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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission file number 1-41642
Knife River Corporation
(Exact name of registrant as specified in its charter)
Delaware92-1008893
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer Identification No.)

1150 West Century Avenue
P.O. Box 5568
Bismarck, North Dakota 58506-5568
(Address of principal executive offices)
(Zip Code)
(701) 530-1400
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueKNFNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No .
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No .
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
Accelerated Filer
Non-Accelerated Filer
Smaller Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  No .
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of October 31, 2024: 56,612,705 shares.


Index
Index
Page
 
Unless otherwise stated or the context otherwise requires, references in this report to “Knife River,” the “Company,” “we,” “our,” or “us” refer to Knife River Corporation and its consolidated subsidiaries.
2

Index
Introduction
Knife River is an aggregates-led construction materials and contracting services provider in the United States. Our 1.1 billion tons of aggregate reserves provide the foundation for our vertically integrated business strategy, with approximately 37 percent of our aggregates in 2024 being used internally to support value-added downstream products (ready-mix concrete and asphalt) and contracting services (heavy-civil construction, asphalt paving, concrete construction, site development and grading services, and in some segments the manufacturing of prestressed concrete products). We are strategically focused on being the provider of choice in mid-size, high-growth markets and are committed to our plan for continued growth and to delivering for our stakeholders — customers, communities, employees and stockholders — by executing on our four core values: People, Safety, Quality and the Environment.
We supply construction materials to customers from 14 states and also provide related contracting services, which are primarily to public-sector customers for the development and servicing of highways, local roads, bridges and other public-infrastructure projects. We have broad access to high-quality aggregates in most of our markets, which forms the foundation of our vertically integrated business model. We share resources, including plants, equipment and people, across our various locations to maximize efficiency. We also transport our products by truck, rail and barge, depending on the particular market, to complete the vertical value chain. Our strategically located aggregate sites, ready-mix plants and asphalt plants, along with our fleet of ready-mix and dump trucks, enable us to better serve our customers. We believe our integrated and expansive business model is a strong competitive advantage that provides scale, efficiency and operational excellence for the benefit of customers, stockholders and the broader communities that we serve.
Knife River is organized into six operating segments: Pacific, Northwest, Mountain, North Central, South and Energy Services. These operating segments are used to determine the Company's reportable segments: Pacific, Northwest, Mountain, Central and Energy Services, which are based on our method of internal reporting and management of our business. Four of the reportable segments are aligned by key geographic areas due to the production of construction materials and related contracting services and one is based on product line. Each geographic segment offers a vertically integrated suite of products and services, including aggregates, ready-mix concrete, asphalt and contracting services, while the Energy Services segment, which has locations throughout our geographic footprint, produces and supplies liquid asphalt and related services, primarily for use in asphalt road construction. We also provide the details of Corporate Services, which includes accounting, legal, treasury, information technology, human resources, corporate development costs and certain corporate expenses that support our operating segments. The internal reporting of these segments is defined based on the reporting and review process used by our chief executive officer and chief operating officer.
In the fourth quarter of 2023, we realigned our reportable segments to better support our operational strategies. The liquid asphalt and related services portion of the Pacific segment’s businesses are now reported under the Energy Services segment. In addition, the North Central and South operating regions have been aggregated into one reportable segment, Central. We also reallocated certain amounts to the operating segments that were previously reported within Corporate Services. All periods have been recast to conform with the revised presentation. For more information on the Company's business segments, see Note 14 of the Notes to Consolidated Financial Statements.
On May 31, 2023, the separation of Knife River from MDU Resources Group, Inc. ("MDU Resources") and its other businesses was completed and Knife River became an independent, publicly traded company ("Separation") listed on the New York Stock Exchange under the symbol "KNF". The Separation was completed as a tax-free spin-off for U.S. federal income tax purposes. As a result of the Separation, MDU Resources distributed shares representing approximately 90 percent of Knife River's outstanding common stock to holders of record of MDU Resources' common stock as of the close of business on May 22, 2023 ("Distribution"). In November 2023, MDU Resources disposed of all retained shares of Knife River.
3

Index
Part I -- Financial Information
Item 1. Financial Statements
Knife River Corporation
Consolidated Statements of Operations
(Unaudited)
Three Months EndedNine Months Ended
 September 30,September 30,
 2024202320242023
 (In thousands, except per share amounts)
Revenue:    
Construction materials$545,711 $553,057 $1,184,938 $1,177,726 
Contracting services559,582 537,315 1,056,851 1,005,736 
Total revenue1,105,293 1,090,372 2,241,789 2,183,462 
Cost of revenue:    
Construction materials345,046 346,298 865,198 856,606 
Contracting services487,236 474,685 920,867 900,388 
Total cost of revenue832,282 820,983 1,786,065 1,756,994 
Gross profit273,011 269,389 455,724 426,468 
Selling, general and administrative expenses63,874 59,168 183,569 167,276 
Operating income209,137 210,221 272,155 259,192 
Interest expense13,936 15,354 41,848 44,005 
Other income2,487 7 7,541 3,311 
Income before income taxes197,688 194,874 237,848 218,498 
Income tax expense49,584 48,219 59,443 56,327 
Net income$148,104 $146,655 $178,405 $162,171 
Net income per share:
    
Basic $2.62 $2.59 $3.15 $2.87 
Diluted$2.60 $2.58 $3.14 $2.86 
Weighted average common shares outstanding:
Basic56,61356,56656,60556,566
Diluted 56,87156,73556,80956,633
The accompanying notes are an integral part of these consolidated financial statements.
4

Index
Knife River Corporation
Consolidated Statements of Comprehensive Income
(Unaudited)
Three Months EndedNine Months Ended
 September 30,September 30,
 2024202320242023
 (In thousands)
Net income$148,104 $146,655 $178,405 $162,171 
Other comprehensive income:
Reclassification adjustment for loss on derivative instruments included in net income, net of tax of $0 and $0 for the three months ended and $0 and $28 for the nine months ended in 2024 and 2023, respectively
   90 
Postretirement liability adjustment:
Postretirement liability losses arising during the period, net of tax of $0 and $0 for the three months ended and $0 and $(6) for the nine months ended in 2024 and 2023, respectively
   (17)
Amortization of postretirement liability losses included in net periodic benefit cost, net of tax of $25 and $16 for the three months ended and $75 and $47 for the nine months ended in 2024 and 2023, respectively
78 49 233 144 
Postretirement liability adjustment78 49 233 127 
Other comprehensive income78 49 233 217 
Comprehensive income attributable to common stockholders
$148,182 $146,704 $178,638 $162,388 
The accompanying notes are an integral part of these consolidated financial statements.
5

Index
Knife River Corporation
Consolidated Balance Sheets
(Unaudited)
 September 30, 2024September 30, 2023December 31, 2023
Assets(In thousands, except shares and per share amounts)
Current assets:  
Cash, cash equivalents and restricted cash$267,442 $116,159 $262,320 
Receivables, net449,188 491,866 266,785 
Costs and estimated earnings in excess of billings on uncompleted contracts69,309 50,545 27,293 
Inventories347,300 314,711 319,623 
Prepayments and other current assets26,396 38,094 37,522 
Total current assets1,159,635 1,011,375 913,543 
Noncurrent assets:  
Property, plant and equipment2,692,182 2,547,577 2,579,734 
Less accumulated depreciation, depletion and amortization1,346,022 1,248,042 1,264,687 
Net property, plant and equipment1,346,160 1,299,535 1,315,047 
Goodwill275,256 274,478 274,478 
Other intangible assets, net9,854 11,463 10,821 
Operating lease right-of-use assets47,430 44,309 44,706 
Investments and other45,782 39,722 41,218 
Total noncurrent assets 1,724,482 1,669,507 1,686,270 
Total assets$2,884,117 $2,680,882 $2,599,813 
Liabilities and Stockholders' Equity  
Current liabilities:  
Long-term debt - current portion$8,791 $7,082 $7,082 
Accounts payable180,572 148,977 107,656 
Billings in excess of costs and estimated earnings on uncompleted contracts44,786 58,785 51,376 
Taxes payable15,991 53,281 9,300 
Accrued compensation42,071 37,922 48,098 
Accrued interest
13,772 16,054 7,247 
Current operating lease liabilities 13,544 13,702 12,948 
Other accrued liabilities106,576 89,164 103,564 
Total current liabilities 426,103 424,967 347,271 
Noncurrent liabilities:  
Long-term debt669,672 675,649 674,577 
Deferred income taxes187,915 173,989 174,542 
Noncurrent operating lease liabilities33,886 30,607 31,758 
Other117,611 132,652 105,653 
Total liabilities 1,435,187 1,437,864 1,333,801 
Commitments and contingencies
Stockholders' equity:  
Common stock, 300,000,000 shares authorized, $0.01 par value, 57,043,841 shares issued and 56,612,705 shares outstanding at September 30, 2024; 56,997,350 shares issued and 56,566,214 shares outstanding at September 30, 2023; 57,009,542 shares issued and 56,578,406 shares outstanding at December 31, 2023
570 570 570 
Other paid-in capital618,799 613,024 614,513 
Retained earnings844,273 645,185 665,874 
Treasury stock held at cost - 431,136 shares
(3,626)(3,626)(3,626)
Accumulated other comprehensive loss(11,086)(12,135)(11,319)
Total stockholders' equity1,448,930 1,243,018 1,266,012 
Total liabilities and stockholders' equity $2,884,117 $2,680,882 $2,599,813 
The accompanying notes are an integral part of these consolidated financial statements.
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Index
Knife River Corporation
Consolidated Statements of Equity
(Unaudited)
Common StockOther
Paid-in Capital
Retained EarningsMDU Resources' Stock Held
by Subsidiary
Treasury Stock
Accumula-ted Other Comprehen-sive Loss
SharesAmountSharesAmountSharesAmountTotal
 (In thousands, except shares)
At December 31, 2023
57,009,542 $570 $614,513 $665,874  $ (431,136)$(3,626)$(11,319)$1,266,012 
Net loss— — — (47,629)— — — — — (47,629)
Other comprehensive income— — — — — — — — 78 78 
Stock-based compensation expense
— — 1,811 — — — — — — 1,811 
Common stock issued for employee compensation, net of tax withholding
31,298 — (1,645)— — — — — — (1,645)
At March 31, 202457,040,840 $570 $614,679 $618,245  $ (431,136)$(3,626)$(11,241)$1,218,627 
Net income
— — — 77,929 — — — — — 77,929 
Other comprehensive Income— — — — — — — — 77 77 
Stock-based compensation expense
— — 2,106 (5)— — — — — 2,101 
Common stock issued for board of director fees
3,001 — (28)— — — — — — (28)
At June 30, 202457,043,841 $570 $616,757 $696,169  $ (431,136)$(3,626)$(11,164)$1,298,706 
Net income— — — 148,104 — — — — — 148,104 
Other comprehensive income— — — — — — — — 78 78 
Stock-based compensation expense
— — 2,042 — — — — — — 2,042 
At September 30, 202457,043,841 $570 $618,799 $844,273  $ (431,136)$(3,626)$(11,086)$1,448,930 
The accompanying notes are an integral part of these consolidated financial statements.
