Knife River Corporation

08/04/2026 | Press release | Distributed by Public on 08/04/2026 15:29

Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words "anticipates," "estimates," "expects," "intends," "plans," "predicts" and similar expressions, and include statements concerning plans, projections, objectives, goals, strategies, future events or performance, and underlying assumptions (many of which are based, in turn, upon further assumptions) and other statements that are other than statements of historical facts. From time to time, Knife River Corporation ("Knife River," the "Company," "we," "our," or "us") may publish or otherwise make available forward-looking statements of this nature, including statements related to strategic initiatives aimed at generating long-term profitable growth, shareholder value creation, expected long-term goals, expected backlog margin, acquisitions, financing plans, expected federal and state funding for infrastructure or other proposed strategies.
Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. Our expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Nonetheless, our expectations, beliefs or projections may not be achieved or accomplished and changes in such assumptions and factors could cause actual future results to differ materially.
Any forward-looking statement contained in this document speaks only as of the date on which the statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law. New factors emerge from time to time, and it is not possible for management to predict all the factors, nor can it assess the effect of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements, whether written or oral and whether made by or on behalf of our Company, are expressly qualified by the risk factors and cautionary statements reported in the section entitled "Item 1A. Risk Factors" in Part I of the Company's 2025 Annual Report on Form 10-K (Annual Report) and subsequent filings with the United States Securities and Exchange Commission (SEC).
Company 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, airport runways and other critical infrastructure needs that connect people with where they want to go and with the supplies they need. 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 operate through four reportable segments across 15 states: West, Mountain, Central and Energy Services. The geographic segments primarily provide aggregates, asphalt and ready-mix concrete, as well as related contracting services such as heavy-civil construction, asphalt paving, concrete construction, site development and grading. The Energy Services segment produces and supplies liquid asphalt and related services, primarily for use in asphalt road construction.
As an aggregates-based construction materials and contracting services company, we have 1.3 billion tons of aggregate reserves supporting our vertically integrated business strategy. About 35 percent of these aggregates are used internally to support value-added downstream products like ready-mix concrete and asphalt, as well as contracting services such as heavy-civil construction, asphalt paving, concrete construction, bridges and in some segments the manufacturing of prestressed concrete products. Our strategically located aggregate sites and associated asphalt and ready-mix plants near mid-sized, higher-growth markets offer transportation advantages, enabling competitive pricing and higher margins. We serve both public and private markets, with public projects making up most of our work and providing stability through economic cycles, which helps offset the cyclical nature of the private markets.
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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:
•West: Alaska, California, Hawaii, Oregon and Washington
•Mountain: Idaho, Montana, Utah 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
Precast/
Ready-Mix Construction Prestressed Liquid Heavy
Aggregates Asphalt Concrete Services Concrete Asphalt Cement Equipment Trucking Rail Barge
West X X X X X X X X X X
Mountain X X X X X X X
Central X X X X X X X X
Energy Services X X X
Market Conditions and Outlook
Federal and state funding remains strong for a majority of our markets with approximately 80 percent of our historical contracting services revenue each year coming from public-sector projects, enhancing stability through market cycles. For more information on factors that may negatively impact our business, see the section entitled "Item 1A. Risk Factors" in Part I of the Company's 2025 Annual Report.
Backlog. Our contracting services backlog was as follows:
June 30, 2026 June 30, 2025 December 31, 2025
(In millions)
West $ 235.7 $ 282.4 $ 203.6
Mountain 449.3 483.4 395.7
Central 531.0 487.6 432.8
$ 1,216.0 $ 1,253.4 $ 1,032.1
Expected margins on backlog at June 30, 2026, were slightly lower compared to the expected margins on backlog at June 30, 2025. Of the $1.2 billion of backlog at June 30, 2026, we expect to complete approximately $984 million in the 12 months following June 30, 2026. Approximately 85 percent of our backlog at June 30, 2026, is related to publicly funded projects, including street and highway construction projects, which are driven primarily by public works projects for state departments of transportation (DOT). Further, there continues to be infrastructure development, as discussed in the following section on Public Funding, which is expected to continue to provide bidding opportunities in our markets.
Period-over-period increases or decreases in backlog may not be indicative of future revenues, margins, net income or earnings before interest, taxes, depreciation, depletion and amortization (EBITDA). See the section entitled "Item 1A. Risk Factors" in Part I of the Company's 2025 Annual Report 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. Currently, states have continued moving forward with allocating funds from federal programs, such as the Infrastructure Investment and Jobs Act (IIJA), which is authorized to provide $1.2 trillion in funding from 2022 through September 30, 2026. As of May 2026, approximately 38 percent of IIJA formula funding had yet to be spent in our 15 state operating market. While each market is unique, the DOT budgets in most of the states where we operate remain strong. Eleven of our 15 states have record DOT budgets for the 2026 fiscal year, representing a combined 15 percent increase over 2025.
In 2025, the American Society of Civil Engineers published its 2025 Report Card for America's Infrastructure, assigning the United States roads a "D+" grade and estimating that between 2024 and 2033, the country will require more funding than what is currently authorized. It is estimated that a total of $2.2 trillion in funding will be needed for our roadway systems to reach a state of good repair during that time period.
Profitability. The management team consistently monitors profit margins and has adopted a proactive approach in supporting long-term profitability objectives and creating shareholder value. In 2023, we launched our EDGE initiatives and established specialized
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teams to deliver training, support higher-margin bidding opportunities across regions and pursue targeted growth opportunities. Process Improvement Teams ("PIT Crews") have focused on improving operational efficiencies, reducing production costs across our materials product lines and optimizing product quality. In addition, we are rolling out new technologies designed to increase productivity and provide enhanced, real-time visibility into daily operations.
