.9 $ 422.0 $ 306.7 $ 293.4 14.9 % 12.1 % 13.2 % __________________ * EBITDA and EBITDA Margin are non-GAAP financial measures.
Biggest changeRevenues EBITDA 1 EBITDA margin 1 2024 2023 2022 2024 2023 2022 2024 2023 2022 (In millions) Pacific $ 493.1 $ 462.2 $ 418.1 $ 59.9 $ 56.2 $ 44.0 12.1 % 12.2 % 10.5 % Northwest 692.4 666.1 600.2 149.8 121.1 103.9 21.6 % 18.2 % 17.3 % Mountain 663.1 634.0 542.0 113.5 103.2 72.6 17.1 % 16.3 % 13.4 % Central 818.1 825.0 779.8 131.6 116.6 86.6 16.1 % 14.1 % 11.1 % Energy Services 275.7 292.3 238.4 60.2 78.1 28.3 21.8 % 26.7 % 11.9 % Segment totals 2,942.4 2,879.6 2,578.5 515.0 475.2 335.4 17.5 % 16.5 % 13.0 % Corporate Services and Eliminations (43.4) (49.3) (43.8) (60.7) (53.2) (28.7) N.M.
Among other things, those historical financial statements include more detailed information regarding the basis of presentation for the financial data included in the following discussion. Certain percentages presented in this discussion and analysis are calculated from the underlying whole-dollar amounts and therefore may not recalculate from the rounded numbers used for disclosure purposes.
Among other things, those financial statements include more detailed information regarding the basis of presentation for the financial data included in the following discussion. Certain percentages presented in this discussion and analysis are calculated from the underlying whole-dollar amounts and therefore may not recalculate from the rounded numbers used for disclosure purposes.
The improvement was the result of higher contracting services revenues and margins contributing profit of $19.7 million due to strong markets for Agency, airport and commercial work, as well as cost savings and job efficiencies. Higher sales prices outpaced costs across all product lines by $11.9 million.
The improvement was the result of higher contracting services revenues and margins contributing profit of $19.7 million due to strong markets for public agency, airport and commercial work, as well as cost savings and job efficiencies. Higher sales prices outpaced costs across all product lines by $11.9 million.
Partially offsetting these increases were lower sales volumes of $33.0 million across most product lines largely as the regions continue to target improved bid margins on projects which also impacts internal sales volumes and the absence of an impact project in 57 South Dakota.
Partially offsetting these increases were lower sales volumes of $33.0 million across most product lines largely as the regions continue to target improved bid margins on projects which also impacts internal sales volumes and the absence of an impact project in South Dakota.
Interest Expense Interest expense increased $28.0 million due primarily to higher average interest rates. Interest rates were higher as a result of the Company settling related-party notes payable as part of the Separation and entering into new debt agreements with higher interest rates, which resulted in additional interest expense in the period of $29.5 million.
Interest Expense Interest expense increased $28.0 million due primarily to higher average interest rates. Interest rates were higher as a result of settling related-party notes payable as part of the Separation and entering into new debt agreements with higher interest rates, which resulted in additional interest expense in the period of $29.5 million.
Further contributing to the higher selling, general and administrative costs were increased payroll-related costs of $27.7 million, due in part to higher incentive accruals across the segments based on the Company’s performance; non-cash asset impairments of $5.8 million on aggregate sites discussed in Item 8 - Note 2; absence of a gain of $6.7 million recognized in 2022 on the sale of non-strategic assets in southeast Texas; higher office expenses of $2.6 million; increased expected credit losses of $1.5 million directly associated with an increase in receivable balances over 90 days and the absence of bad debt recoveries in 2022; and higher information technology and other costs.
Further contributing to the higher selling, general and administrative costs were increased payroll-related costs of $27.7 million, due in part to higher incentive accruals across the segments based on our performance; non-cash asset impairments of $5.8 million on aggregate sites discussed in Item 8 - Note 2; absence of a gain of $6.7 million recognized in 2022 on the sale of non-strategic assets in southeast Texas; higher office expenses of $2.6 million; increased expected credit losses of $1.5 million directly associated with an increase in receivable balances over 90 days and the absence of bad debt recoveries in 2022; and higher information technology and other costs.
This decreased usage of cash was driven largely by lower payments on operating expenses at the end of the period and decreased liquid asphalt inventory balances, partially offset by increased accounts receivable balances at the end of the year associated with 61 higher revenues during 2023.
This decreased usage of cash was driven largely by lower payments on operating expenses at the end of the period and decreased liquid asphalt inventory balances, partially offset by increased accounts receivable balances at the end of the year associated with higher revenues during 2023.
Ready-mix concrete sales volumes 52 increased in northern California as a result of an acquisition in December 2022, which were offset in part by lower sales volumes in Alaska due to fewer projects over the prior year.
Ready-mix concrete sales volumes increased in northern California as a result of an acquisition in December 2022, which were offset in part by lower sales volumes in Alaska due to fewer projects over the prior year.
As a result of the Separation, the Company experienced increased recurring costs, including payroll-related costs of $12.3 million, largely due to additional staff and stock-based compensation expense for the management team and board of directors; insurance costs of $2.8 million; and professional services of $2.6 million, which were offset in part by a reduction in general corporate expenses from MDU Resources of $7.6 million, as discussed in Item 8 - Note 1.
