Knife River Corporation

02/20/2026 | Press release | Distributed by Public on 02/20/2026 07:01

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

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. 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. 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. 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. 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 14 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 provider in the United States, our 1.3 billion tons of aggregate reserves provide the foundation for a vertically integrated business strategy, with approximately 35 percent of our aggregates in 2025 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). Our aggregate sites and associated asphalt and ready-mix plants are primarily in strategic locations near mid-sized, higher-growth markets, providing us with a transportation advantage for our materials that supports competitive pricing and increased margins. 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.
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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 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
West X 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. 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. The financial statements for all periods are presented on a consolidated basis in conformity with GAAP. All intercompany balances and transactions between the businesses comprising Knife River have been eliminated in the accompanying audited consolidated financial statements. For additional information related to the basis of presentation, see Item 8 - Note 1.
In January 2025, we made a change to our organizational structure to better align with our business strategy. We reorganized our business segments to reflect changes in the way our chief operating decision maker evaluates performance, makes operating decisions and allocates resources. Our former Pacific and Northwest operating segments were combined to form the new West operating segment. Our former North Central and South operating segments were combined to form the new Central operating segment. The reorganization resulted in four operating segments: West, Mountain, Central and Energy Services, each of which is also a reportable segment. Each segment's performance is evaluated based on segment results without allocating corporate expenses, which include corporate costs associated with accounting, legal, treasury, business development, information technology, human resources, and other corporate expenses that support the operating segments. Prior periods have been recast to conform to the current reportable segment presentation.
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Market Conditions and Outlook
Our markets remain resilient, and construction activity remains generally strong. Approximately 80 percent of our contracting services revenue each year comes 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."
Backlog.Contracting services backlog was as follows as of December 31:
2025 2024 2023
(In millions)
West $ 203.6 $ 230.2 $ 247.4
Mountain 395.7 339.9 256.7
Central 432.8 175.5 158.1
Total $ 1,032.1 $ 745.6 $ 662.2
Backlog as of December 31, 2025, was 38 percent percent higher than the prior period with lower expected margins. Of the $1.0 billion of backlog at December 31, 2025, we expect to complete an estimated $768.8 million, or 75 percent, during 2026. Approximately 89 percent of our backlog as of December 31, 2025, relates to publicly funded projects, including street and highway construction projects, which are driven primarily by public works projects for state departments of transportation. Further, there continues to be infrastructure development across our segments, which is expected to provide bidding opportunities in our markets throughout 2026.
Period-over-period increases or decreases in backlog may not be indicative of future revenues, margins, net income or EBITDA. For a discussion of EBITDA and EBITDA margin, see "Non-GAAP Financial Measures" later in this section. 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. 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. States have moved forward with allocating funds from federal programs, such as the IIJA, which is authorized to provide $1.2 trillion in funding from 2022 through 2026. As of November 2025, approximately 46 percent of IIJA formula funding had yet to be distributed in our 14-state operating market.
Additionally, DOT budgets in most of the states where we operate remain strong, with ten of our 14 states having record DOT budgets going into the 2026 fiscal year. The North Dakota DOT's estimated bid lettings for their 2026 construction program is between $745 million and $810 million, which is a significant increase over their 2025 bid lettings of $345 million. We have already seen our contracting services backlog increase in North Dakota, year-over-year, and expect more work yet to bid. Oregon is the one Knife River state that has not finalized its budget for the current biennium, however, their budget has been legislatively approved and is expected to be approximately $6 billion, just short of the record funding from the previous biennium. The Oregon DOT expects its 2026 asphalt paving volumes will be comparable to 2025. We continue to monitor legislative activity in all of our states as they address their infrastructure needs.
In early 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. Our management team continually monitors our margins and has been proactive in applying strategies to increase margins to support our long-term profitability goals and to create shareholder value. In 2023, we began implementing EDGE initiatives and established teams to deliver training, assist with targeting higher-margin bidding opportunities across the regions and pursue growth opportunities, as well as identifying ways to
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increase efficiencies and reduce costs. The Materials Process Improvement Team (Materials PIT Crew) has rolled out new technologies and training programs to boost productivity and control costs across the product lines and provide more real-time visibility into daily operations.
Under the current tariff environment, we did not experience a material direct impact in 2025. We have clauses in most of our quotes that allows for us to pass-through increased costs associated with tariffs to our customers, and to date, we have been substantially successful with passing those costs on. We continue to closely monitor the effects and changes to these announcements.
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. In 2025, we successfully completed the acquisition and integration of five companies expanding our footprint within existing markets, which was an investment of $611.7 million. As a result of these acquisitions, we added approximately 30 years of aggregate reserves, 29 ready-mix plants, 5 asphalt plants and a fleet of equipment and vehicles, as well as skilled construction, materials production and delivery professionals. We expect the additions made to our company in 2025 will provide meaningful volume and margin growth in future periods, as well as provide synergies across the segments. For more information on our acquisitions, see Item 8 - Note 3.
In addition, we continue to invest in multiple organic projects, including an aggregates expansion project in South Dakota that will increase our production capabilities in the Sioux Falls market. This project is scheduled to be operational in 2027. In the first quarter of 2025, we completed construction of a processing plant to manufacture polymer-modified asphalt (PMA) and increased our liquid asphalt storage capacity at our South Dakota terminal, which has allowed us to more cost effectively supply this market. In Twin Falls, Idaho, we are greenfielding new ready-mix operations, which allows us to build a local team in this market, and are expected to be fully operational in the first quarter of 2026.
Consolidated Overview
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, interest expense and other expenses.
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; information technology; depreciation and amortization; training, travel and entertainment; office supplies; healthcare; allowance for expected credit losses; gains or losses on the sale of assets; expenses for the transition services agreement with MDU Resources in 2023; and other miscellaneous expenses.