We are subject to downward pressure on our margins due to competitive market dynamics and fluctuations in the prices of raw materials, including diesel fuel, gasoline, natural gas, liquid asphalt, cement and steel. We are experiencing competitive market dynamics, primarily within contracting services, which is resulting in projects being more competitively bid and in turn compressing our contracting services margins.
To counteract the effects of raw material price fluctuations, we have utilized various mitigating strategies, such as dynamic pricing; energy escalation clauses in our contracting services contracts; securing materials in advance including the prepurchasing of diesel; fuel surcharges and pursuing other cost-saving measures. Energy escalation adjustments within contracting services are often subject to a recognition delay of a few months and are not reflected immediately in our results of operations. During the first half of 2026, our teams were successful with these mitigating controls, however, our results of operations were still impacted, largely as a result of the timing of contract billings. We will continue to monitor the effects these economic conditions have on our business.
Pursuing our strategic growth goals through targeted acquisitions is expected to drive an increase in selling, general and administrative expenses on a year-over-year basis. In the initial year of an acquisition, additional payroll-related costs associated with the acquired company, third-party consulting commitments, and newly recognized intangible assets contributing to elevated amortization expense are all anticipated. Upon complete integration of the acquired entities, operational synergies with our existing business can be realized, generating cost efficiencies.
Growth. Our management team continues to evaluate growth opportunities, both through organic growth and acquisitions they believe will generate shareholder value. Our business development team is focused on our growth with materials-led businesses in mid-size, higher growth markets, and has several targets at various stages of completion in our acquisition pipeline.
During the first half of 2026, we finalized three aggregates-based acquisitions within the Mountain region and one in the West region. Two of these transactions broadens our presence in Montana, enhancing our ability to supply aggregates and ready-mix concrete to the expanding market in western Montana. The acquisition in the West expands our footprint in the Southwest Oregon markets. Additionally, the acquisition of Morgan Asphalt marked our entry into the Utah market. This acquisition included aggregate crushing and production operations with reserves projected to last over 30 years, an asphalt manufacturing facility and a range of contracting services such as asphalt paving, excavation and grading, serving both public and private sector customers.
In addition, we continue to invest in multiple organic projects, including an aggregates expansion project in South Dakota and ready-mix operations in both Minnesota and Texas. The aggregate expansion project will increase our production capabilities in the Sioux Falls market and is scheduled to be operational in 2027. In Minnesota, we are redeploying a portable ready-mix plant to an existing aggregate site north of the Twin Cities metro area. The addition of this plant expands our ability to serve the central Minnesota market and is anticipated to be operational in the third quarter of 2026. In Texas, we purchased a ready-mix site in April 2026 located in the Conroe, Texas area that is complementary to locations included in the TexCrete acquisition. Site improvements are currently underway and a new plant is expected to be located on this site by the end of 2026. Further, we completed greenfielded ready-mix operations located in the Twin Falls market, which became fully operational in the second quarter of 2026.
Seasonality. Our operations can be impacted by weather especially due to a large portion of our markets being geographically located in the northern part of the country. Generally, construction activity increases in the second quarter and continues throughout the year, contributing to both materials and contracting services volumes. However, an unusually wet spring or longer winter can lead to reduced construction activity, which would also impact our aggregate and asphalt product lines.
Due to the seasonality of our operations, we see more pre-production activity and site improvements in the first quarter and early second quarter as we prepare for the upcoming construction season. These pre-production activities will provide a benefit to us the remainder of the year as volumes and sales increase. Some of this pre-production work includes stripping and harvesting at our aggregate sites as well as repairing and mobilizing equipment.
Workforce. As a people-first company, we continually take steps to address safety, recruitment and retention of our employees. Safety is one of Knife River's core values. The fundamental tenets of our "I Choose Safety" program are that safety is a choice and that all injuries are preventable. Our team is committed to work safely every day and we continue to advance our culture of safety through engagement and empowering our team members to take action and make meaningful changes that improve their well-being and the well-being of others.
Our training and development team, based out of the Knife River Training Center, is comprised of professional instructors, who bring a wealth of knowledge and experience to the learning environment. This dedicated team has a long-standing tradition of
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delivering quality training programs that are both comprehensive and practical. Their expertise helps ensure that our team members receive the highest standard of education and skill development.
Consolidated Overview
Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 % Change 2026 2025 % Change
(In millions)
Revenue $ 938.6 $ 833.8 13 % $ 1,348.7 $ 1,187.2 14 %
Cost of revenue 775.8 676.5 15 % 1,188.7 1,039.6 14 %
Gross profit 162.8 157.3 3 % 160.0 147.6 8 %
Selling, general and administrative expenses 81.7 69.2 18 % 165.1 142.2 16 %
Operating income (loss) 81.1 88.1 (8) % (5.1) 5.4 (194) %
Interest expense 24.5 22.3 10 % 45.3 37.6 20 %
Other income 3.3 2.2 50 % 2.6 6.8 (62) %
Income (loss) before income taxes 59.9 68.0 (12) % (47.8) (25.4) (88) %
Income tax expense (benefit) 16.0 17.4 (8) % (12.5) (7.3) (71) %
Net income (loss) $ 43.9 $ 50.6 (13) % $ (35.3) $ (18.1) (95) %
EBITDA* $ 140.2 $ 139.7 - % $ 104.8 $ 98.2 7 %
Adjusted EBITDA* $ 139.7 $ 140.8 (1) % $ 107.9 $ 102.8 5 %
*EBITDA and Adjusted EBITDA are non-GAAP financial measures. For more information and reconciliations to the nearest GAAP measures, see the section entitled "Non-GAAP Financial Measures."