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Index

Knife River Corporation
Consolidated Statements of Equity
(Unaudited)
Common StockOther
Paid-in Capital
Retained EarningsMDU Resources' Stock Held
by Subsidiary
Treasury Stock
Accumula-ted Other Comprehen-sive Loss
SharesAmountSharesAmountSharesAmountTotal
 (In thousands, except shares)
At December 31, 2022
80,000 $800 $549,106 $494,661 (538,921)$(3,626) $ $(12,352)$1,028,589 
Net loss— — — (41,320)— — — — — (41,320)
Other comprehensive income— — — — — — — — 93 93 
Stock-based compensation expense
— — 453 (39)— — — — — 414 
Net transfers to Centennial— — (1,385)(11,622)— — — — — (13,007)
At March 31, 2023
80,000 $800 $548,174 $441,680 (538,921)$(3,626) $ $(12,259)$974,769 
Net income
— — — 56,836 — — — — — 56,836 
Other comprehensive Income— — — — — — — — 75 75 
Stock-based compensation expense
— — 212 14 — — — — — 226 
Transfer of MDU Resources' stock held by subsidiary— — — — 538,921 3,626 — — — 3,626 
Receipt of treasury stock at cost— — — — — — (431,136)(3,626)— (3,626)
Retirement of historical common stock in connection with the Separation(80,000)(800)800 — — — — — —  
Issuance of common stock in connection with the Separation56,997,350 570 (596)— — — — — — (26)
Net transfers from Centennial and MDU Resources including Separation adjustments— — 62,972 — — — — — — 62,972 
At June 30, 2023
56,997,350 $570 $611,562 $498,530  $ (431,136)$(3,626)$(12,184)$1,094,852 
Net income— — — 146,655 — — — — — 146,655 
Other comprehensive income— — — — — — — — 49 49 
Stock-based compensation expense
— — 1,462 — — — — — — 1,462 
At September 30, 2023
56,997,350 $570 $613,024 $645,185  $ (431,136)$(3,626)$(12,135)$1,243,018 
The accompanying notes are an integral part of these consolidated financial statements.
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Index
Knife River Corporation
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
 September 30,
 20242023
 (In thousands)
Operating activities:  
Net income$178,405 $162,171 
Adjustments to reconcile net income to net cash provided by operating activities:
  
Depreciation, depletion and amortization101,519 92,511 
Deferred income taxes13,432 (1,884)
Provision for credit losses603 1,386 
Amortization of debt issuance costs2,072 2,425 
Employee stock-based compensation costs5,728 2,127 
Pension and postretirement benefit plan net periodic benefit cost 908 889 
Unrealized gains on investments(2,865)(685)
Gains on sales of assets(6,323)(3,806)
Changes in current assets and liabilities, net of acquisitions:
Receivables(224,758)(302,536)
Due from related-party 16,050 
Inventories(27,262)8,566 
Other current assets11,125 (20,127)
Accounts payable77,152 91,663 
Due to related-party (7,310)
Other current liabilities17,268 78,006 
Pension and postretirement benefit plan contributions(2,502)(1,611)
Other noncurrent changes5,388 35,092 
Net cash provided by operating activities149,890 152,927 
Investing activities:  
Capital expenditures(127,161)(86,450)
Acquisitions, net of cash acquired(15,008) 
Net proceeds from sale or disposition of property and other7,605 5,227 
Investments(3,263)(1,764)
Net cash used in investing activities(137,827)(82,987)
Financing activities:  
Issuance of long-term related-party notes, net 205,275 
Issuance of long-term debt 700,000 
Repayment of long-term debt(5,268)(1,891)
Debt issuance costs (16,640)
Proceeds from issuance of common stock (26)
Tax withholding on stock-based compensation
(1,673) 
Net transfers to Centennial (850,589)
Net cash (used in) provided by financing activities(6,941)36,129 
Increase in cash, cash equivalents and restricted cash5,122 106,069 
Cash, cash equivalents and restricted cash -- beginning of year262,320 10,090 
Cash, cash equivalents and restricted cash -- end of period$267,442 $116,159 
The accompanying notes are an integral part of these consolidated financial statements.
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Knife River Corporation
Notes to Consolidated
Financial Statements
September 30, 2024 and 2023
(Unaudited)
Note 1 - Background
Knife River is 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. Knife River is one of the leading providers of crushed stone and sand and gravel in the United States and operates across 14 states. We conduct our operations through five reportable segments: Pacific, Northwest, Mountain, Central and Energy Services.
In the fourth quarter of 2023, we realigned our reportable segments to better support our operational strategies. As a result, a portion of the Pacific segment’s businesses are now reported under the Energy Services segment. In addition, the North Central and South operating regions have been aggregated into one reportable segment, Central. We also reallocated certain amounts to the operating segments that were previously reported within Corporate Services. All periods have been recast to conform with the revised presentation. See Note 14 for additional information.
Separation from MDU Resources
On May 31, 2023, MDU Resources completed the previously announced separation of Knife River through the distribution of approximately 90 percent of the outstanding shares of common stock, par value $.01 per share, of Knife River to the stockholders of record of MDU Resources as of the close of business on May 22, 2023. MDU Resources retained approximately 10 percent of the outstanding shares of Knife River common stock. The Distribution was structured as a pro rata distribution of one share of Knife River common stock for every four shares of MDU Resources common stock. In November 2023, MDU Resources disposed of all 5,656,621 retained shares of Knife River common stock in an underwritten public offering. As a result of the Distribution, Knife River is now an independent public company and its common stock is listed under the symbol “KNF” on the New York Stock Exchange.
All share and earnings per share information has been retroactively adjusted for all periods presented to reflect the Distribution.
Note 2 - Basis of presentation
The accompanying consolidated interim financial statements were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Interim financial statements do not include all disclosures provided in annual financial statements and, accordingly, these financial statements should be read in conjunction with the Company's 2023 Annual Report on Form 10-K ("Annual Report"). The information is unaudited but includes adjustments that are, in the opinion of management, necessary for a fair presentation of the accompanying consolidated interim financial statements and are of a normal recurring nature.
Prior to the Separation, Knife River operated as a wholly owned subsidiary of Centennial Energy Holdings, Inc., a direct wholly owned subsidiary of MDU Resources and the direct parent company of Knife River prior to the spinoff ("Centennial") and an indirect, wholly owned subsidiary of MDU Resources and not as a stand-alone company. The accompanying consolidated financial statements and footnotes for the periods prior to the Separation were prepared on a "carve-out" basis using a legal entity approach in conformity with GAAP and were derived from the consolidated financial statements of MDU Resources as if Knife River operated on a stand-alone basis during these periods.
All revenues and costs, as well as assets and liabilities, directly associated with our business activities are included in the consolidated financial statements. In the periods prior to the Separation, the consolidated financial statements include expense allocations for certain functions provided by MDU Resources and Centennial, including, but not limited to, certain general corporate expenses related to senior management, legal, human resources, finance and accounting, treasury, information technology, communications, procurement, tax, insurance and other shared services. These general corporate expenses are included in the Consolidated Statements of Operations within selling, general and administrative expenses and other income. There were no amounts allocated to Knife River for the three months ended September 30, 2023, and $9.0 million was allocated for the nine months ended September 30, 2023 in selling, general and administrative expenses. There were no amounts allocated for the three months ended September 30, 2023 and $348,000 was allocated for the nine months ended September 30, 2023 in other income. These items were allocated on the basis of direct usage when identifiable, with the remainder principally allocated on the basis of percent of total capital invested or other allocation methodologies that were considered to be a reasonable reflection of the utilization of the services provided to the benefits received, including the following: number of employees paid and stated as cost per check; number of employees served; weighted factor of travel, managed units, national account spending, equipment and fleet acquisitions; purchase order dollars spent and purchase order line count; number of payments, vouchers or unclaimed property reports; labor hours; time tracked; and projected workload. The allocations may not, however, reflect the expenses we would have
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Index
incurred as a stand-alone company for the periods presented. These costs also may not be indicative of the expenses that we will incur in the future or would have incurred if we had obtained these services from a third party.
Management has also evaluated the impact of events occurring after September 30, 2024, up to the date of issuance of these consolidated interim financial statements on November 4, 2024, that would require recognition or disclosure in the Consolidated Financial Statements. See Note 17 - Subsequent Events for more details on these events.
Principles of consolidation
For all periods, the consolidated financial statements were prepared in accordance with GAAP and include the accounts of Knife River and its wholly owned subsidiaries. All intercompany accounts and transactions between the businesses comprising Knife River have been eliminated in the accompanying audited consolidated financial statements.
Use of estimates
The preparation of financial statements in conformity with GAAP requires us 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 consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Estimates are used for items such as long-lived assets and goodwill; fair values of acquired assets and liabilities under the acquisition method of accounting; aggregate reserves; property depreciable lives; tax provisions; revenue recognized using the cost-to-cost measure of progress for contracts; expected credit losses; environmental and other loss contingencies; costs on contracting services contracts; actuarially determined benefit costs; asset retirement obligations; lease classification; present value of right-of-use assets and lease liabilities; and the valuation of stock-based compensation. These estimates are based on management’s best knowledge of current events, historical experience, actions that we may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised. Consequently, operating results can be affected by revisions to prior accounting estimates.
Cash, cash equivalents and restricted cash
We consider all highly liquid investments with an original maturity of three months or less, when purchased, to be cash and cash equivalents. Restricted cash represents deposits held by our captive insurance company that is required by state insurance regulations to remain in the captive insurance company. Cash, cash equivalents and restricted cash on the Consolidated Balance Sheets is comprised of:
September 30, 2024September 30, 2023December 31, 2023
(In thousands)
Cash and cash equivalents
$220,368$84,006$219,324
Restricted cash
47,07432,15342,996
Cash, cash equivalents and restricted cash
$267,442$116,159$262,320
Seasonality of operations
Some of our operations are seasonal and revenues from, and certain expenses for, such operations may fluctuate significantly among quarterly periods, with lower activity in the winter months and higher activity in the summer months. Accordingly, the interim results for particular segments, and for Knife River as a whole, may not be indicative of results for the full fiscal year or other future periods.
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Note 3 - New accounting standards
The following table provides a brief description of the accounting pronouncements applicable to Knife River and the potential impact on its consolidated financial statements and/or disclosures:
StandardDescriptionStandard Effective DateImpact on financial statements/disclosures
Recently issued Financial Accounting Standards Board (FASB) accounting standards updates ("ASU") not yet adopted
ASU 2023-07 - Improvements to Reportable Segment DisclosuresIn November 2023, the FASB issued guidance on modifying the disclosure requirements to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. The guidance also expands the interim disclosure requirements. The guidance is to be applied on a retrospective basis to the financial statements and footnotes and early adoption is permitted.Fiscal periods beginning after December 15, 2023 and interim periods beginning after December 31, 2024The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2024 and interim periods for fiscal year 2025.