As a result of the Separation, we experienced increased recurring costs, including payroll-related costs of $12.3 million, largely due to additional staff and stock-based compensation expense for the management team and board of directors; insurance costs of $2.8 million; and professional services of $2.6 million, which were offset in part by a reduction in general corporate expenses from MDU Resources of $7.6 million, as discussed in Item 8 - Note 1.
Other Income (Expense) Other income (expense) increased $12.4 million, due in part to improved returns on the Company’s nonqualified benefit plan investments of $5.5 million; increased interest income of $5.2 million on higher cash balances and on the cash held in escrow for the $425.0 million of senior notes issued prior to the completion of the Separation; and income resulting from the transition services agreement with MDU Resources, as discussed in Item 8 - Note 19.
Other Income (Expense) Other income (expense) increased $12.4 million, due in part to improved returns on our nonqualified benefit plan investments of $5.5 million; increased interest income of $5.2 million on higher cash balances and on the cash held in escrow for the $425.0 million of senior notes issued prior to the completion of the Separation; and income resulting from the transition services agreement with MDU Resources, as discussed in Item 8 - Note 19.
This discussion contains forward-looking statements about the Company’s business, operations and industry that involve risks and uncertainties, such as statements regarding management’s plans, objectives, expectations and intentions. Future results and financial condition may differ materially from those currently anticipated as a result of the factors described under the sections entitled “Forward-Looking Statements” and “Item 1A.
This discussion contains forward-looking statements about our business, operations and industry that involve risks and uncertainties, such as statements regarding management’s plans, objectives, expectations and intentions. Future results and financial condition may differ materially from those currently anticipated as a result of the factors described under the sections entitled “Forward-Looking Statements” and “Item 1A.
These recurring costs were offset in part by a reduction in general corporate expenses from MDU Resources of $7.6 million, as discussed in Item 8 - Note 1. Also, as part of the Separation, the Company incurred one-time costs of $10.0 million primarily related to professional services, insurance costs and the transition services agreement with MDU Resources.
These recurring costs were offset in part by a reduction in general corporate expenses from MDU Resources of $7.6 million, as discussed in Item 8 - Note 1. Also, as part of the Separation, we incurred one-time costs of $10.0 million primarily related to professional services, insurance costs and the transition services agreement with MDU Resources.
The accompanying audited consolidated financial statements and footnotes for the periods prior to the Separation were prepared on a “carve-out” basis using a legal entity approach in conformity with GAAP and were derived from the audited consolidated financial statements of MDU Resources as if the Company operated on a stand-alone basis during these periods.
The accompanying audited consolidated financial statements and footnotes for the periods prior to the Separation were prepared on a “carve-out” basis using a legal entity approach in conformity with GAAP and were derived from the audited consolidated financial statements of MDU Resources as if we operated on a stand-alone basis during these periods.
Risk Factors” for a list of factors that can cause revenues to be realized in periods and at levels that are different from originally projected. Public Funding . Funding for public projects is dependent on federal and state funding, such as appropriations to the Federal Highway Administration.
Risk Factors” for a list of factors that can cause revenues or margins to be realized in periods and at levels that are different from originally projected. Public Funding . Funding for public projects is dependent on federal and state funding, such as appropriations to the Federal Highway Administration.
Partially offsetting the increase was lower average debt balances. For additional information, see Item 8 - Notes 8 and 19.
Partially offsetting the increase was lower average debt balances. For additional information, see Item 8 - Notes 9 and 19.
The segment saw strong cement product sales volumes to third-party customers in Alaska and strong aggregate sales volumes of $6.0 million, primarily from increased demand in Hawaii as the local economy continues to regain momentum for public and private work.
We saw strong cement product sales volumes to third-party customers in Alaska and strong aggregate sales volumes of $6.0 million, primarily from increased demand in Hawaii as the local economy continues to regain momentum for public and private work.
The Company experienced increased recurring costs, including payroll-related costs of $12.3 million, largely due to additional staff and stock-based compensation expense for the management team and board of directors; professional services of $2.6 million; fees of $1.2 million, primarily related to fees on the new debt issued in conjunction with the Separation; and insurance costs of $400,000.
In 2023, we experienced increased recurring costs, including payroll-related costs of $12.3 million, largely due to additional staff and stock-based compensation expense for the management team and board of directors; professional services of $2.6 million; fees of $1.2 million, primarily related to fees on the new debt issued in conjunction with the Separation; and insurance costs of $400,000.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read together with the Company’s audited consolidated financial statements and related notes included elsewhere in this Annual Report.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report.
The Company also saw increased contracting services revenue in most regions, especially in the Mountain and Northwest regions that benefited from strong demand and more available work. Higher liquid asphalt sales volumes also contributed to the increased revenue.
We also saw increased contracting services revenue in most regions, especially in the Mountain and Northwest regions that benefited from strong demand and more available work. Higher liquid asphalt sales volumes also contributed to the increased revenue.
The preparation of its financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.
The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period.
Under the income approach, the discounted cash flow model determines fair value based on the present value of projected cash flows over a specified period and a residual value related to future cash flows beyond the projection period. Both values are discounted using a rate that reflects the best estimate of the weighted average cost of capital for the Company.