Other income (expense) includes net periodic benefit costs for our benefit plan expenses, other than service costs; interest income; realized and unrealized gains and losses on our nonqualified benefit plan investments; earnings or losses on joint venture arrangements; and other miscellaneous income or expenses, including income related to the transition services agreement with MDU Resources in 2023.
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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 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.
The discussion that follows focuses on the key financial measures we use to evaluate the performance of our business at the consolidated level, which include revenue, EBITDA and EBITDA margin. EBITDA and EBITDA margin are non-GAAP financial measures as these are measures of profitability used by management and our chief operating decision maker to assess operating results. 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, 2025, 2024 and 2023.
Years ended December 31, 2025 2024 2023
2025 vs 2024
% change
2024 vs 2023
% change
(In millions)
Revenue
$ 3,146.0 $ 2,899.0 $ 2,830.3 9 % 2 %
Cost of revenue
2,568.7 2,329.2 2,291.4 10 % 2 %
Gross profit
577.3 569.8 538.9 1 % 6 %
Selling, general and administrative expenses
291.5 253.6 242.5 15 % 5 %
Operating income
285.8 316.2 296.4 (10) % 7 %
Interest expense
81.9 55.2 58.1 48 % (5) %
Other income
9.3 10.0 7.0 7 % 43 %
Income before income taxes
213.2 271.0 245.3 (21) % 10 %
Income taxes
56.1 69.3 62.4 (19) % 11 %
Net income
$ 157.1 $ 201.7 $ 182.9 (22) % 10 %
EBITDA*
$ 484.3 $ 454.3 $ 422.0 7 % 8 %
Adjusted EBITDA*
$ 496.5 $ 463.0 $ 432.4 7 % 7 %
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*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."
The following tables summarize our operating results for the years ended December 31, 2025, 2024 and 2023.
Revenues
EBITDA1
EBITDA margin1
2025 2024 2023 2025 2024 2023 2025 2024 2023
(In millions)
West
$ 1,210.1 $ 1,185.3 $ 1,128.3 $ 234.1 $ 209.7 $ 177.3 19.3 % 17.7 % 15.7 %
Mountain 644.0 663.1 634.0 99.6 113.5 103.2 15.5 % 17.1 % 16.3 %
Central 1,004.8 818.1 825.0 159.6 131.6 116.6 15.9 % 16.1 % 14.1 %
Energy Services 338.0 275.7 292.3 54.9 60.2 78.1 16.2 % 21.8 % 26.7 %
Segment totals
3,196.9 2,942.2 2,879.6 548.2 515.0 475.2 17.1 % 17.5 % 16.5 %
Corporate Services and Eliminations (50.9) (43.2) (49.3) (63.9) (60.7) (53.2) N.M. N.M. N.M.
Total $ 3,146.0 $ 2,899.0 $ 2,830.3 $ 484.3 $ 454.3 $ 422.0 15.4 % 15.7 % 14.9 %
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1EBITDA 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."
2N.M: not meaningful
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Revenues
Gross profit
Gross margin
2025 2024 2023 2025 2024 2023 2025 2024 2023
(In millions)
Aggregates $ 617.1 $ 556.1 $ 547.9 $ 114.1 $ 114.3 $ 109.7 18.5 % 20.6 % 20.0 %
Ready-mix concrete 779.4 655.5 653.9 133.6 106.0 101.2 17.1 % 16.2 % 15.5 %
Asphalt 421.0 441.5 452.4 65.4 68.2 61.5 15.5 % 15.4 % 13.6 %
Liquid asphalt
296.0 238.9 253.2 49.5 51.5 69.7 16.7 % 21.6 % 27.5 %
Other* 279.8 265.8 249.0 60.4 53.3 47.9 21.6 % 20.1 % 19.2 %
Contracting services 1,383.9 1,358.2 1,307.3 154.3 176.5 148.9 11.2 % 13.0 % 11.4 %
Internal sales (631.2) (617.0) (633.4) - - - - % - % - %
Total $ 3,146.0 $ 2,899.0 $ 2,830.3 $ 577.3 $ 569.8 $ 538.9 18.4 % 19.7 % 19.0 %
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*Other includes cement, merchandise, fabric, spreading and other products and services that individually are not considered to be a major line of business.
2025 2024 2023
Sales (thousands):
Aggregates (tons) 32,494 31,832 33,637
Ready-mix concrete (cubic yards) 3,913 3,484 3,837
Asphalt (tons) 6,334 6,454 6,760
Average selling price:
Aggregates (per ton)* $ 18.99 $ 17.47 $ 16.29
Ready-mix concrete (per cubic yard) $ 199.17 $ 188.11 $ 170.42
Asphalt (per ton) $ 66.47 $ 68.40 $ 66.92
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*The average selling price includes freight and delivery and other revenues.
2025 Compared to 2024
Revenue
Revenue increased $247.0 million, largely driven by contributions of acquired companies, as well as price increases of mid-single digits on aggregates, ready-mix concrete and cement across our legacy operations. Partially offsetting these increases were decreased asphalt sales volumes and pricing, primarily due to decreased asphalt paving work.
Gross Profit and Gross Margin
Gross profit improved $7.5 million while gross margin decreased 130 basis points. The improved gross profit was a result of contributions of acquired companies and higher gross profit on ready-mix concrete and cement across our legacy operations as pricing increases outpaced costs. Contracting services margins decreased 180 basis points as we saw lower margins on work due to the type of work and liquid asphalt continued to see a reduction in gross margin as a result of reduced market pricing. Further driving down gross margin was the impact of selling acquired inventory after markup to fair value as part of acquisition accounting of $3.4 million to the aggregates product line and $295,000 to the liquid asphalt product line.
Selling, General and Administrative Expenses
As a percentage of revenues, selling, general and administrative expenses was 9.3% in 2025, compared to 8.7% in 2024. This increase was largely driven by increased costs from recently acquired companies, including $12.9 million of purchase accounting-related intangible asset amortization, and $4.4 million higher acquisition-
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related transaction costs. These increases were offset in part by higher asset sale gains of $12.5 million on the sale of non-strategic assets and equipment throughout the company.