Revenue includes revenue from the sale of construction materials and contracting services. Revenue for construction materials is recognized at a point in time when delivery of the products has taken place. Contracting services revenue is recognized over time using an input method based on the cost-to-cost measure of progress on a project.
Cost of revenue includes all material, labor and overhead costs incurred in the production process for our products and services. Cost of revenue also includes depreciation, depletion and amortization attributable to the assets used in the production process.
Gross profit includes revenue less cost of revenue, as defined above, and is the difference between revenue and the cost of making a product or providing a service, before deducting selling, general and administrative expenses, income taxes and interest expense.
Selling, general and administrative expenses include the costs for estimating, bidding and business development, as well as costs related to corporate and administrative functions. Selling expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities. Other general and administrative expenses include outside services; healthcare; information technology; depreciation and amortization; training, travel and entertainment; office supplies; allowance for expected credit losses; gains or losses on the sale of assets; and other miscellaneous expenses.
Other income includes net periodic benefit costs for our benefit plan expenses, other than service costs; interest income; realized and unrealized gains and losses on investments for our nonqualified benefit plans; earnings or losses on joint venture arrangements; gains on bargain purchases; and other miscellaneous income or expenses.
Income tax expense (benefit) consists of corporate income taxes related to our net income (loss). Income taxes are presented at the corporate services level and not at the individual segments. 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 (loss) before income tax.
The discussion that follows focuses on the key financial measures we use to evaluate the performance of our business, which include revenue, EBITDA and EBITDA margin. EBITDA and EBITDA margin are non-GAAP financial measures used to measure profitability by our management and chief operating decision maker. For more information and reconciliations to the nearest GAAP measures, see the section entitled "Non-GAAP Financial Measures."
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The following tables summarize our operating results.
Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 2026 2025
Dollars
Margin
Dollars
Margin
Dollars Margin Dollars Margin
(In millions)
Revenues by segment:
West $ 290.4 $ 317.4 $ 502.2 $ 525.7
Mountain 236.5 176.1 317.7 242.1
Central 325.6 255.2 426.8 323.1
Energy Services 103.0 97.4 123.5 111.3
Total segment revenues 955.5 846.1 1,370.2 1,202.2
Corporate Services and Eliminations (16.9) (12.3) (21.5) (15.0)
Consolidated revenues $ 938.6 $ 833.8 $ 1,348.7 $ 1,187.2
EBITDA (a):
West $ 49.2 17.0 % $ 60.7 19.1 % $ 71.4 14.2% $ 85.7 16.3%
Mountain 31.0 13.1 % 30.9 17.6 % 22.8 7.2% 14.6 6.0%
Central 53.6 16.5 % 44.4 17.4 % 26.8 6.3% 20.1 6.2%
Energy Services 19.8 19.2 % 17.1 17.5 % 15.2 12.3% 9.3 8.3%
Total segment EBITDA (a) 153.6 16.1 % 153.1 18.1 % 136.2 9.9% 129.7 10.8%
Corporate Services and Eliminations (b)
(13.4) N.M. (13.4) N.M. (31.4) N.M. (31.5) N.M.
Consolidated EBITDA (a)
$ 140.2 14.9 % $ 139.7 16.8 % $ 104.8 7.8% $ 98.2 8.3%
(a)EBITDA, total segment EBITDA, EBITDA margin and total segment EBITDA margin are non-GAAP financial measures. For more information and a reconciliation to the nearest GAAP measure, see the section entitled "Non-GAAP Financial Measures."
(b)N.M. - not meaningful
Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 2026 2025
Sales (thousands):
Aggregates (tons) 10,031 8,826 14,909 12,693
Ready-mix concrete (cubic yards) 1,193 1,041 1,917 1,585
Asphalt (tons) 2,030 1,643 2,313 1,842
Average selling price:*
Aggregates (per ton) $ 19.41 $ 18.80 $ 20.00 $ 19.49
Ready-mix concrete (per cubic yard) $ 198.45 $ 197.91 $ 198.95 $ 198.37
Asphalt (per ton) $ 65.77 $ 67.45 $ 66.79 $ 68.92
*The average selling price includes freight and delivery and other revenues.
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Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 2026 2025
Dollars
Margin
Dollars
Margin
Dollars Margin Dollars Margin
(In millions)
Revenues by product line:
Aggregates $ 194.7 $ 165.9 $ 298.2 $ 247.4
Ready-mix concrete 236.7 206.0 381.3 314.4
Asphalt 133.5 110.8 154.5 127.0
Liquid asphalt
91.4 85.9 109.5 98.1
Other* 83.7 79.6 130.3 123.0
Contracting services 406.5 340.2 554.3 480.2
Internal sales (207.9) (154.6) (279.4) (202.9)
Total revenues $ 938.6 $ 833.8 $ 1,348.7 $ 1,187.2
Gross profit by product line:
Aggregates $ 38.8 19.9 % $ 34.6 20.8 % $ 35.1 11.8% $ 28.6 11.6%
Ready-mix concrete 39.1 16.5 % 32.4 15.7 % 54.6 14.3% 41.1 13.1%
Asphalt 20.9 15.7 % 16.8 15.2 % 16.0 10.3% 11.2 8.8%
Liquid asphalt
16.5 18.1 % 14.9 17.4 % 13.7 12.6% 10.7 10.9%
Other* 16.6 19.8 % 17.8 22.3 % 1.8 1.4% 4.5 3.7%
Contracting services 30.9 7.6 % 40.8 12.0 % 38.8 7.0% 51.5 10.7%
Total gross profit $ 162.8 17.3% $ 157.3 18.9% $ 160.0 11.9% $ 147.6 12.4%
*Other includes cement, merchandise, fabric and spreading, and other products and services that individually are not considered to be a core line of business.
Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025
Revenue
Revenue increased $104.8 million or 13 percent, led by double-digit volume increases for ready-mix, asphalt and aggregates, and an increase in contracting services. The increase in contracting services was largely the result of more asphalt paving work, which also drove an increase in asphalt and aggregates. Acquisitions this past year further contributed to the increases across all product lines. We also continue to focus on our pricing, which contributed another $15.3 million in the quarter.
Gross Profit
Gross profit improved $5.5 million, largely due to the additional product line volumes noted above and price increases on liquid asphalt, aggregates and cement. Partially offsetting the increase was lower margins on contracting services work due to the timing and type of projects, as well as competitive market dynamics. Aggregates gross profit benefited from fuel surcharges and higher delivery revenues, however, these are dilutive to our aggregates gross margin because fuel surcharges are billed at cost and there is minimal margin on delivery costs.
Selling, general and administrative expenses
As a percentage of revenues, selling, general and administrative expense was 8.7 percent in the second quarter of 2026 compared to 8.3 percent in 2025. For the second quarter of 2026, we experienced higher costs, largely related to the absence of gains on asset sales recognized in the second quarter of 2025 of $10.3 million. Also contributing was the additional costs associated with companies acquired, including additional payroll and payroll-related costs, which was offset slightly by $1.7 million lower purchase accounting-related intangible asset amortization.
Interest expense
Interest expense increased $2.2 million due primarily to higher average debt balances with the additional $400 million of borrowings under the Term Loan B amended in May of 2026, offset in part by lower average interest rates.
Other income
Other income increased $1.1 million, due to increased investment returns on our nonqualified defined benefit plans.
Income tax expense
Income tax expense decreased $1.4 million, corresponding with lower income before income taxes, offset slightly by a higher effective tax rate. Our effective tax rate for the second quarters of 2026 and 2025 was 26.7 percent and 25.5 percent, respectively. The increase in the effective tax rate is primarily due to a decrease in tax benefits.
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Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025
Revenue
Revenue increased $161.5 million, led by double-digit volume increases for ready-mix, aggregates and asphalt, and an increase in contracting services. These increases were the direct result of favorable weather allowing for an early start to work in certain segments and increased asphalt paving projects, as well as our acquisition activity. Pricing also positively contributed to the year.
Gross profit
Gross profit improved $12.4 million, largely due to the additional product line volumes noted above and price increases on aggregates, cement and liquid asphalt. Partially offsetting the increase was lower margins on contracting services work due to the timing and type of projects, as well as competitive market dynamics.
Selling, general and administrative expenses
As a percentage of revenues, selling, general and administrative expense was 12.2 percent in the first half of 2026 compared to 12.0 percent in 2025. For the first half of 2026, we experienced higher costs, largely related to lower gains on asset sales of $10.2 million. Also, contributing was the additional costs associated with the companies acquired, including additional payroll and payroll-related costs and $400,000 of additional purchase accounting-related intangible asset amortization.
Interest expense
Interest expense increased $7.7 million due primarily to higher average debt balances with the additional $400 million of borrowings under the Term Loan B amended in May of 2026 and borrowings under our revolving credit facility, offset in part by lower average interest rates.
Other income
Other income decreased $4.2 million, largely due to the absence of a one-time gain of $3.5 million on the bargain purchase of an aggregate quarry operation in the West segment in the prior year. In addition, we had a decrease in interest income of $1.7 million as a result of less cash on hand, which was mostly offset by increased investment returns on our nonqualified defined benefit plans.
Income tax benefit
Income tax benefit increased $5.2 million, corresponding with higher loss before income taxes, offset in part by lower effective tax rate. Our effective tax rate for the first half of 2026 and 2025 was 26.1 percent and 28.7 percent, respectively. The decrease in the effective tax rate is due to non-deductible expenses for tax purposes in the first half of 2025.
Business Segment Financial and Operating Data
A discussion of key financial data from our business segments follows. We provide segment-level information by revenue, EBITDA and EBITDA margin, as these are the measures of profitability used by our chief operating decision maker to assess operational results.
Results of Operations - West
Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 % Change 2026 2025 % Change
(In millions)
Revenue $ 290.4 $ 317.4 (9) % $ 502.2 $ 525.7 (4)%
EBITDA $ 49.2 $ 60.7 (19) % $ 71.4 $ 85.7 (17)%
EBITDA margin 17.0 % 19.1 % 14.2 % 16.3 %
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Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 2026 2025
(In millions)
Revenues:
Aggregates $ 80.0 $ 74.8 $ 144.7 $ 131.1
Ready-mix concrete 88.2 90.0 162.2 159.7
Asphalt 39.1 38.5 51.9 47.4
Other* 49.3 49.3 83.9 83.7
Contracting services 97.8 121.2 165.6 188.7
Internal sales (64.0) (56.4) (106.1) (84.9)
$ 290.4 $ 317.4 $ 502.2 $ 525.7
*Other includes cement, merchandise, transportation services and other products that individually are not considered to be a core line of business for the segment.
Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025
Revenue decreased $27.0 million for the quarter, largely due to less available public-agency work in the segment resulting in lower contracting services revenue in Oregon, as well as 12% lower ready-mix volumes in Oregon due to less available private work. Also, weather-related delays in Alaska resulted in a late start to the construction season, reducing their material product sales volumes. Partially offsetting these decreases were increased pricing of $14.3 million across the segment on aggregates, ready-mix and cement, and contributions from acquisitions.
EBITDA decreased 19 percent for the quarter, driven primarily by lower revenues, as previously mentioned, and lower margin contracting services work related to competitive market dynamics as a result of less available public-agency work in Oregon, as well as the type of work. Gains on asset sales were also lower by $1.7 million in 2026. Increased pricing, as previously mentioned, offset some of the decreases in the quarter.
Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025
Revenue decreased $23.5 million, largely due to less available public-agency work resulting in lower contracting services revenue in Oregon and California. In addition, Hawaii had lower material sales volumes reducing revenue by $12.5 million, mostly due to significant flooding conditions in the first quarter, and Alaska's material sales volumes were down $8.4 million in revenue due to unfavorable weather resulting in a late start to the construction season. Partially offsetting these decreases were increased pricing of $19.7 million across the segment on ready-mix, cement and aggregates, and contributions from acquisitions.
EBITDA decreased 17 percent year-over-year, primarily a result of lower revenues, as previously mentioned, as well as lower margin contracting services work related to competitive market dynamics due to less public-agency work and the type of work. Results were further impacted by the absence of a $3.5 million one-time gain recognized in the first quarter of 2025 due to an acquisition being a bargain purchase and lower gains on asset sales of $2.5 million in 2026. Increased pricing, as previously mentioned, offset some of the decreases to EBITDA.
Results of Operations - Mountain
Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 % Change 2026 2025 % Change
(In millions)
Revenue $ 236.5 $ 176.1 34 % $ 317.7 $ 242.1 31%
EBITDA $ 31.0 $ 30.9 - % $ 22.8 $ 14.6 56%
EBITDA margin 13.1 % 17.6 % 7.2 % 6.0 %
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Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 2026 2025
(In millions)
Revenues:
Aggregates $ 36.2 $ 29.3 $ 49.8 $ 37.4
Ready-mix concrete 42.7 35.7 65.3 48.8
Asphalt 42.6 28.8 45.4 29.3
Other* 1.2 - 1.2 -
Contracting services 163.4 110.7 214.2 158.7
Internal sales (49.6) (28.4) (58.2) (32.1)
$ 236.5 $ 176.1 $ 317.7 $ 242.1
*Other includes merchandise and other products that individually are not considered to be a core line of business for the segment.
Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025
Revenue increased $60.4 million in the quarter, largely resulting from increased contracting services, led by Idaho with $29.3 million as a result of project timing and strong momentum from an early start to the season, and contributions from the three companies acquired in the first quarter of 2026. In addition, our legacy operations realized volume and pricing improvements across all product lines.
EBITDA improved $100,000 for the quarter, largely due to higher revenues, as previously mentioned, and production cost efficiencies on our asphalt and ready-mix product lines. Mostly offsetting the increase was lower margin contracting services work due to the type of work and the impact of increased competition, as well as timing of project performance gains. Further, selling, general and administrative costs were $3.5 million higher, primarily related to additional overhead costs from the three companies acquired in the first quarter of 2026, as well as increased payroll-related costs.
Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025
Revenue increased $75.6 million, mostly driven by favorable weather allowing for early season work, which positively impacted all product lines in Idaho, as well as contributions from the three companies acquired in the first quarter of 2026. In addition, higher pricing for ready-mix, and aggregates contributed $6.4 million of additional revenue to our legacy operations.
EBITDA improved 56 percent year-over-year, largely due to higher revenues, as previously mentioned, as well as production cost efficiencies across all product lines. Slightly offsetting was $5.8 million higher selling, general and administrative costs mostly related to additional overhead costs from the three acquired companies during the first quarter and increased payroll-related costs.
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Results of Operations - Central
Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 % Change 2026 2025 % Change
(In millions)
Revenue $ 325.6 $ 255.2 28 % $ 426.8 $ 323.1 32%
EBITDA $ 53.6 $ 44.4 21 % $ 26.8 $ 20.1 33%
EBITDA margin 16.5 % 17.4 % 6.3 % 6.2 %
Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 2026 2025
(In millions)
Revenues:
Aggregates $ 78.5 $ 61.8 $ 103.7 $ 78.9
Ready-mix concrete 105.8 80.3 153.8 105.9
Asphalt 51.8 43.5 57.2 50.3
Other* 13.7 12.6 17.7 15.0
Contracting services 145.3 108.3 174.5 132.8
Internal sales (69.5) (51.3) (80.1) (59.8)
$ 325.6 $ 255.2 $ 426.8 $ 323.1
*Other includes merchandise and other products that individually are not considered to be a core line of business for the segment.
Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025
Revenue increased $70.4 million for the quarter, primarily driven by contracting services as a result of large projects in North Dakota and more available public-agency work in both North Dakota and Minnesota, which also contributed to an increase in asphalt volumes. In addition, aggregate volumes contributed $18.5 million of additional revenue in the quarter, largely related to supplying data center projects in North Dakota and Texas, as well as more available work, as previously mentioned. Further, contributions from the December 2025 acquisition of Texcrete led to ready-mix volumes that were more than twice as high in Texas as the prior year. Slightly offsetting the increases was decreased consolidated average pricing due to product mix and pricing differentials as a result of contributions from different locations as compared to the prior year.