Under the income approach, the discounted cash flow model determines fair value based on the present value of projected cash flows over a specified period and a residual value related to future cash flows beyond the projection period. Both values are discounted using a rate that reflects the best estimate of our weighted average cost of capital.
The effective tax rate can be affected by many factors, including changes in tax laws, regulations or rates, new interpretations of existing laws or regulations and changes to the Company's overall levels of income before income tax.
The effective tax rate can be affected by many factors, including changes in tax laws, regulations or rates, new interpretations of existing laws or regulations and changes to our overall levels of income before income tax.
Gross Profit and Gross Margin Gross profit improved $178.0 million while gross margin improved 480 basis points. Higher sales prices outpacing costs across its materials product lines contributed $126.0 million in gross profit, which was largely the result of increased market pricing and EDGE-related initiatives, including operating efficiencies and pricing optimization.
Gross Profit and Gross Margin Gross profit improved by $178.0 million while gross margin improved 480 basis points. Higher sales prices outpacing costs across our materials product lines contributed $126.0 million in gross profit, which was largely the result of increased market pricing and EDGE-related initiatives, including operating efficiencies and pricing optimization.
As a project commences, estimates are continually 64 monitored and revised as information becomes available and actual costs and conditions surrounding the job become known. If a loss is anticipated on a contract, the loss is immediately recognized. Contracts are often modified to account for changes in contract specifications and requirements.
As a project commences, estimates are continually 57 Index monitored and revised as information becomes available and actual costs and conditions surrounding the job become known. If a loss is anticipated on a contract, the loss is immediately recognized. Contracts are often modified to account for changes in contract specifications and requirements.
Also, as part of the Separation, the Company incurred one-time costs of $10.0 million primarily related to professional services, insurance costs and the transition services agreement with MDU Resources.
Also, as part of the Separation, we incurred one-time costs of $10.0 million primarily related to professional services, insurance costs and the transition services agreement with MDU Resources.
Critical accounting estimates are defined as estimates that require management to make assumptions about matters that are uncertain at the time the estimate was made, and changes in the estimates could have a material impact on Knife River’s financial position or results of operations.
Critical accounting estimates are defined as estimates that require management to make assumptions about matters that are uncertain at the time the estimate was made, and changes in the estimates could have a material impact on our financial position or results of operations.
Revenue Recognition Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The recognition of revenue requires Knife River to make estimates and assumptions that affect the reported amounts of revenue.
Revenue Recognition Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The recognition of revenue requires us to make estimates and assumptions that affect the reported amounts of revenue.
Due to the nature of these obligations, the Company cannot determine precisely when the payments will be made to settle these obligations. For more information, see Item 8 - Note 10. Defined Benefit Pension Plans The Company has noncontributory qualified defined benefit pension plans for certain employees. Plan assets consist of investments in equity and fixed income securities.
Due to the nature of these obligations, we cannot determine precisely when the payments will be made to settle these obligations. For more information, see Item 8 - Note 11. Defined Benefit Pension Plans Our company has noncontributory qualified defined benefit pension plans for certain employees. Plan assets consist of investments in equity and fixed income securities.
Determining the fair value of a reporting unit requires judgment and the use of significant estimates, which include assumptions about Knife River’s future revenue, profitability and cash flows, long-term growth rates, 65 amount and timing of estimated capital expenditures, inflation rates, weighted average cost of capital, operational plans, and current and future economic conditions, among others.
Determining the fair value of a reporting unit requires judgment and the use of significant estimates, which include assumptions about our future revenue, profitability and cash flows, long-term growth rates, amount and timing of estimated capital expenditures, inflation rates, weighted average cost of capital, operational plans, and current and future economic conditions, among others.
Examples of such events or circumstances may include a significant adverse change in business climate, weakness in an industry in which Knife River’s reporting units operate or recent significant cash or operating losses with expectations that those losses will continue.
Examples of such events or circumstances may include a significant adverse change in business climate, weakness in an industry in which our reporting units operate or recent significant cash or operating losses with expectations that those losses will continue.
These operating segments are used to determine the Company's reportable segments and are based on the Company's method of internal reporting and management of the business, as discussed in Item 8 - Note 15. The Company's reportable segments are: Pacific, Northwest, Mountain, Central and Energy Services.
These operating segments are used to determine our reportable segments and are based on our method of internal reporting and management of our business, as discussed in Item 8 - Note 15. Our reportable segments are: Pacific, Northwest, Mountain, Central and Energy Services.
Income tax expense consists of corporate income taxes related to the net income of the Company. Income taxes are presented at the corporate services level and not at the individual segments.
Income tax expense consists of corporate income taxes related to our net income. Income taxes are presented at the corporate services level and not at the individual segments.
The assumptions underlying cash flow projections are in sync as applicable with Knife River’s strategy and assumptions. Future projections are heavily correlated with the current year results of operations. Future results of operations may vary due to economic and financial impacts.
The assumptions underlying cash flow projections are in sync as applicable with our strategy and assumptions. Future projections are heavily correlated with the current year results of operations. Future results of operations may vary due to economic and financial impacts.
In addition, higher demand for contracting services work related to Agency and railroad projects, as well as prestress data center and other projects, accounted for an increase in revenues of $37.7 million.
In addition, higher demand for contracting services work related to public agencies and railroad projects, as well as prestress data center and other projects, accounted for an increase in revenues of $37.7 million.