Interest Expense
Interest expense increased $26.7 million due primarily to higher average debt balances with the issuance of a new $500 million Term Loan B in March of 2025 and borrowings under our revolving credit facility during the year, offset by slightly lower average interest rates.
Other Income
Other income decreased $700,000, primarily due to a $4.3 million decrease in interest income on lower cash balances, offset by a one-time gain of $3.5 million on the bargain purchase of an aggregate quarry operation in the West segment.
Income Tax Expense
Income tax expense decreased $13.2 million corresponding with lower income before income taxes. Our effective tax rate for 2025 was 26.3 percent, compared to 25.6 percent in 2024. The increase in our effective tax rate for the current year was largely due to increased non-deductible compensation expenses and a mix of state income taxes. For a reconciliation of the federal tax rate to our effective tax rate, see Item 8 - Note 16.
2024 Compared to 2023
Revenue
Revenue improved $68.7 million as pricing increased during the year as a result of our pricing initiatives across all product lines, except liquid asphalt. In 2024, we saw price increases of low-double-digits for ready-mix concrete, high-single-digits for aggregates and low-single digits for asphalt. Our contracting services revenue also increased, as we benefited from additional public-agency work and timing of projects. Partially offsetting these increases were decreased ready-mix, aggregate and asphalt sales volumes, primarily due to EDGE-related initiatives of quality over quantity of work, timing of projects and lower demand for private projects. Liquid asphalt revenue decreased due to lower pricing as a result of reduced supply input costs across our market areas.
Gross Profit and Gross Margin
Gross profit improved by $30.9 million while gross margin improved 70 basis points. Contracting services margins increased 160 basis points as we saw an increase in revenues along with improved bid margins and favorable project execution during the year. Also contributing to the improvement was higher margins on asphalt, aggregates and ready-mix concrete as higher sales prices outpaced costs while volumes declined as we continue to choose quality of work over quantity of work. Liquid asphalt continued to see a reduction in gross profit, as a result of lower revenues due to the pricing decrease.
Selling, General and Administrative Expenses
As a percentage of revenues, selling, general and administrative expenses was 8.7% in 2024, compared to 8.6% in 2023.
Interest Expense
Interest expense decreased $2.9 million due primarily to lower average debt balances, offset by higher average interest rates.
Other Income
Other income increased $3.0 million, primarily due to increased interest income on higher cash balances.
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Income Tax Expense
Income tax expense increased $6.9 million corresponding with higher income before income taxes. Our effective tax rate for 2024 was 25.6 percent, compared to 25.5 percent in 2023. For a reconciliation of the federal tax rate to our effective tax rate, see Item 8 - Note 16.
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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 measures of profitability used by management and our chief operating decision maker to assess operating results.
In January 2025, we made a change to our organizational structure to better align with our business strategy. We reorganized our business segments to reflect changes in the way our chief operating decision maker evaluates performance, makes operating decisions and allocates resources. Our former Pacific and Northwest operating segments were combined to form the new West operating segment. Our former North Central and South operating segments were combined to form the new Central operating segment. The reorganization resulted in four operating segments: West, Mountain, Central and Energy Services, each of which is also a reportable segment. Each segment's performance is evaluated based on segment results without allocating corporate expenses, which include corporate costs associated with accounting, legal, treasury, information technology, human resources, and other corporate expenses that support the operating segments. Prior periods presented have been recast to conform to the current reportable segment presentation.
Results of Operations - West
Years ended December 31, 2025 2024 2023
2025 vs 2024
% change
2024 vs 2023
% change
(In millions)
Revenue
$ 1,210.1 $ 1,185.3 $ 1,128.3 2 % 5 %
EBITDA
$ 234.1 $ 209.7 $ 177.3 12 % 18 %
EBITDA margin
19.3 % 17.7 % 15.7 %
2025 2024 2023
(In millions)
Revenues:
Aggregates
$ 296.3 $ 297.1 $ 294.7
Ready-mix concrete
346.7 313.6 305.7
Asphalt
131.8 135.3 135.5
Other*
177.2 167.4 158.5
Contracting services
470.4 466.7 426.7
Internal sales
(212.3) (194.8) (192.8)
$ 1,210.1 $ 1,185.3 $ 1,128.3
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*Other includes merchandise, transportation services and other products that individually are not considered to be a major line of business for the segment.
2025 Compared to 2024
Our revenue increased $24.8 million in 2025, as a result of more available public-agency and private contracting services work as well as increased ready-mix concrete volumes and pricing in our California market compared to prior year. Hawaii experienced increased ready-mix concrete and cement pricing and volumes of $36.4 million driven by increased market demand, while Alaska saw its aggregate and ready-mix concrete volumes increase by $8.3 million due to stronger demand in the private sector. Partially offsetting these increases was decreased volumes throughout most Oregon product lines due to less secured public-agency and private work.
We saw an increase in both EBITDA of $24.4 million and EBITDA margin of 160 basis points. These improvements were primarily driven by higher cement and ready-mix concrete gross profit of $17.5 million due to market demand in Hawaii and Alaska, as well as more available work and favorable project execution in California with a $14.4 million increase in contracting services gross profit. In addition, the segment benefitted from a one-time
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gain of $3.5 million on the bargain purchase of an aggregate quarry operation in the first quarter of 2025 and higher asset sale gains of $3.5 million. Offsetting, was a decrease in Oregon contracting services margin due to less available agency work and less market demand, which also impacted aggregates and ready-mix concrete margins. Higher selling, general and administrative costs, mostly attributed to increased labor-related costs, also reduced EBITDA.