EBITDA improved $9.2 million, largely the result of higher revenues, as previously mentioned, as well as production efficiencies and lower input material costs. Margins on contracting services work also improved in the quarter largely due to favorable project execution. Partially offsetting the increase was the absence of gains on asset sales of $7.9 million from the prior year, primarily in Texas.
Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025
Revenue increased $103.7 million, primarily driven by contracting services revenue as a result of more available public-agency work in North Dakota and Minnesota, which also contributed to an increase in asphalt volumes. In addition, contributions from the acquisition of Texcrete in December 2025 led to ready-mix volumes that were more than twice as high in Texas as the prior year. Aggregate volumes also contributed $24.1 million of additional revenue, largely related to supplying data center projects in North Dakota and Texas, as well as more available work, as previously mentioned. Slightly offsetting the increases was decreased consolidated average pricing due to product mix and pricing differentials as a result of contributions from different locations as compared to the prior year.
EBITDA improved $6.7 million, largely the result of higher revenues, as previously mentioned, as well as production efficiencies across the product lines. Margins on contracting services work also improved slightly in the year largely due to favorable project execution. Partially offsetting the increase was higher selling, general and administrative costs of $13.1 million, largely from additional overhead costs from companies acquired and increased payroll-related costs, and the absence of gains on asset sales of $8.0 million from the prior year, primarily in Texas.
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Results of Operations - Energy Services
Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 % Change 2026 2025 % Change
(In millions)
Revenue $ 103.0 $ 97.4 6 % $ 123.5 $ 111.3 11%
EBITDA $ 19.8 $ 17.1 16 % $ 15.2 $ 9.3 64%
EBITDA margin 19.2 % 17.5 % 12.3 % 8.3 %
Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 2026 2025
(In millions)
Revenues:
Liquid Asphalt
$ 91.4 $ 85.9 $ 109.5 $ 98.1
Other* 15.6 14.2 19.7 17.2
Internal sales (4.0) (2.7) (5.7) (4.0)
$ 103.0 $ 97.4 $ 123.5 $ 111.3
*Other includes fabric and spreading, burner fuels, merchandise and other products that individually are not considered to be a core line of business for the segment.
Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025
Revenue increased $5.6 million, primarily driven by higher pricing and sales volumes due to improved market opportunities in California. Partially offsetting were lower volumes in other markets resulting from competitive market dynamics.
EBITDA improved $2.7 million, largely as a result of increased revenue, as mentioned previously, as well as lower operating costs due to the absence of boiler repairs and railcar maintenance incurred in the prior year.
Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025
Revenue increased $12.2 million, primarily driven by higher sales volumes in California due to improved pricing and market conditions, which contributed $14.7 million of additional revenue. This increase was slightly offset by lower volumes in other markets resulting from competitive market dynamics.
EBITDA improved $5.9 million, largely as a result of increased revenue, as mentioned previously, as well as lower operating costs due to the absence of boiler repairs and railcar maintenance incurred in the prior year.
Corporate Services and Eliminations
Corporate Services includes all expenses related to the corporate functions of our company, as well as insurance activity at our captive insurer; interest expense on a majority of our long-term debt; interest income; and unrealized gains or losses on investments for nonqualified benefit plans.
Three Months Ended June 30, 2026, Compared to Three Months Ended June 30, 2025
During the second quarter of 2026, Corporate Services contributed negative EBITDA of $13.4 million, which was comparable to the prior year, as a result of flat selling, general and administrative costs year-over-year. Increased investment returns on our nonqualified defined benefit plans and lower due diligence and integration costs related to corporate development and completed acquisitions were offset by increased salaries and burden.
Six Months Ended June 30, 2026, Compared to Six Months Ended June 30, 2025
During the first half of 2026, Corporate Services contributed negative EBITDA of $31.4 million, which was comparable to the prior year, as a result of flat selling, general and administrative costs year-over-year. Lower due diligence and integration costs related to corporate development and completed acquisitions were offset by increased salaries and burden.
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Liquidity and Capital Resources
At June 30, 2026, we had unrestricted cash and cash equivalents of $40.7 million, working capital of $794.4 million and borrowing capacity of $387.2 million on our revolving credit facility, net of our outstanding letters of credit. Working capital is calculated as current assets less current liabilities. As of June 30, 2026, we had sufficient liquid assets and borrowing capacity to meet our financial commitments, debt obligations and anticipated capital expenditures for at least the next 12 months.
On May 15, 2026, we entered into a second amendment to our secured credit agreement, increasing our Term Loan B by an aggregate principal amount of $400.0 million and reducing the interest rate margin by 0.25%. After the second amendment, the aggregate principal amount of the Term Loan B outstanding was $895.0 million.
Given the seasonality of our business, we typically experience significant fluctuations in working capital needs and balances throughout the year. Working capital requirements generally increase in the first half of the year as we build up inventory and focus on preparing our equipment, facilities and crews for our construction season. Working capital levels then decrease as the construction season winds down and we collect on receivables.
The ability to fund our cash needs will depend on the ongoing ability to generate cash from operations and obtain debt financing with competitive rates. 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 business. Our principal uses of cash in the future will be to fund our operations, working capital needs, capital expenditures, repayment of debt and strategic business development transactions.
Capital expenditures
We are committed to disciplined capital allocation, including reinvesting in our company to maintain fixed assets, improve operations and grow our business.
We currently estimate total 2026 capital expenditures for maintenance and improvement to be between $170 million and $235 million. For the six months ended June 30, 2026, we spent $90.1 million, largely on the replacement of construction equipment and plant improvements.