Knife River’s critical accounting estimates are subject to judgments and uncertainties that affect the application of its significant accounting policies discussed in Item. 8 - Note 2. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised.
Our critical accounting estimates are subject to judgments and uncertainties that affect the application of the significant accounting policies discussed in Item. 8 - Note 2. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised.
Consequently, Knife River’s financial position or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of the following critical accounting estimates.
Consequently, our financial position or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of the following critical accounting estimates.
Knife River only includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Changes in circumstances could impact management’s estimates made in determining the value of variable consideration recorded.
We only include variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Changes in circumstances could impact management’s estimates made in determining the value of variable consideration recorded.
The long-term growth rates used in the five-year forecast are developed by management based on industry data, management’s knowledge of the industry and management’s strategic plans. The long-term growth rate used was 3 percent in 2023, 2022 and 2021.
The long-term growth rates used in the five-year forecast are developed by management based on industry 59 Index data, management’s knowledge of the industry and management’s strategic plans. The long-term growth rate used was 3 percent in 2024, 2023 and 2022.
Under the market approach, Knife River estimates fair value using various multiples derived from enterprise value to EBITDA for comparative peer companies as well as comparable market transaction multiples to EBITDA for each respective reporting unit. These multiples are applied to operating data for each reporting unit to arrive at an indication of fair value.
Under the market approach, we estimate fair value using various multiples derived from enterprise value to EBITDA for comparative peer companies as well as comparable market transaction multiples to EBITDA for each respective reporting unit. These multiples are applied to operating data for each reporting unit to arrive at an indication of fair value.
Prior to the Separation, Knife River operated as a wholly owned subsidiary of Centennial and an indirect, wholly owned subsidiary of MDU Resources and not as a stand-alone company.
Prior to the Separation, we operated as a wholly owned subsidiary of Centennial and an indirect, wholly owned subsidiary of MDU Resources and not as a stand-alone company.
For further information, see Item 8 - Note 8.
For further information, see Item 8 - Note 9.
Knife River has determined that the reporting units for its goodwill impairment test are its operating segments as they constitute a business for which discrete financial information is available and for which segment management regularly reviews the operating results. Goodwill impairment, if any, is measured by comparing the fair value of each reporting unit to its carrying value.
We have determined that the reporting units for our goodwill impairment test are our operating segments as they constitute a business for which discrete financial information is available and for which segment management regularly reviews the operating results. Goodwill impairment, if any, is measured by comparing the fair value of each reporting unit to its carrying value.
Knife River tests long-lived assets for impairment at a level significantly lower than that of goodwill impairment testing. Long-lived assets or groups of assets are evaluated for impairment at the lowest level of largely independent identifiable cash flows at an individual operation or group of operations collectively serving a local market.
We test long-lived assets for impairment at a level significantly lower than that of goodwill impairment testing. Long-lived assets or groups of assets are evaluated for impairment at the lowest level of largely independent identifiable cash flows at an individual operation or group of operations collectively serving a local market.
Its aggregate sites and associated asphalt and ready-mix plants are primarily in strategic locations near mid-sized, high-growth markets, providing Knife River with a transportation advantage for its materials that supports competitive pricing and increased margins.
Our aggregate sites and associated asphalt and ready-mix plants are primarily in strategic locations near mid-sized, high-growth markets, providing us with a transportation advantage for our materials that supports competitive pricing and increased margins.
As an aggregates-led construction materials and contracting services provider in the United States, the Company's 1.1 billion tons of aggregate reserves provide the foundation for a vertically integrated business strategy, with approximately 37 percent of its aggregates in 2023 being used internally to support value-added downstream products (ready-mix concrete and asphalt) and contracting services (heavy-civil construction, laydown, asphalt paving, concrete construction, site development and grading services, bridges, and in some segments the 43 manufacturing of prestressed concrete products).
As an aggregates-led construction materials and contracting services provider in the United States, our 1.2 billion tons of aggregate reserves provide the foundation for a vertically integrated business strategy, with 38 Index approximately 37 percent of our aggregates in 2024 being used internally to support value-added downstream products (ready-mix concrete and asphalt) and contracting services (heavy-civil construction, laydown, asphalt paving, concrete construction, site development and grading services, bridges, and in some segments the manufacturing of prestressed concrete products).
Changes in estimates could have a material effect on Knife River’s results of operations, financial position and cash flows. For the years ended December 31, 2023, 2022 and 2021, Knife River’s total contracting services revenue was $1.3 billion, $1.2 billion and $1.0 billion, respectively. Several factors are evaluated in determining the bid price for contract work.
Changes in estimates could have a material effect on our results of operations, financial position and cash flows. For the years ended December 31, 2024, 2023 and 2022, our total contracting services revenue was $1.4 billion, $1.3 billion and $1.2 billion, respectively. Several factors are evaluated in determining the bid price for contract work.
The accuracy of revenues reported on the audited consolidated financial statements depends on, among other things, management’s estimates of total costs to complete projects because Knife River uses the cost-to-cost measure of progress on contracting services contracts for revenue recognition.
The accuracy of revenues reported on the audited consolidated financial statements depends on, among other things, management’s estimates of total costs to complete projects because we use the cost-to-cost measure of progress on contracting services contracts for revenue recognition.