2024 Compared to 2023
Our revenue increased $57.0 million in 2024, largely the result of EDGE-related pricing initiatives on all product lines, which together contributed $76.5 million as well as higher demand for contracting services work primarily driven by large public agency-related construction projects. Partially offsetting the increases were lower aggregate and ready-mix sales volumes due to EDGE-related pricing initiatives and lower demand in the residential and commercial markets.
We saw an increase in EBITDA of $32.4 million and EBITDA margin of 200 basis points in 2024. These improvements resulted from higher contracting services gross profit of $18.3 million due to favorable job execution, efficiencies gained at our Spokane prestress facility and more available public agency work. We also benefited from improved ready-mix concrete margins as a result of increased pricing and favorable project execution in southern Oregon and increased asphalt margins due to lower asphalt oil and variable production costs. In addition, our selling, general and administrative expenses decreased $5.3 million due to the absence of a non-cash asset impairment in 2023 of $5.8 million on certain aggregate sites, as discussed in Item 8 - Note 2; higher gains on the sale of equipment; lower bad debt expenses, offset in part by higher payroll-related costs due to additional staffing.
Results of Operations - Mountain
Years ended December 31, 2025 2024 2023
2025 vs 2024
% change
2024 vs 2023
% change
(In millions)
Revenue
$ 644.0 $ 663.1 $ 634.0 (3) % 5 %
EBITDA
$ 99.6 $ 113.5 $ 103.2 (12) % 10 %
EBITDA margin
15.5 % 17.1 % 16.3 %
2025 2024 2023
(In millions)
Revenues:
Aggregates
$ 95.2 $ 101.8 $ 100.5
Ready-mix concrete
124.6 117.1 120.5
Asphalt
99.0 120.9 112.9
Contracting services
435.7 459.0 433.0
Internal sales
(110.5) (135.7) (132.9)
$ 644.0 $ 663.1 $ 634.0
2025 Compared to 2024
Our revenue decreased $19.1 million in 2025, primarily due to decreased contracting services work in Montana and Wyoming, which also contributed to lower aggregate and asphalt volumes of $12.7 million and $9.2 million, respectively. The decrease was driven by less available asphalt paving work as a result of competitive bid dynamics and the type and location of available DOT projects throughout the region. Partially offsetting this decrease was an increase in aggregate and ready-mix pricing of $13.2 million and higher contracting services revenue of $6.7 million in our Idaho market due to larger DOT projects.
We saw a decrease in EBITDA of $13.9 million and EBITDA margin of 160 basis points in 2025. Our contracting services division experienced lower margins throughout the segment due to less secured work, while
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favorable project execution partially offset this decrease. Lower gross profit on aggregates and asphalt were largely the result of lower volumes due to fewer construction projects and higher repairs and maintenance costs. Partially offsetting the decline was $3.6 million of higher asset sales gains in the year and higher ready-mix concrete gross profit, largely due to increased pricing.
2024 Compared to 2023
Our revenue improved $29.1 million in 2024, primarily from an increase in Idaho public agency construction work and airport work, which drove increases in both contracting services revenue and asphalt volumes. We also benefited from the continued implementation of our EDGE-related pricing initiative throughout all product lines, which contributed $24.6 million in additional revenue. Offsetting these increases were lower ready-mix concrete volumes of $14.4 million due to a decrease in demand for residential and commercial work, as well as lower aggregates sales volumes of $11.0 million, largely due to the timing of wind energy projects and lower internal sales from the lack of large aggregate projects in 2024.
We saw an increase in EBITDA of $10.3 million and EBITDA margin of 80 basis points in 2024. These increases are the result of higher pricing across all product lines from our EDGE-related pricing initiatives outpacing cost increases. Gross profit on contracting services and asphalt also benefited from the increase in public agency construction work and airport work, as previously mentioned. Partially offsetting the increase were lower aggregates and ready-mix concrete volumes of $4.9 million, as previously discussed. In addition, selling, general and administrative expenses increased $3.2 million, largely due the absence of asset sale gains in 2023 and higher payroll-related costs.
Results of Operations - Central
Years ended December 31, 2025 2024 2023
2025 vs 2024
% change
2024 vs 2023
% change
(In millions)
Revenue
$ 1,004.8 $ 818.1 $ 825.0 23 % (1) %
EBITDA
$ 159.6 $ 131.6 $ 116.6 21 % 13 %
EBITDA margin
15.9 % 16.1 % 14.1 %
2025 2024 2023
(In millions)
Revenues:
Aggregates
$ 225.6 $ 157.2 $ 152.7
Ready-mix concrete
308.1 224.8 227.7
Asphalt
190.2 185.3 204.0
Other*
35.2 31.7 28.8
Contracting services
477.8 432.5 447.6
Internal sales
(232.1) (213.4) (235.8)
$ 1,004.8 $ 818.1 $ 825.0
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*Other includes merchandise and other products that individually are not considered to be a major line of business for the segment.
2025 Compared to 2024
Revenue increased $186.7 million in 2025, largely driven by contributions from acquired companies, as well as the impact of our legacy operations price increases in the aggregate product line of $12.5 million and ready-mix product line of $6.5 million. Partially offsetting the increase was 6 percent less contracting services work in our northern states due to unfavorable weather in the second and third quarters and the timing of North Dakota DOT bid lettings, which also caused decreased aggregate volumes.
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We saw an increase in EBITDA of $28.0 million while EBITDA margin decreased 20 basis points in 2025. The EBITDA improvement is largely a result of acquired companies as well as increased asset sales gains of $5.5 million. Offsetting this increase was less contracting services work largely due to unfavorable weather in most parts of the segment and the timing of North Dakota DOT bid lettings. In addition, the impact of selling acquired inventory after markup to fair value as part of acquisition accounting of $3.4 million negatively impacted the aggregate product line.