ASU 2023-09 - Improvements to Income Tax DisclosuresIn December 2023, the FASB issued guidance on modifying the disclosure requirements to increase transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. The guidance is to be applied on a prospective basis to the financial statements and footnotes, however, retrospective adoption is also permitted. The guidance also permits early adoption.Fiscal periods beginning after December 15, 2024
The Company is electing to early adopt the guidance for the year ended December 31, 2024, on a retrospective basis. The Company has reviewed the impact to its disclosures and although not material, will have updates to the income tax footnote.
Note 4 - Receivables and allowance for expected credit losses
Receivables consist primarily of trade and contract receivables for the sale of goods and services net of expected credit losses. A majority of our receivables are due in 30 days or less. The total balance of receivables past due 90 days or more was $12.6 million, $14.4 million and $16.7 million at September 30, 2024, September 30, 2023 and December 31, 2023, respectively. Receivables were as follows:
September 30, 2024September 30, 2023December 31, 2023
(In thousands)
Trade receivables$229,887$236,373$124,134
Contract receivables187,622223,874112,037
Retention receivables35,98037,81436,782
Receivables, gross453,489498,061272,953
Less expected credit loss4,3016,1956,168
Receivables, net$449,188$491,866$266,785
The Company's expected credit losses are determined through a review using historical credit loss experience; changes in asset specific characteristics; current conditions; and reasonable and supportable future forecasts, among other specific account data, and is performed at least quarterly. We develop and document our methodology to determine our allowance for expected credit losses. Risk characteristics used by management may include customer mix, knowledge of customers and general economic conditions of the various local economies, among others. Specific account balances are written off when management determines the amounts to be uncollectible. Management has reviewed the balance reserved through the allowance for expected credit losses and believes it is reasonable.
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Details of the Company's expected credit losses were as follows:
PacificNorthwestMountainCentralEnergy ServicesTotal
 (In thousands)
As of December 31, 2023
$2,053 $1,004 $2,293 $718 $100 $6,168 
Current expected credit loss provision177 (223)(47)87  (6)
Less write-offs charged against the allowance(53)133 2 3  85 
At March 31, 2024
$2,283 $648 $2,244 $802 $100 $6,077 
Current expected credit loss provision25 79 27 151 1 283 
Less write-offs charged against the allowance513 11 1,122 212 1 1,859 
At June 30, 2024
$1,795 $716 $1,149 $741 $100 $4,501 
Current expected credit loss provision126 (19)(5)223 1 326 
Less write-offs charged against the allowance74 108 233 106 5 526 
At September 30, 2024
$1,847 $589 $911 $858 $96 $4,301 
PacificNorthwestMountainCentralEnergy ServicesTotal
 (In thousands)
As of December 31, 2022$1,945 $1,253 $1,278 $901 $100 $5,477 
Current expected credit loss provision45 313 164 (90) 432 
Less write-offs charged against the allowance1 68 18   87 
At March 31, 2023
$1,989 $1,498 $1,424 $811 $100 $5,822 
Current expected credit loss provision8 74 631 (131)1 583 
Less write-offs charged against the allowance17 512 3 2 1 535 
At June 30, 2023
$1,980 $1,060 $2,052 $678 $100 $5,870 
Current expected credit loss provision46 242 (152)235  371 
Less write-offs charged against the allowance26 4 13 3  46 
At September 30, 2023
$2,000 $1,298 $1,887 $910 $100 $6,195 
Note 5 - Inventories
Inventories on the Consolidated Balance Sheets were as follows:
 September 30, 2024September 30, 2023December 31, 2023
 (In thousands)
Finished products$240,746 $213,702 $225,319 
Raw materials67,830 63,156 61,776 
Supplies and parts38,724 37,853 32,528 
Total$347,300 $314,711 $319,623 

Inventories are valued at the lower of cost or net realizable value using the average cost method. Inventories include production costs incurred as part of our aggregate mining activities. These inventoriable production costs include all mining and processing costs associated with the production of aggregates. Stripping costs incurred during the production phase, which represent costs of removing overburden and waste materials to access mineral deposits, are a component of inventoriable production costs.
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Note 6 - Net income per share
Basic net income per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the applicable period. Diluted net income per share is computed by dividing net income by the total of the weighted average number of shares of common stock outstanding during the applicable period, plus the effect of non-vested performance shares and restricted stock units. Weighted average common shares outstanding is comprised of issued shares of 57,043,841 less shares held in treasury of 431,136. Basic and diluted net income per share are calculated as follows, based on a reconciliation of the weighted-average common shares outstanding on a basic and diluted basis:
Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
(In thousands, except per share amounts)
Net income$148,104 $146,655 $178,405 $162,171 
Weighted average common shares outstanding - basic56,613 56,566 56,605 56,566 
Effect of dilutive performance shares and restricted stock units
258 169 204 67 
Weighted average common shares outstanding - diluted56,871 56,735 56,809 56,633 
Shares excluded from the calculation of diluted loss per share
    
Net income per share - basic
$2.62 $2.59 $3.15 $2.87 
Net income per share - diluted
$2.60 $2.58 $3.14 $2.86 
Note 7 - Accumulated other comprehensive loss
The after-tax changes in the components of accumulated other comprehensive loss were as follows:
Net Unrealized
Loss on
Derivative
 Instruments
 Qualifying as
Hedges
Postretirement
 Liability
Adjustment
Total
Accumulated
 Other
Comprehensive
 Loss
 (In thousands)
As of December 31, 2023$ $(11,319)$(11,319)
Amounts reclassified from accumulated other comprehensive loss 78 78 
Net current-period other comprehensive income 78 78 
At March 31, 2024
$ $(11,241)$(11,241)
Amounts reclassified from accumulated other comprehensive loss 77 77 
Net current-period other comprehensive income 77 77 
At June 30, 2024
$ $(11,164)$(11,164)
Amounts reclassified from accumulated other comprehensive loss 78 78 
Net current-period other comprehensive income 78 78 
At September 30, 2024
$ $(11,086)$(11,086)
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Index
Net Unrealized
Loss on
Derivative
 Instruments
 Qualifying as
Hedges
Postretirement
 Liability
Adjustment
Total
Accumulated
 Other
Comprehensive
 Loss
 (In thousands)
As of December 31, 2022$(90)$(12,262)$(12,352)
Amounts reclassified from accumulated other comprehensive loss46 47 93 
Net current-period other comprehensive income46 47 93 
At March 31, 2023
$(44)$(12,215)$(12,259)
Other comprehensive loss before reclassification
 (17)(17)
Amounts reclassified from accumulated other comprehensive loss44 48 92 
Net current-period other comprehensive income44 31 75 
At June 30, 2023
$ $(12,184)$(12,184)
Amounts reclassified from accumulated other comprehensive loss 49 49 
Net current-period other comprehensive income  49 49 
At September 30, 2023
$ $(12,135)$(12,135)
The following amounts were reclassified out of accumulated other comprehensive loss into net income. The amounts presented in parenthesis indicate a decrease to net income on the Consolidated Statements of Operations. The reclassifications were as follows:
Three Months EndedNine Months EndedLocation on Consolidated Statements of Operations
September 30,September 30,
2024202320242023
(In thousands)
Reclassification adjustment for loss on derivative instruments included in net income
$ $ $ $(118)Interest expense
   28 Income taxes
   (90)
Amortization of postretirement liability losses included in net periodic benefit cost(103)(65)(308)(191)Other income
25 16 75 47 Income taxes
(78)(49)(233)(144)
Total reclassifications$(78)$(49)$(233)$(234)
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Note 8 - Revenue from contracts with customers
Revenue is recognized when a performance obligation is satisfied by transferring control over a product or service to a customer. Revenue includes revenue from the sales of construction materials and contracting services. Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. Knife River is considered an agent for certain taxes collected from customers. As such, we present revenues net of these taxes at the time of sale to be remitted to governmental authorities, including sales and use taxes. Revenue for construction materials is recognized at a point in time when delivery of the products has taken place. Contracting revenue is recognized over time using an input method based on the cost-to-cost measure of progress on a project.
Disaggregation
In the following tables, revenue is disaggregated by category for each segment and includes sales of materials to both third parties and internal customers. Due to consolidation requirements, the internal sales revenues must be eliminated against the construction materials product used in downstream materials and contracting services to arrive at the external operating revenues. We believe this level of disaggregation best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. For more information on the Company’s reportable segments, see Note 14.
Three Months Ended September 30, 2024PacificNorthwestMountainCentralEnergy ServicesCorporate Services and EliminationsTotal
(In thousands)
Aggregates$36,642 $54,038 $40,115 $62,685 $ $ $193,480 
Ready-mix concrete40,428 46,999 40,559 85,474   213,460 
Asphalt11,859 47,170 60,022 95,998   215,049 
Liquid asphalt
    110,917  110,917 
Other48,028 5,416 9 12,242 20,877 3,132 89,704 
Contracting services public-sector48,435 89,271 142,864 198,843   479,413 
Contracting services private-sector9,316 17,545 42,830 10,478   80,169 
Internal sales(29,722)(42,614)(65,281)(110,905)(25,308)(3,069)(276,899)
Revenues from contracts with customers
$164,986 $217,825 $261,118 $354,815 $106,486 $63 $1,105,293 
Three Months Ended September 30, 2023PacificNorthwestMountainCentralEnergy ServicesCorporate Services and EliminationsTotal
(In thousands)
Aggregates$33,624 $57,398 $39,519 $63,044 $ $ $193,585 
Ready-mix concrete39,861 46,785 44,053 85,340   216,039 
Asphalt14,050 43,462 59,673 105,592   222,777 
Liquid asphalt
    122,596  122,596 
Other49,533 4,497 11 10,214 21,797 5,464 91,516 
Contracting services public-sector32,632 68,316 135,700 205,262   441,910 
Contracting services private-sector17,745 25,144 43,944 8,572   95,405 
Internal sales(30,116)(36,683)(68,178)(123,099)(28,972)(6,408)(293,456)
Revenues from contracts with customers
$157,329 $208,919 $254,722 $354,925 $115,421 $(944)$1,090,372 
Nine Months Ended September 30, 2024PacificNorthwestMountainCentralEnergy ServicesCorporate Services and EliminationsTotal
(In thousands)
Aggregates$87,450 $146,497 $80,708 $121,499 $ $ $436,154 
Ready-mix concrete108,316 124,435 89,361 170,722   492,834 
Asphalt22,828 87,937 93,712 146,324   350,801 
Liquid asphalt
    187,256  187,256 
Other115,714 14,563 22 25,015 38,325 12,786 206,425 
Contracting services public-sector74,623 196,614 258,746 322,696   852,679 
Contracting services private-sector31,612 58,173 98,185 16,202   204,172 
Internal sales(65,342)(91,017)(106,021)(172,079)(41,735)(12,338)(488,532)
Revenues from contracts with customers
$375,201 $537,202 $514,713 $630,379 $183,846 $448 $2,241,789 
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Nine Months Ended September 30, 2023PacificNorthwestMountainCentralEnergy ServicesCorporate Services and EliminationsTotal
(In thousands)
Aggregates$79,768 $147,937 $78,051 $117,766 $ $ $423,522 
Ready-mix concrete106,531 125,273 92,929 172,973   497,706 
Asphalt21,640 84,908 89,955 164,830   361,333 
Liquid asphalt
    203,802  203,802 
Other112,755 11,513 21 22,709 37,838 7,231 192,067 
Contracting services public-sector53,450 138,621 244,320 342,146   778,537 
Contracting services private-sector37,220 80,258 94,706 15,015   227,199 
Internal sales(63,313)(84,937)(108,888)(191,860)(44,900)(6,806)(500,704)
Revenues from contracts with customers
$348,051 $503,573 $491,094 $643,579 $196,740 $425 $2,183,462 
Note 9 - Uncompleted contracts
The timing of revenue recognition may differ from the timing of invoicing to customers. The timing of invoicing to customers does not necessarily correlate with the timing of revenues being recognized under the cost-to-cost method of accounting. Contracts from contracting services are billed as work progresses in accordance with agreed upon contractual terms. Generally, billing to the customer occurs contemporaneous to revenue recognition. A variance in timing of the billings may result in a contract asset or a contract liability. A contract asset occurs when revenues are recognized under the cost-to-cost measure of progress, which exceeds amounts billed on uncompleted contracts. Such amounts will be billed as standard contract terms allow, usually based on various measures of performance or achievement. A contract liability occurs when there are billings in excess of revenues recognized under the cost-to-cost measure of progress on uncompleted contracts. Contract liabilities decrease as revenue is recognized from the satisfaction of the related performance obligation.