Additionally, for the six months ended June 30, 2026, we spent $244.5 million on growth initiatives, which comprised of $184.4 million on acquisitions and $60.1 million on aggregate expansion and greenfield projects. For the remainder of 2026, we estimate to spend $76.4 million on organic growth projects. Capital expenditures for future acquisitions and new organic growth opportunities would be incremental to our outlined capital program. It is anticipated that capital expenditures for the remainder of 2026 will be funded by various sources, including cash flows from operations and debt.
Cash flows
Six Months Ended
June 30,
2026 2025
(In millions)
Net cash provided by (used in)
Operating activities $ (133.6) $ (167.8)
Investing activities (332.6) (701.9)
Financing activities 444.8 666.3
Decrease in cash, cash equivalents and restricted cash (21.4) (203.4)
Cash, cash equivalents and restricted cash -- beginning of year 123.4 281.1
Cash, cash equivalents and restricted cash -- end of period $ 102.0 $ 77.7
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Operating activities
Six Months Ended
June 30,
2026 2025 Variance
(In millions)
Components of net cash used in operating activities:
Net loss $ (35.3) $ (18.1) $ (17.2)
Adjustments to reconcile net loss to net cash used in operating activities
112.0 79.9 32.1
Changes in current assets and liabilities, net of acquisitions:
Receivables (233.2) (177.4) (55.8)
Inventories (66.2) (59.9) (6.3)
Other current assets (22.5) (18.1) (4.4)
Accounts payable 87.6 36.2 51.4
Other current liabilities 16.7 (15.6) 32.3
Pension and postretirement benefit plan contributions (0.3) (0.3) -
Other noncurrent charges 7.6 5.5 2.1
Net cash used in operating activities $ (133.6) $ (167.8) $ 34.2
Cash used in operating activities at June 30, 2026, improved $34.2 million, largely related to lower working capital needs, offset by a higher net loss in the period. Cash used by working capital components totaled $217.6 million for the six months ended June 30, 2026, compared to $234.8 million for the six months ended June 30, 2025. This reduction in cash used in 2026 was primarily the result of decreased incentive payments in 2026 and the timing of interest payments, primarily associated with the Term Loan B that was amended May 15, 2026. Partially offsetting these decreases was an increase in our taxes receivable due to the increase in net loss and the timing of taxes paid.
Investing activities
Six Months Ended
June 30,
2026 2025 Variance
(In millions)
Capital expenditures $ (150.2) $ (228.6) $ 78.4
Acquisitions, net of cash acquired (184.4) (501.9) 317.5
Net proceeds from sale or disposition of property and other 4.8 31.4 (26.6)
Investments (2.8) (2.8) -
Net cash used in investing activities $ (332.6) $ (701.9) $ 369.3
The decrease in cash used in investing activities for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, was primarily the result of decreased cash used for acquisition activity and aggregate reserve replacements, partially offset by the absence of prior year proceeds from the sale of ready-mix operations in the Central segment.
Financing activities
Six Months Ended
June 30,
2026 2025 Variance
(In millions)
Issuance of long-term debt $ 461.0 $ 683.0 $ (222.0)
Debt issuance costs (3.9) (11.1) 7.2
Repayment of long-term debt (6.9) (3.0) (3.9)
Tax withholding on stock-based compensation
(5.4) (2.6) (2.8)
Net cash provided by financing activities $ 444.8 $ 666.3 $ (221.5)
Cash flows provided by financing activities for the six months ended June 30, 2026 decreased compared to the six months ended June 30, 2025. In the second quarter of 2026, we entered into a second amendment to our secured credit agreement, increasing our Term Loan B by an aggregate principal amount of $400 million, while in 2025 we issued $500 million against our Term Loan B. Further, in 2026 we borrowed less against our revolving credit facility.
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Material cash requirements
There were no material changes in the contractual obligations from those reported in the 2025 Annual Report other than as set forth below. For more information on our contractual obligations on long-term debt, operating leases and purchase commitments, see Part II, Item 8 in the 2025 Annual Report.
Our material short-term and long-term cash requirements include repayment of third-party long-term debt and related interest payments, payments on operating lease agreements, payments of obligations on purchase commitments and asset retirement obligations.
At June 30, 2026, our long-term debt reflected an increase of approximately $454.1 million from the balance at December 31, 2025. This increase is primarily due to the second amendment to our secured credit facility increasing our Term Loan B facility by $400.0 million and outstanding borrowings of $61.0 million under our revolving credit facility. The funds from the Term Loan B were used to repay borrowings under the revolving credit agreement, working capital needs and general corporate purposes.
At June 30, 2026, our total estimated interest payments over the life of our debt reflected an increase of approximately $90.3 million from the total estimated interest payments at December 31, 2025. This increase is primarily due to the amendment to our Term Loan B facility and borrowings under our revolving credit facility, as previously mentioned.
At June 30, 2026, our purchase commitments reflected an increase of approximately 14 percent from the balance at December 31, 2025. This increase is primarily due to the seasonality of work and preparing for our peak construction season. We expect purchase commitments to continue to decrease throughout the remainder of 2026 as obligations continue to be satisfied during the construction season.