2024 Compared to 2023
Our revenue decreased $6.9 million in 2024, as a result of lower asphalt and ready-mix concrete volumes and $15.1 million less contracting services revenues, largely due to our EDGE-related initiative of quality of work over quantity of work. We also saw less contracting services work and asphalt sales volumes in our northern states in 2024 related to the timing of projects with more work completed in late 2023 due to favorable weather later in the construction season. Partially offsetting the decrease in volumes was the benefit of higher prices on ready-mix concrete and asphalt of $24.4 million with the continued implementation of EDGE-related pricing initiatives. Overall, our aggregate sales volumes across the segment increased $4.7 million.
We saw an increase in EBITDA of $15.0 million and EBITDA margin of 200 basis points in 2024. These improvements are the result of increased margins across all product lines, largely due to continued EDGE-related pricing initiatives. Our contracting services work contributed an additional $4.9 million of gross profit, largely due to higher margin work, disciplined project bidding and favorable project execution. Offsetting these increases were higher selling, general and administrative expenses of $5.4 million, largely due to additional payroll-related costs of $5.7 million, due in part to additional staffing, and increased professional services fees, offset by higher gains on the sale of non-strategic assets in Texas of $2.3 million.
Results of Operations - Energy Services
Years ended December 31, 2025 2024 2023
2025 vs 2024
% change
2024 vs 2023
% change
(In millions)
Revenue
$ 338.0 $ 275.7 $ 292.3 23 % (6) %
EBITDA
$ 54.9 $ 60.2 $ 78.1 (9) % (23) %
EBITDA margin
16.2 % 21.8 % 26.7 %
2025 2024 2023
(In millions)
Revenues:
Liquid asphalt
$ 296.0 $ 238.9 $ 253.2
Other*
53.5 50.6 49.3
Internal sales
(11.5) (13.8) (10.2)
$ 338.0 $ 275.7 $ 292.3
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*Other includes transportation services, fabric, spreading and other products that individually are not considered to be a major line of business for the segment.
2025 Compared to 2024
Our revenue increased $62.3 million in 2025, largely due to contributions from the acquisition of Albina Asphalt in November 2024. In addition, the new polymer modified asphalt processing plant in South Dakota contributed an additional $15.4 million in revenue. These increases were partially offset by lower volumes in our
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legacy operations due to less carry over work from 2024 as well as lower pricing driven by current liquid asphalt market pricing.
Our EBITDA decreased $5.3 million and EBITDA margin decreased 560 basis points in 2025. The decrease in EBITDA was driven by reduced market pricing mentioned above as well as planned and required maintenance costs of $1.9 million to our railcar fleet, continued tank and equipment repair costs at our terminals and the impact of selling acquired inventory after markup to fair value as part of acquisition accounting for Albina of $295,000. Partially offsetting the decrease was earnings from the addition of Albina Asphalt.
2024 Compared to 2023
Our revenue decreased $16.6 million in 2024, largely due to lower pricing as a result of reduced supply input costs across our market areas. Liquid asphalt sales volumes were up 4 percent, primarily from strong demand in California and Texas, which were partially offset by decreased volumes in the Midwest due to less carry over jobs year-over-year. The acquisition of Albina during the fourth quarter of 2024 also contributed additional liquid asphalt sales volumes.
Our EBITDA decreased $17.9 million and EBITDA margin decreased 490 basis points in 2024. The decrease in EBITDA was driven by reduced market pricing bringing our margins back within a normal range and an increase in operating costs, primarily $1.5 million in plant repairs at our California terminal. Higher selling, general and administrative expenses of $735,000, largely due to higher payroll-related costs with the addition of Albina employees in the fourth quarter of 2024, also reduced EBITDA.
Corporate Services and Eliminations
Corporate Services includes all expenses related to the corporate functions of our company, as well as insurance activity of our captive insurer; interest expense on a majority of our long-term debt; interest income; and unrealized gains and losses on investments for our nonqualified benefit plans.
2025 Compared to 2024
Corporate Services had negative EBITDA of $63.9 million, or $3.2 million less EBITDA in 2025, compared to the prior year. Corporate Services had increased selling, general and administrative expenses of $2.8 million, which was primarily due to higher due diligence and integration costs related to corporate development and completed acquisitions of $4.4 million and increased stock-based compensation expense for the management team and board of directors due to additional participants. In addition, salaries and burden were higher for the year due to additional staff, however, these were mostly offset by lower incentive accruals. We also had a benefit of $3.8 million primarily due to the lack of one-time costs incurred in the prior year consisting of insurance costs related to the Separation and the transition services agreement with MDU Resources.
2024 Compared to 2023
Corporate Services contributed negative EBITDA of $60.7 million, or $7.5 million less EBITDA in 2024, compared to the prior year. Corporate Services had increased selling, general and administrative expenses of $7.0 million. The increase in costs for non-Separation related expenses totaled $7.4 million, which was primarily due to higher due diligence and integration costs related to corporate development and completed acquisitions of $7.5 million and higher information technology costs of $3.4 million. These costs were partially offset by lower payroll-related costs of $2.4 million, largely due to lower bonus accruals, and a reduction in insurance loss reserves at our captive insurer of $2.6 million. As a result of the Separation, we experienced higher recurring costs as a publicly traded company of $6.3 million, including payroll-related costs of $9.5 million, largely due to additional staff and stock-based compensation expenses for the management team and board of directors; information technology costs of $2.8 million; professional services of $1.8 million; and fees of $750,000 primarily related to fees on new debt issued in conjunction with the Separation, partially offset by a reduction in general corporate expenses from MDU Resources of $8.9 million. We also incurred less one-time costs of $6.5 million primarily consisting of insurance costs related to the Separation and the transition services agreement with MDU Resources.
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Liquidity and Capital Resources
At December 31, 2025, we had unrestricted cash and cash equivalents of $73.8 million and working capital of $582.9 million. Working capital is calculated as current assets less current liabilities. We have a centralized cash management model and intend to use cash on hand and third-party credit facilities to fund day-to-day operations. 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. Working capital requirements generally increase in the first half of the year as we build up inventory and focus on preparing equipment and facilities for our construction season. Working capital levels then typically 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. 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 our 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.