Risk Factors.” Overview Knife River is a people-first construction materials and contracting services company. The Company provides construction materials and contracting services to build safe roads, bridges and airport runways, and other critical infrastructure needs, that connect people with where they want to go and with the supplies they need.
Risk Factors.” Overview At Knife River, we are a people-first construction materials and contracting services company. We provide construction materials and contracting services to build safe roads, bridges and airport runways, and other critical infrastructure needs that connect people with where they want to go and with the supplies they need.
For more information on factors that may negatively impact Knife River's business, see the section entitled "Item 1A. Risk Factors." Backlog.
For more information on factors that may negatively impact our business, see the section entitled "Item 1A. Risk Factors." Backlog.
For most contracts, the customer contracts with Knife River to provide a significant service of integrating a complex set of tasks and components into a single project. Hence, Knife River’s contracts are generally accounted for as one performance obligation.
For most contracts, the customer contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project. Hence, our contracts are generally accounted for as one performance obligation.
Material short-term cash requirements of the Company include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations. At December 31, 2023, the current portion of asset retirement obligations was $6.9 million and was included in other accrued liabilities on the Consolidated Balance Sheets.
Material short-term cash requirements include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations. At December 31, 2024, the current portion of asset retirement obligations was $7.1 million and was included in other accrued liabilities on the Consolidated Balance Sheets.
Knife River relies on access to capital markets as sources of liquidity for capital requirements not satisfied by cash flows from operations, particularly in the first half of the year due to the seasonal nature of the industry.
We rely on access to capital markets as sources of liquidity for capital requirements not satisfied by cash flows from operations, particularly in the first half of the year due to the seasonal nature of the industry.
While the Company believes the current backlog of work remains firm, prolonged delays in the receipt of critical supplies and materials or continued increases to pricing, among other things, could result in customers seeking to delay or terminate existing or pending agreements and could reduce expected margins. See the section entitled “Item 1A.
While we believe the current backlog of work remains firm, prolonged delays in the receipt of critical supplies and materials, among other things, could result in customers seeking to delay or terminate existing or pending agreements and could reduce expected margins. See the section entitled “Item 1A.
In the event the Company does not comply with the applicable covenants and other conditions, it would be in default on its agreements and alternative sources of funding may need to be pursued and there can be no assurance that, if needed, the Company will be able to secure additional debt or equity financing on terms acceptable to the Company or at all.
In the event that we do not comply with the applicable covenants and other conditions, we would be in default on our agreements and alternative sources of funding may need to be pursued and there can be no assurance that, if needed, we will be able to secure additional debt or equity financing on terms acceptable to us or at all.
Knife River’s ability to fund its cash needs will depend on the ongoing ability to generate cash from operations and obtain debt financing with competitive rates.
Our ability to fund our cash needs will depend on the ongoing ability to generate cash from operations and obtain debt financing with competitive rates.
To determine the proper revenue recognition method for contracts, Knife River evaluates whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation.
To determine the proper revenue recognition method for contracts, we evaluate whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation.
Financing activities Years ended December 31, 2023 2022 2021 (In millions) Issuance of current related-party notes, net $ — $ 208.0 $ — Issuance (repayment) of long-term related-party notes, net 205.3 (207.0) 282.0 Issuance of long-term debt 700.0 — — Repayment of long-term debt (3.6) (.3) (.2) Debt issuance costs (16.7) (.8) — Net transfers to Centennial (850.6) (55.2) (58.0) Net cash provided by (used in) financing activities $ 34.4 $ (55.3) $ 223.8 The increase in cash flows provided by financing activities from 2023 to 2022 was largely related to the changes in debt as a result of the Separation, which included the issuance of senior notes, term loans and a revolving credit facility, and a transfer of the majority of the proceeds to Centennial.
Financing activities Years ended December 31, 2024 2023 2022 (In millions) Issuance of current related-party notes, net $ — $ — $ 208.0 Issuance (repayment) of long-term related-party notes, net — 205.3 (207.0) Issuance of long-term debt — 700.0 — Repayment of long-term debt (7.0) (3.6) (.3) Debt issuance costs — (16.7) (.8) Tax withholding on stock-based compensation (1.7) — — Net transfers to Centennial — (850.6) (55.2) Net cash provided by (used in) financing activities $ (8.7) $ 34.4 $ (55.3) The increase in cash flows used in financing activities from 2024 to 2023 was largely related to changes in our debt structure in 2023 as a result of the Separation, which included the issuance of senior notes, term loans, and a revolving credit facility and a transfer of the majority of the proceeds to Centennial.
For more information and reconciliations to the nearest GAAP measures, see the section entitled “Non-GAAP Financial Measures.” The following tables summarize operating results for the Company for the years ended December 31, 2023, 2022 and 2021.
For more information and reconciliations to the nearest GAAP measures, see the section entitled “Non-GAAP Financial Measures.” 42 Index The following tables summarize our operating results for the years ended December 31, 2024, 2023 and 2022.