The changes in contract assets and liabilities were as follows:
September 30, 2024December 31, 2023ChangeLocation on Consolidated Balance Sheets
(In thousands)
Contract assets
$69,309 $27,293 $42,016 Costs and estimated earnings in excess of billings on uncompleted contracts
Contract liabilities(44,786)(51,376)6,590 Billings in excess of costs and estimated earnings on uncompleted contracts
Net contract assets (liabilities)
$24,523 $(24,083)$48,606 
September 30, 2023December 31, 2022ChangeLocation on Consolidated Balance Sheets
(In thousands)
Contract assets
$50,545 $31,145 $19,400 Costs and estimated earnings in excess of billings on uncompleted contracts
Contract liabilities(58,785)(39,843)(18,942)Billings in excess of costs and estimated earnings on uncompleted contracts
Net contract liabilities
$(8,240)$(8,698)$458 
The Company recognized $3.9 million and $48.8 million in revenue for the three and nine months ended September 30, 2024, respectively, which was previously included in contract liabilities at December 31, 2023. The Company recognized $3.4 million and $35.1 million in revenue for the three and nine months ended September 30, 2023, respectively, which was previously included in contract liabilities at December 31, 2022.
The Company recognized a net increase in revenues of $15.9 million and $28.6 million for the three and nine months ended September 30, 2024, respectively, from performance obligations satisfied in prior periods. The Company recognized a net increase in revenues of $12.1 million and $10.6 million for the three and nine months ended September 30, 2023, respectively, from performance obligations satisfied in prior periods.
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Remaining performance obligations
The remaining performance obligations, also referred to as backlog, include unrecognized revenues that we reasonably expect to be realized. These unrecognized revenues can include: projects that have a written award, a letter of intent, a notice to proceed, an agreed upon work order to perform work on mutually accepted terms and conditions, and change orders or claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. The majority of our contracts for contracting services have an original duration of less than one year.
At September 30, 2024, the Company's remaining performance obligations were $755.1 million. We expect to recognize the following revenue amounts in future periods related to these remaining performance obligations: $688.8 million within the next 12 months or less; $55.1 million within the next 13 to 24 months; and $11.2 million in 25 months or more.
Note 10 - Goodwill and other intangible assets
The changes in the carrying amount of goodwill were as follows:
Balance at January 1, 2024Goodwill Acquired During the YearMeasurement Period AdjustmentsReallocation of GoodwillBalance at September 30, 2024
 (In thousands)
Pacific$32,621 $43 $ $ $32,664 
Northwest90,978    90,978 
Mountain26,816    26,816 
North Central
75,879 735   76,614 
South
38,708    38,708 
Energy Services9,476    9,476 
Total$274,478 $778 $ $ $275,256 
Balance at January 1, 2023
Goodwill Acquired During the YearMeasurement Period AdjustmentsReallocation of Goodwill
Balance at September 30, 2023
 (In thousands)
Pacific$38,339 $ $(62)$ $38,277 
Northwest90,978    90,978 
Mountain26,816    26,816 
North Central
75,879    75,879 
South
38,708    38,708 
Energy Services3,820    3,820 
Total$274,540 $ $(62)$ $274,478 
Balance at January 1, 2023
Goodwill Acquired During the YearMeasurement Period AdjustmentsReallocation of Goodwill
Balance at December 31, 2023
 (In thousands)
Pacific$38,339 $ $(62)$(5,656)$32,621 
Northwest90,978    90,978 
Mountain26,816    26,816 
North Central
75,879    75,879 
South
38,708    38,708 
Energy Services3,820   5,656 9,476 
Total$274,540 $ $(62)$ $274,478 
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Other amortizable intangible assets were as follows:
 September 30, 2024September 30, 2023December 31, 2023
 (In thousands)
Customer relationships$19,059 $18,540 $18,540 
Less accumulated amortization10,419 8,668 9,102 
 8,640 9,872 9,438 
Noncompete agreements3,926 4,039 4,039 
Less accumulated amortization3,452 3,358 3,473 
474 681 566 
Other1,796 2,479 2,479 
Less accumulated amortization1,056 1,569 1,662 
 740 910 817 
Total$9,854 $11,463 $10,821 
Amortization expense for amortizable intangible assets for the three and nine months ended September 30, 2024, was $522,000 and $1.6 million, respectively. Amortization expense for amortizable intangible assets for the three and nine months ended September 30, 2023, was $647,000 and $2.0 million, respectively. Estimated amortization expense for identifiable intangible assets as of September 30, 2024, was:
Remainder of 20242025202620272028Thereafter
(In thousands)
Amortization expense$677 $1,991 $1,811 $1,789 $1,744 $1,842 
Note 11 - Fair value measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The fair value guidance establishes a hierarchy for grouping assets and liabilities, based on the significance of inputs. The estimated fair values of the Company's assets and liabilities measured on a recurring basis are determined using the market approach.
Financial instruments measured at fair value on a recurring basis
We measure our investments in certain fixed-income and equity securities at fair value with changes in fair value recognized in income. We anticipate using these investments, which consist of insurance contracts, to satisfy our obligations under our unfunded, nonqualified defined benefit and defined contribution plans for our executive officers and certain key management employees, and invests in these fixed-income and equity securities for the purpose of earning investment returns and capital appreciation. These investments, which totaled $28.5 million, $23.5 million and $24.9 million at September 30, 2024 and 2023, and December 31, 2023, respectively, are classified as investments on the Consolidated Balance Sheets. The net unrealized gains on these investments were $1.3 million and $2.9 million for the three and nine months ended September 30, 2024, respectively. The net unrealized loss on these investments was $597,000 for the three months ended September 30, 2023 and the net unrealized gain on these investments was $685,000 for the nine months ended September 30, 2023. The change in fair value, which is considered part of the cost of the plan, is classified in other income on the Consolidated Statements of Operations.
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The Company's assets measured at fair value on a recurring basis were as follows:
 Fair Value Measurements at September 30, 2024, Using 
 Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance at September 30, 2024
(In thousands)
Assets:    
Money market funds$ $4,034 $ $4,034 
Insurance contracts* 28,498  28,498 
Total assets measured at fair value$ $32,532 $ $32,532 
*    The insurance contracts invest approximately 36 percent in fixed-income investments, 23 percent in common stock of large-cap companies, 15 percent in cash equivalents, 10 percent in common stock of mid-cap companies, 9 percent target date investments, 5 percent in common stock of small-cap companies, 1 percent in international investments and 1 percent in real estate investments.
 Fair Value Measurements at September 30, 2023, Using 
 Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Balance at
June 30, 2023
(In thousands)
Assets:    
Money market funds$ $3,199 $ $3,199 
Insurance contracts* 23,483  23,483 
Total assets measured at fair value$ $26,682 $ $26,682 
*    The insurance contracts invest approximately 41 percent in fixed-income investments, 19 percent in cash equivalents, 18 percent in common stock of large-cap companies, 8 percent in common stock of mid-cap companies, 8 percent target date investments, 5 percent in common stock of small-cap companies and 1 percent international investments.
 Fair Value Measurements at December 31, 2023, Using 
Quoted Prices in
Active Markets
for Identical
Assets
 (Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
 (Level 3)
Balance at December 31, 2023
(In thousands)
Assets:    
Money market funds$ $3,241 $ $3,241 
Insurance contracts* 24,896  24,896 
Total assets measured at fair value$ $28,137 $ $28,137 
*    The insurance contracts invest approximately 40 percent in fixed-income investments, 19 percent in common stock of large-cap companies, 18 percent in cash equivalents, 8 percent in target date investments, 8 percent in common stock of mid-cap companies, 6 percent in common stock of small-cap companies and 1 percent in international investments.
The Company’s Level 2 money market funds are valued at the net asset value of shares held at the end of the period, based on published market quotations on active markets, or using other known sources including pricing from outside sources. The estimated fair value of the Company’s Level 2 insurance contracts is based on contractual cash surrender values that are determined primarily by investments in managed separate accounts of the insurer. These amounts approximate fair value. The managed separate accounts are valued based on other observable inputs or corroborated market data.
Though we believe the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value.
Nonfinancial instruments measured at fair value on a nonrecurring basis
We apply the provisions of the fair value measurement standard to our nonrecurring, non-financial measurements, including long-lived asset impairments. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments
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only in certain circumstances. We review the carrying value of our long-lived assets, excluding goodwill, whenever events or changes in circumstances indicate that such carrying amounts may not be recoverable.
The assets and liabilities of the acquisitions that occurred during the third quarter of 2024 were calculated using a market or cost approach. The fair value of some of the assets was determined based on Level 3 inputs including estimated future cash flows, discount rates, growth rates and sales projections, all of which require significant management judgment.