Debt Financing Activities
The following table summarizes our outstanding debt facilities at December 31, 2025:
Facility
Facility Limit
Amount Outstanding
Letters of Credit
Expiration Date
(In millions)
Revolving credit agreement1
$ 500.0 $ - $ 23.4 3/7/2030
Term loan A
275.0 259.7 - 3/7/2030
Term loan B
500.0 496.3 - 3/8/2032
Senior notes
425.0 425.0 - 5/1/2031
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1 Outstanding letters of credit reduce the amount available under the revolving credit agreement.
On March 7, 2025, we entered into an amendment to our senior secured credit agreement to increase our revolving credit facility from $350 million to $500 million and extend the maturity to March 7, 2030, refinance our existing $275 million Term Loan A with a maturity of March 7, 2030, and provide for a new Term Loan B in an aggregate principal amount of $500.0 million with a maturity date of March 8, 2032. Each facility has a SOFR-based interest rate. The Term Loan A has a mandatory annual amortization of 2.50 percent for years one and two, 5.00 percent for years three and four and 7.50 percent in the fifth year. The Term Loan B has a mandatory annual amortization of $5.0 million. We used the proceeds from the issuance of the new Term Loan B to fund a portion of Strata's purchase price. Separately, we increased the total commitments under our existing revolving credit facility for future expenditures. For more information on the debt agreements and covenant restrictions, see Item 8 - Note 9.
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, 2025. 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. For additional information on our debt, see Item 8 - Note 9.
Off-Balance Sheet Arrangements
As of December 31, 2025, we had aggregate outstanding letters of credit issued under our revolving credit facility in the amount of $23.4 million. Other than these letters of credit further discussed in Item 8 - Note 18, we do
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not currently have any off-balance sheet arrangements that have, or are reasonably likely to have, a material impact on current or future financial conditions, results of operations or cash flows.
Capital Expenditures
We are committed to disciplined capital allocation, including reinvesting in our company to maintain fixed assets, improve operations and grow our business.
In 2025, we spent $169.5 million on the replacement of construction equipment and plant improvements. Additionally, we spent $788.6 million on growth initiatives in 2025, which comprised of $610.0 million on acquisitions and $178.6 million on aggregate expansions and greenfield projects. In connection with the Strata acquisition, we also received proceeds of $14.5 million on the sale of four ready-mix plant operations in 2025. Capital expenditures for 2025 were funded by internally generated funds and debt borrowings.
For 2026, we expect capital expenditures for maintenance and improvement to be between $170 million and $235 million and approximately $130 million for organic growth projects and aggregate reserve additions. Our capital expenditure expectations should be considered preliminary and subject to further evaluation and authorization as the year progresses.
Capital expenditures for future acquisitions and future growth opportunities would be incremental to our outlined capital program; these opportunities are dependent upon economic and other competitive conditions. It is anticipated that capital expenditures for 2026 will be funded by various sources, including, but not limited to, internally generated cash and debt.
Cash Flows
Years ended December 31, 2025 2024 2023
(In millions)
Net cash provided by (used in)
Operating activities
$ 278.5 $ 322.3 $ 335.7
Investing activities
(913.7) (294.8) (117.9)
Financing activities
477.5 (8.7) 34.4
Increase (decrease) in cash, cash equivalents and restricted cash
(157.7) 18.8 252.2
Cash, cash equivalents and restricted cash - beginning of year
281.1 262.3 10.1
Cash, cash equivalents and restricted cash - end of year
$ 123.4 $ 281.1 $ 262.3
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Operating activities
Years ended December 31, 2025 2024 2023
(In millions)
Net income
$ 157.1 $ 201.7 $ 182.9
Adjustments to reconcile net income to net cash provided by operating activities
209.5 137.4 128.8
Changes in current assets and current liabilities, net of acquisitions:
Receivables
(44.0) 14.1 (54.8)
Due from related-party
- - 16.1
Inventories
(13.4) (44.3) 3.7
Other current assets
(9.1) 10.9 (19.6)
Accounts payable
(15.0) 7.3 33.1
Due to related-party
- - (7.3)
Other current liabilities
(9.3) (4.0) 49.0
Pension and postretirement benefit plan contributions
(.6) (2.7) (1.8)
Other noncurrent changes
3.3 1.9 5.6
Net cash provided by operating activities
$ 278.5 $ 322.3 $ 335.7
Cash provided by operating activities for the year ended December 31, 2025, decreased $43.8 million, largely related to higher working capital needs. Cash used by working capital components increased $74.8 million in 2025. This increased usage of cash was primarily the result of higher working capital needs due to the acquisitions in 2025, as discussed in Business Segment Financial and Operating Data; timing of taxes paid; increased software maintenance and licenses; and fluctuations in the timing of payment on accounts payable.
Cash provided by operating activities for the year ended December 31, 2024, decreased $13.4 million, largely related to higher working capital needs. Cash used by working capital components increased $36.1 million in 2024. This increased usage of cash was driven largely by higher accrued compensation due in part to additional employees associated with the Separation; higher liquid asphalt and aggregate volumes as well as higher costs of aggregate inventory; timing of prepaid insurance due to Separation; the removal of all related-party balances due to the Separation; and fluctuations in the timing of payment on accounts payable. In addition, stronger collections on receivable balances during 2024 and higher net income partially offset the decrease in cash.
Investing activities
Years ended December 31, 2025 2024 2023
(In millions)
Capital expenditures
$ (348.1) $ (172.4) $ (124.3)
Acquisitions, net of cash acquired
(610.0) (131.0) -
Net proceeds from sale or disposition of property and other
47.5 12.0 8.3
Investments
(3.1) (3.4) (1.9)
Net cash used in investing activities
$ (913.7) $ (294.8) $ (117.9)
The increase in cash used in investing activities from 2025 to 2024 was primarily due to additional investments to grow our company. We spent $479.0 million more on acquisitions in 2025, which includes the acquisition of Strata. We also spent $175.6 million more on capital expenditures, including the replenishment of depleting aggregate reserves and greenfield projects. The increase in cash usage was offset in part by proceeds from the sale of ready-mix operations as part of the Strata acquisition in the Central segment as discussed in Item 8 - Note 3 and the sale of non-strategic assets in both the West and Central segments.