The Company operates in the following states: • Pacific: Alaska, California and Hawaii • Northwest: Oregon and Washington • Mountain: Idaho, Montana and Wyoming • Central: Iowa, Minnesota, North Dakota, South Dakota and Texas • Energy Services: California, Iowa, Nebraska, South Dakota, Texas and Wyoming The following table presents a summary of products and services provided, as well as modes of transporting those products: Products and Services Modes of Transportation Aggregates Asphalt Ready- Mix Concrete Construction Services Precast/ Prestressed Concrete Liquid Asphalt Cement Heavy Equipment Trucking Rail Barge Pacific X X X X X X X X X X Northwest X X X X X X X X X Mountain X X X X X X Central X X X X X X X X Energy Services X X X Basis of Presentation On May 31, 2023, the Company became a stand-alone publicly traded company.
We provide various products and services and operate a variety of facility types, including aggregate quarries and mines, ready-mix concrete plants, asphalt plants and distribution facilities in the following states: • Pacific: Alaska, California and Hawaii • Northwest: Oregon and Washington • Mountain: Idaho, Montana and Wyoming • Central: Iowa, Minnesota, North Dakota, South Dakota and Texas • Energy Services: California, Iowa, Nebraska, Oregon, South Dakota, Texas, Washington and Wyoming The following table presents a summary of products and services provided, as well as modes of transporting those products: Products and Services Modes of Transportation Aggregates Asphalt Ready- Mix Concrete Construction Services Precast/ Prestressed Concrete Liquid Asphalt Cement Heavy Equipment Trucking Rail Barge Pacific X X X X X X X X X X Northwest X X X X X X X X X Mountain X X X X X X Central X X X X X X X X Energy Services X X X Basis of Presentation On May 31, 2023, we became a stand-alone publicly traded company.
Material long-term cash requirements of the Company include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations. At December 31, 2023, the Company had total liabilities of $41.8 million related to asset retirement obligations that are excluded from the table above.
Our material long-term cash requirements include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations. At December 31, 2024, we had total liabilities of $59.4 million related to asset retirement obligations that are excluded from the table above.
Therefore, this change in asset values will be reflected in future expenses of the plans beginning in 2024. The funded status of the plans did not change significantly with the increase in assets because the liabilities increased as well due to the decrease in the discount rate.
Therefore, this change in asset values will be reflected in future expenses of the plans beginning in 2025. The funded status of the plans did not change significantly with the gains on the assets because the liabilities decreased as well due to the increase in the discount rate.
These non-GAAP financial measures are calculated the same for both the segment and consolidated metrics and should not be considered as alternatives to, or more meaningful than, GAAP financial measures such as net income, net income margin and net cash provided by (used in) operating activities and are intended to be helpful supplemental financial measures for investors’ understanding of Knife River’s operating performance.
These non-GAAP financial measures are calculated the same for both the segment and consolidated metrics and should not be considered as alternatives to, or more meaningful than, GAAP financial measures such as net income and net income margin and are intended to be helpful supplemental financial measures for investors’ understanding of our operating performance.
Knife River estimates the amount of revenue to be recognized on variable consideration using one of the two prescribed estimation methods, the expected value method or the most likely amount method, depending on which method best predicts the most likely amount of consideration Knife River expects to be entitled to or expects to incur.
We estimate the amount of revenue to be recognized on variable consideration using one of the two prescribed estimation methods, the expected value method or the most likely amount method, depending on which method best predicts the most likely amount of consideration we expect to be entitled to or expect to incur.
The fair value of each reporting unit is determined using a weighted combination of income and market approaches. Knife River believes that the estimates and assumptions used in its impairment assessments are reasonable and based on available market information. Knife River uses a discounted cash flow methodology for its income approach.
The fair value of each reporting unit is determined using a weighted combination of income and market approaches. We believe the estimates and assumptions used in our impairment assessments are reasonable and based on available market information. A discounted cash flow methodology is used for our income approach.
In addition, Knife River adds a reasonable control premium when calculating the fair value utilizing the peer multiples, which is estimated as the premium that would be received in a sale in an orderly transaction between market participants. Knife River uses significant judgment in estimating its five-year forecast.
In addition, we add a reasonable control premium when calculating the fair value utilizing the peer multiples, which is estimated as the premium that would be received in a sale in an orderly transaction between market participants. Significant judgment is used in estimating our five-year forecast.
Various assumptions are used in calculating the benefit expense (income) and liability (asset) related to the pension plans. Actuarial assumptions include assumptions about the discount rate and expected return on plan assets. For 2023, the Company assumed a discount rate of 4.83 percent and long-term rate of return on its qualified defined pension plan assets of 6.50 percent.
Various assumptions are used in calculating the benefit expense (income) and liability (asset) related to the pension plans. Actuarial assumptions include assumptions about the discount rate and expected return on plan assets. For 2024, we assumed a discount rate of 5.4 percent and long-term rate of return on our qualified defined pension plan assets of 6.0 percent.
EBITDA and EBITDA margin are non-GAAP financial measures. For more information and reconciliations to the nearest GAAP measures, see the section entitled "Non-GAAP Financial Measures." 47 Comparison for the Years Ended December 31, 2023, 2022 and 2021.
For more information and reconciliations to the nearest GAAP measures, see the section entitled "Non-GAAP Financial Measures." Comparison for the Years Ended December 31, 2024, 2023 and 2022.
The Company believes it has sufficient liquid assets, cash flows from operations and borrowing capacity to meet its financial commitments, debt obligations and anticipated capital expenditures for at least the next 12 months. Given the seasonality of its business, the Company typically experiences significant fluctuations in working capital needs and balances throughout the year.