The Company's long-term debt is not measured at fair value on the Consolidated Balance Sheets and the fair value is being provided for disclosure purposes only. The fair value was categorized as Level 2 in the fair value hierarchy and was based on discounted cash flows using current market interest rates. The estimated fair value of the Company's Level 2 long-term debt was as follows:
 September 30, 2024September 30, 2023December 31, 2023
 (In thousands)
Carrying amount$691,717 $698,747 $696,985 
Fair value$719,351 $700,687 $725,086 
The carrying amounts of our remaining financial instruments included in current assets and current liabilities approximate their fair values.
Note 12 - Debt
Certain debt instruments of the Company contain restrictive covenants and cross-default provisions. In order to borrow under the debt agreements, we must be in compliance with the applicable covenants and certain other conditions, all of which the Company, as applicable, was in compliance with at September 30, 2024. In the event we do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued.
Long-term Debt Outstanding Long-term debt outstanding was as follows:
 
Weighted
Average
Interest
Rate at
September 30, 2024
September 30, 2024September 30, 2023December 31, 2023
 (In thousands)
Term loan agreement due on May 31, 2028
6.45 %$266,406 $273,281 $271,562 
Senior notes due on May 1, 2031
7.75 %425,000 425,000 425,000 
Other notes due on January 1, 2061
 %311 466 423 
Less unamortized debt issuance costs13,254 16,016 15,326 
Total long-term debt678,463 682,731 681,659 
Less current maturities8,791 7,082 7,082 
Net long-term debt$669,672 $675,649 $674,577 
Schedule of Debt Maturities Long-term debt maturities, which excludes unamortized debt issuance costs, at September 30, 2024, were as follows:
Remainder of
2024
2025202620272028Thereafter
(In thousands)
Long-term debt maturities$1,916 $10,425 $13,750 $17,188 $223,438 $425,000 
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Note 13 - Cash flow information
Cash expenditures for interest and income taxes were as follows:
Nine Months Ended
 September 30,
 20242023 
 (In thousands)
Interest paid, net
$35,321 $32,028 
Income taxes paid, net$33,362 $22,183 
Noncash investing and financing transactions were as follows:
Nine Months Ended
September 30,
20242023 
(In thousands)
Right-of-use assets obtained in exchange for new operating lease liabilities
$15,130 $9,717 
Property, plant and equipment additions in accounts payable
$1,770 $2,832 
Equity contribution from Centennial related to the Separation
$ $64,724 
Equity contribution to MDU Resources for asset/liability transfers related to the Separation $ $(1,548)
MDU Resources' stock issued prior to spin in connection with a business combination$ $383 
Note 14 - Business segment data
We focus on the vertical integration of our products and services by offering customers a single source for construction materials and related contracting services. We operate in 14 states across the United States through our operating segments: Pacific, Northwest, Mountain, North Central, South and Energy Services. These operating segments are used to determine the Company’s reportable segments, Pacific, Northwest, Mountain, Central and Energy Services, which are based on our method of internal reporting and management of our business. Four of the reportable segments are aligned by key geographic areas due to the production of construction materials and related contracting services and one is based on product line. Each segment is led by a segment manager who reports to the Company’s chief operating officer, who is also the Company's chief operating decision maker, along with the chief executive officer. The chief operating decision maker evaluates the performance of the segments and allocates resources to them based on earnings before interest, taxes, depreciation, depletion and amortization ("EBITDA").
In the fourth quarter of 2023, we realigned our reportable segments to better support our operational strategies. The liquid asphalt and related services portion of the Pacific segment's businesses are now reported under the Energy Services segment. In addition, the North Central and South operating regions have been aggregated into one reportable segment, Central. We also reallocated certain amounts to the operating segments that were previously reported within Corporate Services. All periods have been recast to conform with the revised presentation.
Each geographic segment offers a vertically integrated suite of products and services, including aggregates, ready-mix concrete, asphalt and contracting services, while the Energy Services segment produces and supplies liquid asphalt, primarily for use in asphalt road construction, and is a supplier to some of the other segments. Each geographic segment mines, processes and sells construction aggregates (crushed stone and sand and gravel); produces and sells asphalt; and produces and sells ready-mix concrete as well as vertically integrating its contracting services to support the aggregate-based product lines. Contracting services include heavy-civil construction, asphalt and concrete paving, and site development and grading. Although not common to all locations, the geographic segments also sell cement, merchandise and other building materials and related services.
Corporate Services represents the unallocated costs of certain corporate functions, such as accounting, legal, treasury, information technology, human resources and other corporate expenses that support the operating segments. We account for intersegment sales and transfers as if the sales or transfers were to third parties. The accounting policies applicable to each segment are consistent with those used in the audited consolidated financial statements.
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The information below follows the same accounting policies as described in the audited financial statements and notes included in the Company's 2023 Annual Report. Information on the Company's segments was as follows:
Three Months EndedNine Months Ended
September 30,September 30,
 2024 2023 2024 2023 
 (In thousands)
External operating revenues:   
Pacific$164,986 $157,329 $375,201 $348,051 
Northwest217,825 208,919 537,202 503,573 
Mountain261,118 254,722 514,713 491,094 
Central354,815 354,925 630,379 643,579 
Energy Services106,486 115,421 183,846 196,740 
Total reportable segment external operating revenues
$1,105,230 $1,091,316 $2,241,341 $2,183,037 
Intersegment operating revenues:
Pacific$29,722 $30,116 $65,342 $63,313 
Northwest42,614 36,683 91,017 84,937 
Mountain65,281 68,178 106,021 108,888 
Central110,905 123,099 172,079 191,860 
Energy Services25,308 28,972 41,735 44,900 
Total reportable segment intersegment operating revenues
$273,830 $287,048 $476,194 $493,898 
EBITDA:    
Pacific$29,497 $28,557 $46,543 $46,161 
Northwest55,914 48,467 126,831 101,335 
Mountain59,446 59,434 96,500 86,004 
Central79,830 74,779 97,295 86,279 
Energy Services33,708 45,714 50,593 64,519 
Total reportable segment EBITDA
$258,395 $256,951 $417,762 $384,298 
A reconciliation of consolidated operating revenues to reportable segment operating revenues is as follows:
Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
(In thousands)
Consolidated operating revenues
$1,105,293 $1,090,372 $2,241,789 $2,183,462 
Plus:
Intersegment operating revenues
276,899 293,456 488,532 500,704 
Less:
Corporate Services revenue3,132 5,464 12,786 7,231 
Total reportable segment operating revenues$1,379,060 $1,378,364 $2,717,535 $2,676,935 
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A reconciliation of consolidated net income before income taxes to reportable segment EBITDA is as follows:
Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
(In thousands)
Total consolidated net income before income taxes
$197,688 $194,874 $237,848 $218,498 
Plus:
Depreciation, depletion and amortization34,796 31,752 101,519 92,511 
Interest expense, net*12,113 14,774 36,069 41,399 
Less:
Corporate Services EBITDA(13,798)(15,551)(42,326)(31,890)
Total EBITDA for reportable segments$258,395 $256,951 $417,762 $384,298 
*Interest, net is interest expense net of interest income.
Note 15 - Commitments and contingencies
The Company is party to claims and lawsuits arising out of its business and that of its consolidated subsidiaries, which may include, but are not limited to, matters involving property damage, personal injury, and environmental, contractual and statutory obligations. We accrue a liability for those contingencies when the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. We do not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is probable or reasonably possible and which are material, we disclose the nature of the contingency and, in some circumstances, an estimate of the possible loss. Accruals are based on the best information available, but in certain situations management is unable to estimate an amount or range of a reasonably possible loss including, but not limited to when: (1) the damages are unsubstantiated or indeterminate, (2) the proceedings are in the early stages, (3) numerous parties are involved, or (4) the matter involves novel or unsettled legal theories.
At September 30, 2024 and 2023, and December 31, 2023, we accrued contingent liabilities as a result of litigation, which have not been discounted, of $3.2 million, $645,000 and $873,000, respectively. Most of these claims and lawsuits are covered by insurance, thus the Company's exposure is typically limited to its deductible amount. Management will continue to monitor each matter and adjust accruals as might be warranted based on new information and further developments. Management believes that the outcomes with respect to probable and reasonably possible losses in excess of the amounts accrued, net of insurance recoveries, while uncertain, either cannot be estimated or will not have a material effect upon the Company's financial position, results of operations or cash flows. Unless otherwise required by GAAP, legal costs are expensed as they are incurred.
Environmental matters
The Company is a party to claims for the cleanup of a superfund site in Portland, Oregon. There were no material changes to the environmental matters that were previously reported in the audited financial statements and notes included in the Company's 2023 Annual Report.
Guarantees
Knife River and certain of its subsidiaries have outstanding obligations to third parties where the Company has guaranteed their performance. These guarantees are related to contracts for contracting services and certain other guarantees. At September 30, 2024, the fixed maximum amounts guaranteed under these agreements aggregated to $11.5 million, all of which have no scheduled maturity date. Certain of the guarantees also have no fixed maximum amounts specified. There were no amounts outstanding under the previously mentioned guarantees at September 30, 2024.
Knife River and certain of its subsidiaries have outstanding letters of credit to third parties related to insurance policies and other agreements. At September 30, 2024, the fixed maximum amounts guaranteed under these letters of credit aggregated $20.6 million. At September 30, 2024, the amounts of scheduled expiration of the maximum amounts guaranteed under these letters of credit aggregate to $0 in 2024, $20.5 million in 2025, $0 in 2026 and $104,000 in 2027. There were no amounts outstanding under the previously mentioned letters of credit at September 30, 2024.
In the normal course of business, we have surety bonds related to contracts for contracting services, reclamation obligations and insurance policies of its subsidiaries. In the event a subsidiary of Knife River does not fulfill a bonded obligation, the Company would be responsible to the surety bond company for completion of the bonded 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 September 30, 2024, approximately $686.8 million of surety bonds were outstanding, which were not reflected on the Consolidated Balance Sheet.
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Note 16 - Related-party transactions
Transition services agreements
As part of the Separation, MDU Resources provided transition services to Knife River and Knife River is providing transition services to MDU Resources in accordance with the Transition Services Agreement entered into on May 30, 2023. The Company paid $40,000 and $1.3 million for the three months ended and $1.3 million and $1.9 million for the nine months ended September 30, 2024 and 2023, respectively, related to these activities, which were reflected in selling, general and administrative expenses on the Consolidated Statements of Operations. The Company received $14,000 and $407,000 for the three months ended and $152,000 and $684,000 for the nine months ended September 30, 2024 and 2023, respectively, related to these activities, which were reflected in other income on the Consolidated Statements of Operations. The majority of the transition services were completed over a period of one year after the Separation. The Company expects minimal continued services by Knife River to MDU Resources through May 2025.
For additional information on the presentation of related-party transactions, see Note 2.
Note 17 - Subsequent event
On November 2, 2024, the Company acquired the business of Albina Asphalt, a liquid asphalt provider with operations in Washington, Oregon and California, and will be included in the Company's Energy Services segment. To date, the initial accounting for the acquisition is incomplete. Due to the limited time since the date of the acquisition, it is impracticable for the Company to make business combination disclosures related to the acquisition. The Company is still gathering the necessary information to provide such disclosures in future filings.