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The increase in cash used in investing activities from 2024 to 2023 was primarily due to the completion of six acquisitions in 2024 and higher capital expenditures, including a liquid asphalt expansion project, aggregate reserve replacements and routine replacement of construction equipment. The increase in cash usage was offset in part by additional proceeds from asset sales, largely as a result of the sale of non-strategic assets in Texas in 2024.
Financing activities
Years ended December 31, 2025 2024 2023
(In millions)
Issuance of long-term related-party notes, net
$ - $ - $ 205.3
Issuance of long-term debt
500.0 - 700.0
Repayment of long-term debt
(8.8) (7.0) (3.6)
Debt issuance costs
(11.1) - (16.7)
Tax withholding on stock-based compensation (2.6) (1.7) -
Net transfers to Centennial
- - (850.6)
Net cash provided by (used in) financing activities
$ 477.5 $ (8.7) $ 34.4
The increase in cash flows provided by financing activities from 2025 to 2024 was largely related to the funding of a new Term Loan B in March of 2025. Offsetting the cash provided by long-term debt were higher debt issuance costs associated with the amendment of our senior secured credit agreement to increase our revolving credit facility capacity, extend the maturity date of the revolving credit facility and Term Loan A, and the issuance of a new Term Loan B. For further information, see Item 8 - Note 9.
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.
Material Cash Requirements
For more information on our contractual obligations on long-term debt, operating leases and purchase commitments, see Item 8 - Notes 9, 10 and 18. At December 31, 2025, our material cash requirements under these obligations were as follows:
Less than 1 year
1-3 years
3-5 years
More than
5 years
Total
(In millions)
Long-term debt maturities1
$ 11.7 $ 34.9 $ 238.3 $ 896.2 $ 1,181.1
Estimated interest payments2
75.8 148.7 134.7 48.4 407.6
Operating leases
17.5 24.3 9.7 9.4 60.9
Purchase commitments
42.9 66.0 34.8 10.5 154.2
$ 147.9 $ 273.9 $ 417.5 $ 964.5 $ 1,803.8
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1Unamortized debt issuance costs are excluded from the table.
2Represents the estimated interest payments using our long-term debt outstanding at December 31, 2025, assuming current interest rates and consistent amounts outstanding until their respective maturity dates over the periods indicated in the table above.
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, 2025, the current portion of asset retirement obligations was $14.2 million and was included in other accrued liabilities on the Consolidated Balance Sheets.
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, 2025, we had total liabilities of $78.8 million related to asset
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retirement obligations that are excluded from the table above. 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. 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 2025, we assumed a discount rate of 5.2 percent and long-term rate of return on our qualified defined pension plan assets of 6.0 percent. Decreased discount rates for 2025 compared to 2024 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. Therefore, this change in asset values will be reflected in future expenses of the plans beginning in 2026. 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.
At December 31, 2025, the pension plans' assets exceeded the plans' accumulated benefit obligations by approximately $53,000. Pretax pension expense (income) reflected in the Consolidated Statements of Operations for the years ended December 31, 2025, 2024 and 2023, was $349,000, $289,000 and $343,000, respectively. Our pension expense is currently projected to be approximately $637,000 in 2026. We do not expect to make any pension plan contributions in 2026, as the plan is fully funded and is based on using a full yield curve. There were no minimum required contributions for the years ended December 31, 2025 and 2023. During 2024, we contributed $2.1 million to our pension plans which was driven by additional discretionary contributions to increase the funded status of the plans. For more information on our pension plans, see Item 8 - Note 17.
New Accounting Standards
For information regarding new accounting standards, see Item 8 - Note 2, which is incorporated herein by reference.
Critical Accounting Estimates
We have prepared our financial statements in conformity with GAAP. 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. Management reviews these estimates and assumptions based on historical experience, changes in business conditions and other relevant factors believed to be reasonable under the circumstances.
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. 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, 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.
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. The accuracy of revenues reported on the audited consolidated financial statements depends on, among other things,
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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.
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. 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.
We recognize contracting services revenue over time using an input method based on the cost-to-cost measure of progress for contracts because it best depicts the transfer of assets to the customer which occurs as we incur costs on the contract. Under the cost-to-cost measure of progress, the costs incurred are compared with total estimated costs of a performance obligation. Revenues are recorded proportionately to the costs incurred. This method depends largely on the ability to make reasonably dependable estimates related to the extent of progress toward completion of the contract, contract revenues, and contract costs. Since contract prices are generally set before the work is performed, the estimates pertaining to every project could contain significant unknown risks such as volatile labor, material and fuel costs, weather delays, adverse project site conditions, unforeseen actions by regulatory agencies, performance by subcontractors, job management and relations with project owners. Changes in estimates could have a material effect on our results of operations, financial position and cash flows. For the years ended December 31, 2025, 2024 and 2023, our total contracting services revenue was $1.4 billion, $1.4 billion and $1.3 billion, respectively.
Several factors are evaluated in determining the bid price for contract work. These include, but are not limited to, the complexities of the job, past history performing similar types of work, seasonal weather patterns, competition and market conditions, job site conditions, workforce safety, reputation of the project owner, availability of labor, materials and fuel, project location and project completion dates. As a project commences, estimates are continually 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. We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Generally, contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration of services provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.