We believe we have sufficient liquid assets, cash flows from operations and borrowing capacity to meet our financial commitments, debt obligations and anticipated capital expenditures for at least the next 12 months. Given the seasonality of our business, we typically experience significant fluctuations in working capital needs and balances throughout the year.
In order to borrow under the debt instruments, the Company must be in compliance with the applicable covenants and certain other conditions, all of which the Company, as applicable, was in compliance at December 31, 2023.
In order to borrow under the debt instruments, we must be in compliance with the applicable covenants and certain other conditions, all of which we are in compliance at December 31, 2024.
Knife River considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations.
We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations.
Partially offsetting the increases were lower sales volumes across all product lines of $22.2 million, due in large part to the timing of impact projects in 2023 and decreased demand for asphalt paving and residential work.
Partially offsetting the increases were lower sales volumes across all product lines of $22.2 million, due in large part to the timing of impact projects in 2023 and decreased demand for asphalt paving and residential work. We saw an increase in EBITDA of $17.2 million and EBITDA margin of 90 basis points in 2023.
Knife River provides its products and services to both public and private markets, with public markets tending to be more stable across economic cycles, which helps offset the cyclical nature of the private markets.
We provide our products and services to both public and private markets, with public markets tending to be more stable across economic cycles, which helps offset the cyclical nature of the private markets.
Working capital requirements generally increase in the first half of the year as the Company builds up inventory and focuses on preparing equipment and facilities and other start-up costs for its construction season. Working capital levels then typically decrease as the construction season winds down and the Company collects on receivables.
Working capital requirements generally increase in the first half of the year as we build up inventory and focus on preparing equipment and facilities and other start-up costs for our construction season. Working capital levels then typically decrease as the construction season winds down and we collect on receivables.
On May 31, 2023, Knife River entered into a senior secured credit agreement consisting of a $275.0 million term loan and a $350.0 million revolving credit facility, each with a SOFR-based interest rate and a maturity date of May 31, 2028.
On May 31, 2023, we entered into a senior secured credit agreement consisting of a $275.0 million term loan and a $350.0 million revolving credit facility, each with a SOFR-based interest rate and a maturity date of May 31, 2028. Outstanding letters of credit reduce the amount available under the revolving credit agreement.
Years ended December 31, 2023 2022 2021 2023 vs 2022 % change 2022 vs 2021 % change (In millions) Revenue $ 2,830.3 $ 2,534.7 $ 2,228.9 12 % 14 % Cost of revenue 2,291.4 2,173.8 1,881.9 5 % 16 % Gross profit 538.9 360.9 347.0 49 % 4 % Selling, general and administrative expenses 242.5 166.6 155.9 46 % 7 % Operating income 296.4 194.3 191.1 53 % 2 % Interest expense 58.1 30.1 19.2 93 % 57 % Other (expense) income 7.0 (5.4) 1.3 230 % (515) % Income before income taxes 245.3 158.8 173.2 54 % (8) % Income taxes 62.4 42.6 43.4 46 % (2) % Net income $ 182.9 $ 116.2 $ 129.8 57 % (10) % EBITDA* $ 422.0 $ 306.7 $ 293.4 38 % 5 % Adjusted EBITDA* $ 432.4 $ 313.4 $ 294.7 38 % 6 % __________________ * EBITDA and Adjusted EBITDA are non-GAAP financial measures.
Years ended December 31, 2024 2023 2022 2024 vs 2023 % change 2023 vs 2022 % change (In millions) Revenue $ 2,899.0 $ 2,830.3 $ 2,534.7 2 % 12 % Cost of revenue 2,329.2 2,291.4 2,173.8 2 % 5 % Gross profit 569.8 538.9 360.9 6 % 49 % Selling, general and administrative expenses 253.6 242.5 166.6 5 % 46 % Operating income 316.2 296.4 194.3 7 % 53 % Interest expense 55.2 58.1 30.1 (5) % 93 % Other (expense) income 10.0 7.0 (5.4) (43) % 230 % Income before income taxes 271.0 245.3 158.8 10 % 54 % Income taxes 69.3 62.4 42.6 11 % 46 % Net income $ 201.7 $ 182.9 $ 116.2 10 % 57 % EBITDA* $ 454.3 $ 422.0 $ 306.7 8 % 38 % Adjusted EBITDA* $ 463.0 $ 432.4 $ 313.4 7 % 38 % __________________ * EBITDA and Adjusted EBITDA are non-GAAP financial measures.
Wyoming also experienced wetter weather conditions in 2023 which negatively impacted both ready-mix concrete and asphalt sales volumes, partially contributing to a $7.3 million decrease to revenue. Gross Profit and Gross Margin Gross profit improved $31.6 million and gross margin improved 290 basis points.
Wyoming also experienced wetter weather conditions in 2023 which negatively impacted both ready-mix concrete and asphalt sales volumes, partially contributing to a $7.3 million decrease to revenue. We saw an increase in EBITDA of $30.6 million and EBITDA margin of 290 basis points in 2023.
In addition, the test is performed on an interim basis whenever events or circumstances indicate that the carrying amount of goodwill may not be recoverable.
Goodwill We perform our goodwill impairment testing annually in the fourth quarter. In addition, the test is performed on an interim basis whenever events or circumstances indicate that the carrying amount of goodwill may not be recoverable.