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Item 2. 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 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, trends, 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 its Competitive EDGE strategy ("EDGE") implemented to improve margins and to execute on other strategic initiatives aimed at generating long-term profitable growth.
Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties. Nonetheless, the Company's 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 the Company undertakes 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 the Company's 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 the 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 2023 Annual Report on Form 10-K ("Annual Report") and subsequent filings with the United States Securities and Exchange Commission ("SEC").
Company Overview
Knife River is 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, inclusion, compensation and work-life balance.
Knife River is one of the leading providers of crushed stone and sand and gravel in the United States and operates through six operating segments across 14 states: Pacific, Northwest, Mountain, North Central, South and Energy Services. These operating segments are used to determine the Company's reportable segments and are based on our method of internal reporting and management of our business, as discussed in Note 14. The Company's reportable segments are: Pacific, Northwest, 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-led construction materials and contracting services provider in the United States, our 1.1 billion tons of aggregate reserves provide the foundation for a vertically integrated business strategy, with approximately 37 percent of our aggregates in 2024 being used internally to support value-added downstream products (ready-mix concrete and asphalt) and contracting services (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, high-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:
Pacific: Alaska, California and Hawaii
Northwest: Oregon and Washington
Mountain: Idaho, Montana and Wyoming
Central: Iowa, Minnesota, North Dakota, South Dakota and Texas
Energy Services: California, Iowa, Nebraska, South Dakota, Texas and Wyoming
The following table presents a summary of products and services provided, as well as modes of transporting those products:
Products and ServicesModes of Transportation
Precast/
Ready-MixConstructionPrestressedLiquidHeavy
AggregatesAsphaltConcreteServicesConcreteAsphaltCementEquipmentTruckingRailBarge
PacificXXXXXXXXXX
NorthwestXXXXXXXXX
MountainXXXXXX
CentralXXXXXXXX
Energy ServicesXXX
Basis of Presentation
On May 31, 2023, Knife River became a stand-alone publicly traded company. Prior to the Separation, Knife River operated as a wholly owned subsidiary of Centennial Energy Holdings, Inc. ("Centennial") and an indirect, wholly owned subsidiary of MDU Resources Group, Inc. ("MDU Resources") and not as a stand-alone company. The accompanying historical consolidated financial statements and footnotes for the periods prior to the Separation were prepared on a “carve-out” basis using the legal entity approach in conformity with accounting principles generally accepted in the United States of America ("GAAP") and were derived from the consolidated financial statements of MDU Resources as if Knife River operated on a stand-alone basis during these periods. For additional information related to the basis of presentation, see Note 2.
All intercompany balances and transactions between the businesses comprising Knife River have been eliminated in the accompanying consolidated financial statements.
In the fourth quarter of 2023, we realigned our reportable segments to better support our operational strategies. The liquid asphalt and related services portion of the Pacific segment’s businesses are now reported under the Energy Services segment. In addition, the North Central and South operating regions have been aggregated into one reportable segment, Central. We also reallocated certain amounts to the operating segments that were previously reported within Corporate Services. All periods have been recast to conform with the revised presentation.
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 Knife River's business, see the section entitled "Item 1A. Risk Factors" in Part I of the Company's 2023 Annual Report.
Backlog. Knife River’s contracting services backlog was as follows:
September 30, 2024September 30, 2023December 31, 2023
(In millions)
Pacific$114.9 $69.8 $51.2 
Northwest168.0 227.4 196.2 
Mountain279.9 251.1 256.7 
Central192.3 183.9 158.1 
$755.1 $732.2 $662.2 
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Expected margins on backlog at September 30, 2024, were slightly higher than the expected margins on backlog at September 30, 2023. Of the $755.1 million of backlog at September 30, 2024, we expect to complete approximately $688.9 million in the 12 months following September 30, 2024. While private work has softened to some extent, we continue to see strong bidding opportunities for public work across our states. Approximately 87 percent of our backlog at September 30, 2024, 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, 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"). 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” in Part I of the Company's 2023 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. States have moved forward with allocating funds from federal programs, such as the Infrastructure Investment and Jobs Act ("IIJA"), which is expected to provide $1.2 trillion in funding through 2026. Approximately 48 percent of IIJA formula funding has yet to be obligated to projects in our market areas. At the state level, eight of the 14 states in which we operate have introduced legislation to fund additional construction projects as of September 1, 2024. We continue to monitor the implementation and impact of these legislative items. Additionally, Department of Transportation ("DOT") budgets in the states where we operate remain strong despite coming down from the prior years' record level.
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 looking for ways to increase efficiencies and reduce costs. The process improvement team ("PIT crew") visited 10 of our largest locations in 2023, including quarries, asphalt plants and ready-mix plants. In 2024, the PIT crew has been expanded to extend its influence to more locations and standardize best practices. The PIT crew has visited 58 plants across 8 states through the third quarter of 2024.
Our management team has also continued to evaluate growth opportunities, both through organic growth and acquisitions they believe will generate shareholder value. As of November 4, 2024, we have invested $129.3 million of capital to close on six acquisitions, with a focus on aggregate reserves, ready-mix and liquid asphalt operations. The acquisitions include aggregate-specific purchases in key markets, including the assets of Frank B. Marks & Son in Northern California and Rock Products Manufacturing in Central Oregon. We also added to our ready-mix operations in California's Central Valley and, on November 2, 2024, we purchased the business of Albina Asphalt. Albina has operations in Washington, Oregon and California and will expand the footprint of our high-margin liquid asphalt materials product line.
Knife River operates in geographically diverse and competitive markets, and strives to maximize efficiencies, including transportation costs and economies of scale, to further expand margins and profitability. Our margins can experience negative pressure from competition, as well as impacts from the variability in the cost of raw materials, such as diesel fuel, gasoline, natural gas, liquid asphalt, cement and steel, with fuel and liquid asphalt costs often having the most significant impact on results. Many of these raw materials are subject to factors that are beyond our control, including global economic and political events and new and changing governmental regulations. The Energy Services segment is particularly susceptible to variability in liquid asphalt costs, which can impact both cost of sales and revenues, for which we cannot reliably predict future pricing. Such variability and inflationary pressures may have an impact on our margins, including fixed-price contracting services contracts that are impacted by the variability of energy and material prices. We mitigate our exposure to these fluctuations by entering into various purchase commitments, as well as by generally including terms in our contracting services agreements that provide for price adjustments related to variations in raw materials costs.
Our operations can also be significantly impacted by both favorable and unfavorable weather conditions. Unseasonably dry or warm weather in the states where we operate can allow for a lengthened construction season or allow for an earlier start on specific projects, while unseasonably wet and/or cold weather in the states where we operate can delay the start or cause an early end to the construction season or cause temporary delays on specific projects. Either of these conditions can impact both our construction materials sales and contracting services revenues. Other variables that can impact margins include the timing of project starts or completions, pre-construction season activities including equipment repair and maintenance costs or equipment mobilization, and declines or delays in new and existing projects due to the cyclical nature of the construction industry. Accordingly, operating results in any particular period may not be indicative of the results that can be expected for any other period.
Workforce. As a people-first company, we continually take steps to address safety, recruitment and retention of our employees. Safety is a core value at Knife River, and we continue to advance our safety training and safety culture through engagement, interaction and cross-company participation.
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We continue to deploy resources to attract, develop and retain qualified and diverse talent. As the United States faces shortages in the availability of individuals to fill construction careers, we have taken significant steps to showcase construction as a career of choice. We own and operate a state-of-the-art training facility, the Knife River Training Center, which is used corporate-wide to enhance the skills of both our new and existing employees through classroom education and hands-on experience. One of the most popular courses at the Knife River Training Center is the commercial driver's license training, which is helping to address an industry-wide labor shortage. The training facility also offers a variety of courses around leadership development for all Knife River employees.
Consolidated Overview
Three Months EndedNine Months Ended
September 30,September 30,
 2024 2023 2024 2023 
(In millions)
Revenue$1,105.3 $1,090.4 $2,241.8 $2,183.5 
Cost of revenue832.3 821.0 1,786.1 1,757.0 
Gross profit273.0 269.4 455.7 426.5 
Selling, general and administrative expenses63.9 59.2 183.6 167.3 
Operating income209.1 210.2 272.1 259.2 
Interest expense13.9 15.3 41.8 44.0 
Other income2.5 — 7.5 3.3 
Income before income taxes197.7 194.9 237.8 218.5 
Income tax expense49.6 48.2 59.4 56.3 
Net income$148.1 $146.7 $178.4 $162.2 
EBITDA*$244.6 $241.4 $375.4 $352.4 
Adjusted EBITDA*$245.2 $247.5 $381.8 $360.0 
*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 Knife River's 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 corporate development, as well as costs related to segment and corporate management 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; 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 the Company’s benefit plan expenses, other than service costs; interest income; realized and unrealized gains and losses on investments for the Company’s nonqualified benefit plans; earnings or losses on joint venture arrangements; and other miscellaneous income or expenses, including income and expenses related to the transition services agreement with MDU Resources.
Income tax expense consists of corporate income taxes related to the net income of the Company. Income taxes are presented at the corporate services level and not at the individual segments. The effective tax rate can be affected by many factors, including changes in tax laws, regulations or rates, new interpretations of existing laws or regulations and changes to the Company's overall levels of income before income tax.
The discussion that follows focuses on the key financial measures the Company uses to evaluate the performance of its business, which include revenue, gross profit, gross margin, EBITDA and EBITDA margin. Gross margin is calculated by dividing gross profit
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by revenue. Gross margin reflects the percentage of revenue earned in comparison to cost. EBITDA and EBITDA margin are non-GAAP financial measures. For more information and reconciliations to the nearest GAAP measures, see the section entitled "Non-GAAP Financial Measures."
The following tables summarize operating results for the Company.
Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
Dollars
Margin
Dollars
Margin
Dollars
Margin
Dollars
Margin
(In millions)
Revenues by segment:
Pacific$165.0$157.3$375.2$348.1
Northwest218.1209.4539.7504.2
Mountain261.1255.1514.9491.5
Central354.9354.9630.5643.6
Energy Services125.9140.6214.9234.1
Total segment revenues1,125.01,117.32,275.22,221.5
Corporate Services and Eliminations(19.7)(26.9)(33.4)(38.0)
Consolidated revenues$1,105.3$1,090.4$2,241.8$2,183.5
Gross profit by segment:
Pacific$34.320.8%$33.321.1%$60.216.0%$59.817.2%
Northwest57.426.3%50.224.0%129.123.9%107.921.4%
Mountain61.123.4%59.723.4%101.119.6%88.818.1%
Central85.424.1%80.422.6%110.617.5%101.115.7%
Energy Services34.727.5%46.733.3%53.725.0%68.229.1%
Total segment gross profit272.924.3%270.324.2%454.720.0%425.819.2%
Corporate Services and Eliminations.1(0.6)%(.9)3.2%1.0(3.0)%.7(1.6)%
Consolidated gross profit$273.024.7%$269.424.7%$455.720.3%$426.519.5%
Net income by segment:
Pacific$23.414.2%$23.114.7%$28.57.6%$30.28.7%
Northwest45.220.7%38.718.5%95.117.6%72.914.5%
Mountain52.720.2%53.120.8%76.814.9%67.413.7%
Central70.119.8%66.118.6%69.711.1%61.19.5%
Energy Services32.425.8%44.531.6%46.821.8%60.826.0%
Total segment net income
223.819.9%225.520.2%316.913.9%292.413.2%
Corporate Services and Eliminations (a)
(75.7)N.M.(78.8)N.M.(138.5)N.M.(130.2)N.M.