Our contracts for contracting services generally contain variable consideration including liquidated damages, performance bonuses or incentives, claims, unpriced change orders and penalties or index pricing. The variable amounts usually arise upon achievement of certain performance metrics or change in project scope. 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. Assumptions as to the occurrence of future events and the likelihood and amount of variable consideration are made during the contract performance period, using estimates of variable consideration and assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available to management. 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. When determining if the variable consideration is constrained, we consider if factors exist that could increase the likelihood or the magnitude of a potential reversal of revenue. We update our estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis.
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We believe our estimates surrounding the cost-to-cost method are reasonable based on the information that is known when the estimates are made. We have contract administration, accounting and management control systems in place that allow our estimates to be updated and monitored on a regular basis. Because of the many factors that are evaluated in determining bid prices, it is inherent that our estimates have changed in the past and will continually change in the future as new information becomes available for each job.
Business Combinations
We account for acquisitions on the audited consolidated financial statements starting from the date of the acquisition, which is the date that control is obtained. The acquisition method of accounting requires acquired assets and liabilities assumed be recorded at their respective fair values as of the date of the acquisition. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The estimation of fair values of acquired assets and liabilities assumed requires significant judgment and various assumptions. Although independent appraisals may be used to assist in the determination of the fair value of certain assets and liabilities, the appraised values may be based on significant estimates provided by management. The amounts and useful lives assigned to depreciable and amortizable assets compared to amounts assigned to goodwill, which is not amortized, can affect the results of operations in the period of and periods subsequent to a business combination.
In determining fair values of acquired assets and liabilities assumed, we use various observable inputs for similar assets or liabilities in active markets and various unobservable inputs, which includes the use of valuation models. Fair values are based on various factors including, but not limited to, age and condition of property, maintenance records, auction values for equipment with similar characteristics, recent sales and listings of comparable properties, data collected from drill holes and other subsurface investigations and geologic data. We primarily use the market and cost approaches in determining the fair value of land and property, plant and equipment. A combination of the market and income approaches are used for aggregate reserves and intangibles, primarily a discounted cash flow model. Although we may engage independent third-party consultants to assist with the valuation of aggregate reserves and intangibles, the valuations are based on significant estimates that are approved by management. The process is highly subjective and requires a large degree of management judgement. Assumptions used may vary for each specific business combination due to unique circumstances of each transaction. Assumptions may include discount rate, time period, terminal value and growth rate. The values generated from the discounted cash flow model are sensitive to the assumptions used. Inaccurate assumptions can lead to deviations from the values generated.
There is a measurement period after the acquisition date during which we may adjust the amounts recognized for a business combination. Any such adjustments are recorded in the period the adjustment is determined with the corresponding offset to goodwill. These adjustments are typically based on obtaining additional information that existed at the acquisition date regarding the assets acquired and the liabilities assumed. The measurement period ends once we have obtained all necessary information that existed as of the acquisition date, but does not extend beyond one year from the date of the acquisition. Once the measurement period has ended, any adjustments to assets acquired or liabilities assumed are recorded in income from continuing operations.
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. 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.
We have determined that the reporting units for our goodwill impairment test are our operating segments, along with the Prestress component of the West operating segment, 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. If the fair value of a reporting unit exceeds its carrying value, the goodwill of the reporting unit is not impaired. If the
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carrying value of a reporting unit exceeds its fair value, we must record an impairment loss for the amount that the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. For the years ended December 31, 2025, 2024 and 2023, there were no impairment losses recorded. At October 31, 2025, the fair value of each of our reporting units substantially exceeded the carrying value.
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. 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. 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.
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. 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. 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. 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 2025, 2024 and 2023.
Long-Lived Assets Excluding Goodwill
Long-lived assets, which include aggregate reserves and related assets, represent 56 percent of our total assets as of December 31, 2025. 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.
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.
When indications of or triggers for impairment are noted, impairment testing is completed. The impairment testing requires the use of significant estimates, judgments and uncertainties by management, which may vary from actual results. Estimates and judgments may include, among other things, whether triggering events have occurred, estimates of future cash flows, the asset's useful life, disposal activity obligations, growth and production.
The determination of whether an impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, compared to the carrying value of the assets. If impairment has occurred, the amount of the impairment recognized is determined by estimating the fair value of the assets and recording a loss if the carrying value is greater than the fair value.
No impairment losses were recorded in 2025 or 2024. During the year ended December 31, 2023, we recognized non-cash asset impairments of $5.8 million as a result of certain aggregate sites no longer being economically feasible to mine and having no remaining value. Unforeseen events and changes in circumstances could require the recognition of impairment losses at some future date.
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Non-GAAP Financial Measures
This Annual Report 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 and net income 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 stock-based compensation, unrealized gains and losses on benefit plan investments, 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 also exclude the one-time, non-recurring costs associated with the Separation as those are not expected to continue. 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 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. 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, impact of selling acquired inventory after markup to fair value as part of acquisition accounting, and one-time Separation costs, 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 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. 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.
Index
The following information reconciles consolidated net income 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 (expense) on the Consolidated Statements of Operations.
Years ended December 31,
2025 2024 2023
(In millions)
Net income
$ 157.1 $ 201.7 $ 182.9
Depreciation, depletion and amortization 193.7 136.9 123.8
Interest expense, net 77.4 46.4 52.9
Income taxes 56.1 69.3 62.4
EBITDA $ 484.3 $ 454.3 $ 422.0
Unrealized gains on benefit plan investments
(2.9) (2.9) (2.7)
Stock-based compensation expense 11.4 7.8 3.1
Impact of selling acquired inventory after markup to fair value as part of acquisition accounting
3.7 - -
One-time separation costs - 3.8 10.0
Adjusted EBITDA
$ 496.5 $ 463.0 $ 432.4
Revenue $ 3,146.0 $ 2,899.0 $ 2,830.3
Net income margin
5.0 % 7.0 % 6.5 %
EBITDA margin
15.4 % 15.7 % 14.9 %
Adjusted EBITDA margin
15.8 % 16.0 % 15.3 %
Knife River Corporation published this content on February 20, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 20, 2026 at 13:01 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]