Knife River also champions a positive workplace culture by focusing on safety, training, inclusion, compensation and work-life balance. Knife River is one of the leading providers of crushed stone and sand and gravel in the United States and operates through six operating segments across 14 states: Pacific, Northwest, Mountain, North Central, South and Energy Services.
We also champion a positive workplace culture by focusing on safety, training, compensation and work-life balance. We are one of the leading providers of crushed stone and sand and gravel in the United States and, as of December 31, 2024, operated through six operating segments across 14 states: Pacific, Northwest, Mountain, North Central, South and Energy Services.
Decreased discount rates for 2023 compared to 2022 resulted in actuarial losses, offset in part by higher than expected asset sale gains. Differences between actuarial assumptions and actual plan results are deferred and amortized into expense when the accumulated differences exceed 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets.
Increased discount rates for 2024 compared to 2023 resulted in actuarial gains. Differences between actuarial assumptions and actual plan results are deferred and amortized into expense when the accumulated differences exceed 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets.
Long-Lived Assets Excluding Goodwill Long-lived assets, which include aggregate reserves and related assets, represent 50 percent of Knife River’s total assets as of December 31, 2023. Knife River reviews the carrying values of its long-lived assets when events or changes in circumstances indicate that such carrying values may not be recoverable.
Long-Lived Assets Excluding Goodwill Long-lived assets, which include aggregate reserves and related assets, represent 55 percent of our total assets as of December 31, 2024. We review the carrying values of our long-lived assets when events or changes in circumstances indicate that such carrying values may not be recoverable.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changePrior to the Separation, Centennial would from time to time utilize interest rate swap agreements to manage a portion of the Company's interest rate risk. The Company may take advantage of such agreements in the future to minimize such risk. For additional information on the 69 Company's long-term debt, see Item 8 - Notes 7 and 8.
Biggest changeWe may take advantage of interest rate swap agreements in the future to minimize our interest rate risk. For additional information on our long-term debt, see Item 8 - Notes 8 and 9.
The Company uses fixed and variable rate long-term debt to partially finance capital expenditures, including acquisitions, and mandatory debt retirements. These debt agreements expose the Company to market risk related to changes in interest rates. The Company manages this risk by attempting to take advantage of favorable market conditions when timing the placement of long-term financing.
We use fixed and variable rate long-term debt to partially finance capital expenditures, including acquisitions, and mandatory debt retirements. These debt agreements expose us to market risk related to changes in interest rates. We manage this risk by attempting to take advantage of favorable market conditions when timing the placement of long-term financing.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to certain market risks arising from transactions that are entered into in the normal course of business. The Company has policies and procedures to assist in controlling these market risks and from time to time has utilized derivatives to manage a portion of its risk.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are exposed to certain market risks arising from transactions that are entered into in the normal course of business. We have policies and procedures to assist in controlling these market risks and from time to time have utilized derivatives to manage a portion of our risk.
As of December 31, 2023, the rate in effect was 7.24 percent, therefore, a hypothetical increase of 1.00 percent to the interest rate at December 31, 2023 would have increased the all-in rate to 8.24 percent, the effect of which would increase the Company’s interest expense by $2.7 million over the next 12 months based on the balances outstanding for these borrowings as of December 31, 2023.
As of December 31, 2024, the rate in effect was 6.18 percent, therefore, a hypothetical increase of 1.00 percent to the interest rate at December 31, 2024, would have increased the all-in rate to 7.18 percent, the effect of which would increase our interest expense by $2.6 million over the next 12 months based on the balances outstanding for these borrowings as of December 31, 2024.
Accordingly, a hypothetical 10 percent increase or decrease would have increased or decreased, respectively, the Company’s operating results over the next 12 months by $43.2 million based on the costs associated with diesel fuel, liquid asphalt and cement for the year ended December 31, 2023. 70
Accordingly, a hypothetical 10 percent increase or decrease would have increased or decreased, respectively, our operating results over the next 12 months by $39.5 million based on the costs associated with diesel fuel, liquid asphalt and cement for the year ended December 31, 2024. 62 Index
While the Company uses price increases, escalation clauses in construction services contracts, fuel surcharges and purchase commitments to mitigate the impacts of higher costs, these measures may not be sufficient to offset these increased costs. For the year ended December 31, 2023, the Company’s costs associated with diesel fuel, liquid asphalt and cement were $432.1 million.
While we generally use price increases, escalation clauses in construction services contracts, fuel surcharges and purchase commitments to mitigate the impacts of higher costs, these measures may not be sufficient to offset these increased costs. For the year ended December 31, 2024, our costs associated with diesel fuel, liquid asphalt and cement were $394.7 million.
At December 31, 2023 and 2022, the Company had no outstanding interest rate hedges. Commodity price risk Knife River is subject to commodity price risk with respect to price changes in diesel fuel, liquid asphalt and cement.
At December 31, 2024 and 2023, we had no outstanding interest rate hedges. 61 Index Commodity price risk We are subject to commodity price risk with respect to price changes in diesel fuel, liquid asphalt and cement.
Interest rate risk As of December 31, 2023, the Company had $271.6 million in term loans outstanding which bear interest at a variable rate.
Interest rate risk As of December 31, 2024, we had $264.7 million in term loans outstanding which bear interest at a variable rate.

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