Consolidated net income
$148.113.4%$146.713.4%$178.48.0%$162.27.4%
EBITDA (b):
Pacific$29.517.9%$28.618.2%$46.512.4%$46.113.3%
Northwest55.925.6%48.523.2%126.823.5%101.320.1%
Mountain59.422.8%59.423.3%96.518.7%86.017.5%
Central79.822.5%74.821.1%97.315.4%86.313.4%
Energy Services33.726.8%45.732.5%50.623.5%64.527.6%
Total segment EBITDA (b)
258.323.0%257.023.0%417.718.4%384.217.3%
Corporate Services and Eliminations
(13.7)N.M.(15.6)N.M.(42.3)N.M.(31.8)N.M.
Consolidated EBITDA (b)
$244.622.1%$241.422.1%$375.416.7%$352.416.1%
(a)N.M. - not meaningful
(b)EBITDA, segment EBITDA, EBITDA margin and 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."
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Three Months EndedNine Months Ended
September 30,September 30,
2024 2023 2024 2023 
Sales (thousands):
Aggregates (tons)11,16912,02224,83326,071
Ready-mix concrete (cubic yards)1,1481,2712,6532,944
Asphalt (tons)3,1503,3495,1835,441
Average selling price:*
Aggregates (per ton)$17.32$16.10$17.56$16.24
Ready-mix concrete (per cubic yard)$185.97$169.98$185.78$169.02
Asphalt (per ton)$68.28$66.51$67.68$66.41
*The average selling price includes freight and delivery and other revenues.
Three Months EndedNine Months Ended
September 30,September 30,
2024202320242023
Dollars
Margin
Dollars
Margin
Dollars
Margin
Dollars
Margin
(In millions)
Revenues by product line:
Aggregates$193.4$193.6$436.2$423.5
Ready-mix concrete213.5216.0492.8497.7
Asphalt215.1222.8350.8361.3
Liquid Asphalt
110.9122.6187.3203.8
Other*89.791.5206.4192.1
Contracting services559.6537.31,056.81,005.8
Internal sales(276.9)(293.4)(488.5)(500.7)
Total revenues$1,105.3$1,090.4$2,241.8$2,183.5
Gross profit by product line:
Aggregates$51.726.7%$51.826.7%$96.122.0%$90.621.4%
Ready-mix concrete39.618.6%37.717.4%78.115.8%74.515.0%
Asphalt43.120.0%39.417.7%54.715.6%49.713.8%
Liquid Asphalt
28.826.0%39.232.0%43.723.3%57.428.1%
Other*37.541.8%38.742.3%47.122.8%48.925.5%
Contracting services72.312.9%62.611.7%136.012.9%105.410.5%
Total gross profit$273.024.7%$269.424.7%$455.720.3%$426.519.5%
*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 September 30, 2024, Compared to Three Months Ended September 30, 2023
Revenue
Revenue increased $14.9 million, largely driven by additional contracting services activity resulting from more public agency-related construction work. During the quarter, prices increased as a result of our pricing initiatives across all product lines, with the exception of liquid asphalt. Aggregate and ready-mix concrete prices increased in the high single digits while asphalt increased low single digits. Liquid asphalt prices were lower as a result of reduced supply input costs across our market areas. Offsetting the price increases was a decline in ready-mix concrete and aggregate volumes across all segments, while asphalt volumes decreased in only the Central and Pacific segments. These lower volumes are largely the result of EDGE-related initiatives of quality over quantity of work, the timing of projects and lower demand for private projects.
Gross profit and gross margin
Gross profit improved $3.6 million and gross margin remained unchanged. We recognized 120 basis points higher contracting services margins in the quarter from increased activity and improved bid margins as a result of disciplined project bidding and favorable project execution. Also contributing to the improvement was an increase in gross margin on the ready-mix concrete and asphalt product lines. As part of our EDGE-related initiatives, price increases outpaced higher costs while volumes declined as the segments continue to choose quality of work over quantity of work. Liquid asphalt continued to see a reduction in gross profit from reduced market pricing.
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Selling, general and administrative expenses
Selling, general and administrative expenses increased $4.7 million year-over-year. Our reportable segments had higher costs of $4.5 million, which was primarily increased payroll-related costs of $3.4 million, largely due to additional staffing and competitive wage increases, and higher professional services. Corporate Services had increased costs of $2.2 million for due diligence and integration costs related to corporate development, higher health care costs of $1.9 million and additional information technology costs of $1.1 million. Offsetting these costs at Corporate Services was a reduction in insurance loss reserves at our captive insurer, as well as lower one-time Separation costs of $3.6 million, primarily related to insurance costs and the transition services agreement with MDU Resources.
Interest expense
Interest expense decreased $1.4 million due primarily to lower average debt balances.
Other income
Other income improved $2.5 million, largely driven by increased interest income on higher average cash balances and higher returns on nonqualified benefit plan investments.
Income tax expense
Income tax expense increased $1.4 million, corresponding with higher income before income taxes.
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023
Revenue
Revenue increased $58.3 million, largely driven by additional contracting services activity resulting from more public agency-related construction work. During the year, prices increased as a result of our pricing initiatives across all product lines, except liquid asphalt. Aggregate and ready-mix concrete prices increased in the high single digits while asphalt increased low single digits. Liquid asphalt prices were lower as a result of reduced supply input costs across our market areas. Offsetting the price increases was a decline in ready-mix concrete and aggregate volumes across most segments, while asphalt volumes decreased only in the Central segment. These lower volumes are largely the result of EDGE-related initiatives of quality over quantity of work, the timing of projects and lower demand for private projects.
Gross profit and gross margin
Gross profit improved $29.2 million and gross margin improved 80 basis points. Contracting services margins improved 240 basis points as all segments saw an increase in revenue along with improved bid margins and favorable project execution during the year. Also contributing to the improvement was higher gross margin on all product lines except liquid asphalt. As part of our EDGE-related initiatives, price increases outpaced higher costs while volumes declined as the segments continue to choose quality of work over quantity of work. Liquid asphalt continued to see a reduction in gross profit from reduced market pricing.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $16.3 million. Our reportable segments had higher costs of $4.8 million, which was primarily higher payroll-related costs, largely due to additional staffing and competitive wage increases, and higher professional services of $3.0 million, partially offset by higher gains on asset sales of $2.5 million.
Corporate Services had increased costs of $11.4 million. The increase in costs for non-Separation related expenses include higher health care costs of $4.6 million, partly due to 2023 claims being paid from the MDU Resources health and welfare trust, due diligence and integration costs related to corporate development of $2.6 million and higher information technology costs of $1.0 million, partially offset by a reduction in insurance loss reserves at our captive insurer of $2.6 million. As a result of the Separation, Corporate Services experienced higher recurring costs as a publicly traded company of $6.6 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 $2.0 million; fees of $870,000 primarily related to fees on new debt issued in conjunction with the Separation; and insurance costs of $600,000. These recurring costs were partially offset by a reduction in general corporate expenses from MDU Resources of $9.0 million, as discussed in Note 2. Also, as part of the Separation, we incurred less one-time costs of $2.8 million, primarily related to insurance costs and the transition services agreement with MDU Resources.
Interest expense
Interest expense decreased $2.2 million due primarily to lower average debt balances, offset by higher average interest rates.
Other income
Other income increased $4.2 million due to increased interest income on higher average cash balances and higher returns on nonqualified benefit plan investments.
Income tax expense
Income tax expense increased $3.1 million, corresponding with higher income before income taxes.
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Business Segment Financial and Operating Data
A discussion of key financial data from Knife River’s business segments follows. Knife River provides segment-level information by revenue, gross profit, gross margin, EBITDA and EBITDA margin, as these are the measures of profitability used by our chief operating decision maker to assess operational results. EBITDA and EBITDA margin are non-GAAP financial measures. For more information and reconciliations to the nearest GAAP measure, see the section entitled "Non-GAAP Financial Measures.”
In the fourth quarter of 2023, we realigned our reportable segments to better support our operational strategies. Based on how the chief operating decision maker manages the Company, the reportable segments are: Pacific, Northwest, Mountain, Central and Energy Services. The liquid asphalt and related services portion of the Pacific segment’s businesses are now reported under the Energy Services segment. In addition, the North Central and South operating regions have been aggregated into one reportable segment, Central. We also provide the details of Corporate Services, which includes accounting, legal, treasury, information technology, human resources and certain corporate expenses that support our operating segments. As a result of the segment changes, we reallocated certain amounts to the operating segments that were previously reported within Corporate Services. All periods have been recast to conform with the revised presentation.
Results of Operations - Pacific
Three Months EndedNine Months Ended
September 30,September 30,
2024 2023 % Change2024 2023 % Change
(In millions)
Revenue$165.0$157.35%$375.2$348.18%
Gross profit$34.3$33.33%$60.2$59.81%
Gross margin20.8 %21.1 %16.0 %17.2 %
EBITDA$29.5$28.63%$46.5$46.11%
EBITDA margin17.9 %18.2 %12.4%13.3 %
Three Months EndedNine Months Ended
September 30,September 30,
2024 2023 2024 2023 
(In millions)
Revenues:
Aggregates$36.6$33.6$87.5$79.7
Ready-mix concrete40.439.9108.3106.5
Asphalt11.914.022.821.7
Other*48.049.5115.7112.8
Contracting services57.850.4106.290.7
Internal sales(29.7)(30.1)(65.3)(63.3)
$165.0$157.3$375.2$348.1
*Other includes cement, merchandise and other products that individually are not considered to be a core line of business for the segment.
Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023
Revenue
Revenue increased $7.7 million as price increases across its product lines contributed an additional $12.0 million, which was mainly due to pricing initiatives and aggregate product mix. The revenue increase was also driven by an increase in construction activity in Northern California of $11.5 million, which was largely related to additional public agency-related construction activity. Offsetting the price increases were reduced volumes of $12.9 million across all material product lines, partly due to increased competition and reduced demand in private markets.
Gross profit and gross margin
Gross profit improved $1.0 million, largely due to increased gross profit across most product lines as a result of price increases outpacing costs, providing an additional $1.2 million. Also contributing to additional gross profit was more public agency-related construction work in Northern California. These increases were offset by lower asphalt volumes due to the nature of the contracting work in the quarter being more heavy-civil construction than paving, as well as higher costs, which contributed to a decline in gross margin of 30 basis points.