Off-Balance Sheet Arrangements
Surety Bonds and Letters of Credit
In the normal course of business, we have surety bonds and letters of credit related to contracts for contracting services, reclamation obligations and insurance policies of our subsidiaries. In the event a subsidiary of Knife River does not fulfill a bonded obligation, we would be responsible to the surety bond company or for a draw on our letter of credit for completion of the contract or obligation. A large portion of the surety bonds are expected to expire within the next 12 months; however, we will likely continue to enter into surety bonds for our subsidiaries in the future. At June 30, 2026, approximately $1.1 billion of surety bonds and $51.9 million of letters of credit were outstanding, of which the total of letters of credit balance reduced availability under our revolving credit facility. These balances were not reflected on the Consolidated Balance Sheet.
Other than the surety bonds and letters of credit above, we did not have any off-balance sheet arrangements as of June 30, 2026.
Defined benefit pension plans
We have frozen noncontributory qualified defined benefit pension plans for certain employees. Various assumptions are used in calculating the benefit expense (income) and liability (asset) related to these plans. Costs of providing these benefits are dependent upon assumptions of future conditions and bear the risk of changing.
There were no material changes to our qualified noncontributory defined benefit pension plans from those reported in the 2025 Annual Report. We do not expect to make any pension plan contributions in 2026 as the plan is fully funded. For more information, see Part II, Item 8 in the 2025 Annual Report.
Non-GAAP Financial Measures
The Business Segment Financial and Operating Data includes financial information prepared in accordance with GAAP, as well as EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin, as well as total segment measures, as applicable, that are considered non-GAAP measures of financial performance. These non-GAAP financial measures are not measures of financial performance under GAAP. The items excluded from these non-GAAP financial measures are significant components in understanding and assessing financial performance. Therefore, these non-GAAP financial measures should not be considered substitutes for the applicable GAAP metric.
EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are most directly comparable to the corresponding GAAP measures of net income (loss) and net income (loss) margin. We believe these non-GAAP financial measures, in addition to corresponding GAAP measures, are useful to investors by providing meaningful information about operational efficiency compared to our peers by excluding the impacts of differences in tax jurisdictions and structures, debt levels and capital investment. We believe Adjusted EBITDA and Adjusted EBITDA margin are useful performance measures because they allow for an effective evaluation of our operating performance by excluding unrealized gains and losses on benefit plan investments, stock-based compensation, and the impact of selling acquired inventory after markup to fair value as part of acquisition accounting as they are considered non-cash and not part of our core operations. We believe EBITDA and Adjusted EBITDA assist rating agencies and investors in comparing operating performance across operating periods on a consistent basis by excluding items management does
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not believe are indicative of our operating performance. Additionally, EBITDA and Adjusted EBITDA are important financial metrics for debt investors who utilize debt to EBITDA and debt to Adjusted EBITDA ratios. We believe these non-GAAP financial measures, including total segment measures, as applicable, are useful performance measures because they provide clarity as to our operational results. Our management uses these non-GAAP financial measures in conjunction with GAAP results when evaluating our operating results internally and calculating employee incentive compensation.
EBITDA is calculated by adding back income taxes, interest expense (net of interest income) and depreciation, depletion and amortization expense to net income (loss). EBITDA margin is calculated by dividing EBITDA by revenues. Adjusted EBITDA is calculated by adding back unrealized gains and losses on benefit plan investments, stock-based compensation and the impact of selling acquired inventory after markup to fair value as part of acquisition accounting to EBITDA. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues. These non-GAAP financial measures are calculated the same for both the total segment and consolidated metrics and should not be considered as alternatives to, or more meaningful than, GAAP financial measures such as net income or net income margin, and are intended to be helpful supplemental financial measures for investors' understanding of our operating performance. Our non-GAAP financial measures are not standardized; therefore, it may not be possible to compare these financial measures with other companies' EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin measures having the same or similar names.
The following information reconciles segment and consolidated net income (loss) to EBITDA and Adjusted EBITDA and provides the calculation of EBITDA margin and Adjusted EBITDA margin. Interest expense, net, is net of interest income that is included in other income on the Consolidated Statements of Operations.
Three Months Ended Six Months Ended
June 30, June 30,
2026 2025 2026 2025
(In millions)
Net income (loss) $ 43.9 $ 50.6 $ (35.3) $ (18.1)
Depreciation, depletion and amortization 56.4 50.2 108.5 88.9
Interest expense, net 23.9 21.5 44.1 34.7
Income taxes 16.0 17.4 (12.5) (7.3)
EBITDA $ 140.2 $ 139.7 $ 104.8 $ 98.2
Unrealized (gains) losses on benefit plan investments (3.2) (1.8) (2.4) (1.1)
Stock-based compensation expense 2.6 2.9 5.4 5.7
Impact of selling acquired inventory after markup to fair value as part of acquisition accounting
0.1 - 0.1 -
Adjusted EBITDA $ 139.7 $ 140.8 $ 107.9 $ 102.8
Revenue $ 938.6 $ 833.8 $ 1,348.7 $ 1,187.2
Net income (loss) margin 4.7 % 6.1 % (2.6) % (1.5) %
EBITDA margin 14.9 % 16.8 % 7.8 % 8.3 %
Adjusted EBITDA margin 14.9 % 16.9 % 8.0 % 8.7 %
New Accounting Standards
For information regarding new accounting standards, see Note 3, which is incorporated by reference.
Critical Accounting Estimates
Our critical accounting estimates include revenue recognized using the cost-to-cost measure of progress for contracts; fair values of acquired assets and liabilities assumed under the acquisition method of accounting; impairment testing of goodwill; and impairment testing of long-lived assets excluding goodwill. There were no material changes in our critical accounting estimates from those that were previously reported in our 2025 Annual Report.
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Knife River Corporation published this content on August 04, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on August 04, 2026 at 21:29 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]