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EBITDA and EBITDA margin
EBITDA improved $900,000 year-over-year, largely due to improved gross profit, as previously discussed. Slightly offsetting the increase was higher selling, general and administrative costs, largely payroll-related costs and professional services. EBITDA margin resulted in a decrease of 30 basis points, largely the result of the previously discussed lower gross margin.
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023
Revenue
Revenue increased $27.1 million across all core product lines. This increase resulted from increased pricing of $26.6 million primarily from pricing initiatives and additional construction activity in Northern California of $20.8 million, which was largely related to public agency-related construction work. Partially offsetting the increased revenues were lower aggregate and ready-mix concrete volumes of $11.9 million across the segment's markets related to the timing of projects and reduced private-market demand.
Gross profit and gross margin
Gross profit improved $400,000, primarily the result of additional gross profit from contracting services of $3.2 million, largely from more public agency-related construction work in Northern California and improved project execution. Partially offsetting the increase in gross profit were lower aggregate and ready-mix concrete volumes, as previously discussed. The increase in gross profit was also offset by higher repair and maintenance costs within the aggregate, asphalt and ready-mix concrete product lines, which partially contributed to a decline in gross margin of 120 basis points.
EBITDA and EBITDA margin
EBITDA improved $400,000, largely due to improved gross profit, as previously discussed. EBITDA margin decreased 90 basis points, largely as the result of the previously discussed lower gross margin.
Results of Operations - Northwest
Three Months EndedNine Months Ended
September 30,September 30,
2024 2023 % Change2024 2023 % Change
(In millions)
Revenue$218.1$209.44%$539.7$504.27%
Gross profit$57.4$50.214%$129.1$107.920%
Gross margin26.3 %24.0 %23.9 %21.4 %
EBITDA$55.9$48.515%$126.8$101.325%
EBITDA margin25.6 %23.2 %23.5 %20.1 %
Three Months EndedNine Months Ended
September 30,September 30,
2024 2023 2024 2023 
(In millions)
Revenues:
Aggregates$54.0$57.4$146.5$147.9
Ready-mix concrete47.046.7124.4125.3
Asphalt47.243.587.984.9
Other*5.44.514.611.5
Contracting services106.893.5254.8218.9
Internal sales(42.3)(36.2)(88.5)(84.3)
$218.1$209.4$539.7$504.2
*Other includes merchandise, transportation services and other products that individually are not considered to be a core line of business for the segment.
Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023
Revenue
Revenue increased $8.7 million, largely the result of higher contracting services revenue due to public agency-related construction work in the region, which also contributed to higher asphalt volumes. In addition, improved pricing on ready-mix concrete and aggregates provided $9.7 million more in revenues. Partially offsetting the increases were lower aggregate and ready-mix concrete sales volumes of $12.9 million resulting from EDGE-related price initiatives and market conditions.
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Gross profit and gross margin
Gross profit improved $7.2 million and gross margin improved 230 basis points mainly due to improved contracting services margins largely the result of favorable project execution as well as efficiencies gained at our Spokane prestress facility. An increase in asphalt volumes contributed higher gross profit of $1.3 million, largely due to additional contracting services work previously mentioned. Lower aggregate and ready-mix concrete volumes, as previously discussed, and higher depreciation expense across most product lines partially offset the increase in gross profit.
EBITDA and EBITDA margin
EBITDA improved $7.4 million and EBITDA margin improved 240 basis points, largely due to improved gross profit, as previously discussed, which was partially offset by higher selling, general and administrative costs due to increased payroll-related costs of $1.2 million.
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023
Revenue
Revenue increased $35.5 million, largely the result of higher contracting services revenue due to increased public agency-related construction work in the region, which also contributed to higher asphalt volumes. Also contributing to the increase was improved pricing on ready-mix concrete and aggregates of $22.4 million, which was more than offset by lower ready-mix concrete and aggregates volumes of $24.7 million resulting from EDGE-related price initiatives and market conditions.
Gross profit and gross margin
Gross profit improved $21.2 million and gross margin improved 250 basis points largely due to improved contracting services margins resulting from favorable project execution as well as efficiencies gained at our Spokane prestress facility. Also positively contributing was improved gross margin across the aggregate and ready-mix product lines as a result of increased pricing outpacing costs and increased asphalt volumes. Partially offsetting these increases were the effects of lower ready-mix concrete and aggregates volumes, as previously discussed, and higher depreciation expense across all product lines.
EBITDA and EBITDA margin
EBITDA improved $25.5 million and EBITDA margin improved 340 basis points, largely due to higher gross profit, as previously discussed, and higher asset sale gains of $1.8 million. Partially offsetting the increase was higher selling, general and administrative costs comprised of $2.0 million of higher payroll-related costs offset in part by lower information technology costs of $900,000.
Results of Operations - Mountain
Three Months EndedNine Months Ended
September 30,September 30,
2024 2023 % Change2024 2023 % Change
(In millions)
Revenue$261.1$255.12%$514.9$491.55%
Gross profit$61.1$59.72%$101.1$88.814%
Gross margin23.4 %23.4 %19.6 %18.1 %
EBITDA$59.4$59.4—%$96.5$86.012%
EBITDA margin22.8 %23.3 %18.7 %17.5 %
Three Months EndedNine Months Ended
September 30,September 30,
2024 2023 2024 2023 
(In millions)
Revenues:
Aggregates$40.1$39.5$80.7$78.1
Ready-mix concrete40.644.189.493.0
Asphalt60.059.793.889.9
Contracting services185.7179.6356.9339.0
Internal sales(65.3)(67.8)(105.9)(108.5)
$261.1$255.1$514.9$491.5
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Index
Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023
Revenue
Revenue increased $6.0 million due to higher pricing on aggregates and ready-mix concrete, which contributed $9.4 million to the overall increase in revenue. Also contributing to revenue was increased contracting services activity, largely resulting from more public agency and airport construction work, which also positively impacted asphalt volumes. Largely offsetting the increase was lower ready-mix concrete and aggregate volumes due to the timing of projects.
Gross profit and gross margin
Gross profit improved $1.4 million due to increased pricing outpacing costs for aggregates and ready-mix products, as well as improved contracting services gross profit from higher revenues, as previously discussed, disciplined project bidding, and project timing. These increases were offset by lower aggregate and ready-mix volumes due to the timing of projects, as previously discussed, which contributed to a flat gross margin.
EBITDA and EBITDA margin
EBITDA remained unchanged, largely the result of improved gross profit, as previously discussed, offset by higher selling, general and administrative costs due to increased payroll-related costs. EBITDA margin decreased 50 basis points.
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023
Revenue
Revenue increased $23.4 million primarily the result of increased pricing across all core product lines contributing $22.3 million of additional revenues and increased contracting services activity due to more Idaho public agency construction work and additional airport work, which also positively impacted asphalt volumes. These increases were partially offset by lower ready-mix concrete and aggregate volumes due to timing of projects.
Gross profit and gross margin
Gross profit improved $12.3 million and gross margin improved 150 basis points due in large part to increased contracting services margins from higher revenues. Also contributing to the gross profit was increased pricing across all core product lines outpacing costs. Offsetting these increases were lower aggregate and ready-mix concrete volumes, as previously discussed.
EBITDA and EBITDA margin
EBITDA improved $10.5 million and EBITDA margin improved 120 basis points, largely the result of improved gross profit, as previously discussed. Partially offsetting the increase was the absence of asset sale gains of $2.0 million in the prior year.
36

Index
Results of Operations - Central
Three Months EndedNine Months Ended
September 30,September 30,
2024 2023 % Change2024 2023 % Change
(In millions)
Revenue$354.9$354.9—%$630.5$643.6(2)%
Gross profit$85.4$80.46%$110.6$101.19%
Gross margin24.1 %22.6 %17.5 %15.7 %
EBITDA$79.8$74.87%$97.3$86.313%
EBITDA margin22.5 %21.1 %15.4 %13.4 %
Three Months EndedNine Months Ended
September 30,September 30,
2024 2023 2024 2023 
(In millions)
Revenues:
Aggregates$62.7$63.1$121.5$117.8
Ready-mix concrete85.585.3170.7172.9
Asphalt96.0105.6146.3164.8
Other*12.210.225.022.7
Contracting services209.3213.8338.9357.2
Internal sales(110.8)(123.1)(171.9)(191.8)
$354.9$354.9$630.5$643.6
*Other includes merchandise and other products that individually are not considered to be a core line of business for the segment.
Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023
Revenue
Revenue remained steady year-over-year largely due to price increases on ready-mix concrete and asphalt contributing $11.2 million. Offsetting the pricing increase was a decrease in asphalt and ready-mix concrete volumes and less contracting services work, which were the result of our EDGE-related initiative of quality of work over quantity of work.
Gross profit and gross margin
Gross profit improved $5.0 million and gross margin improved 150 basis points, largely driven by increased pricing for ready-mix concrete and asphalt that outpaced increased costs and higher aggregate gross profit due to lower equipment costs. Also positively contributing to the increase was higher margins for contracting services from disciplined project bidding.
EBITDA and EBITDA margin
EBITDA improved $5.0 million and EBITDA margin improved 140 basis points driven by increased gross profit, as previously discussed.
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023
Revenue
Revenue decreased $13.1 million, resulting from lower asphalt and ready-mix concrete volumes and less contracting services revenues as a result of our EDGE-related initiative of quality of work over quantity of work. Partially offsetting the decrease in volumes was higher prices on the material product lines contributing $21.4 million.
Gross profit and gross margin
Gross profit improved $9.5 million and gross margin improved 180 basis points, largely the result of increased pricing of $21.4 million across the material product lines that outpaced increased costs and improved margins on contracting services work contributing $4.1 million additional gross profit from EDGE-related initiatives including disciplined project bidding and favorable project execution. Partially offsetting the improvement was reduced volumes in the asphalt and ready-mix product lines.
EBITDA and EBITDA margin
EBITDA improved $11.0 million and EBITDA margin improved 200 basis points driven by increased gross profit, as previously discussed, and higher gains on asset sales of $2.7 million. Partially offsetting the increase was higher selling, general and administrative costs due to higher payroll-related costs.
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Index
Results of Operations - Energy Services
Three Months EndedNine Months Ended
September 30,September 30,
2024 2023 % Change2024 2023 % Change
(In millions)
Revenue$125.9$140.6(10)%$214.9$234.1(8)%
Gross profit$34.7$46.7(26)%$53.7$68.2(21)%
Gross margin27.5 %33.3 %25.0 %29.1 %
EBITDA$33.7$45.7(26)%$50.6$64.5(22)%
EBITDA margin26.8 %32.5 %23.5 %27.6 %
Three Months EndedNine Months Ended
September 30,September 30,
2024 2023 2024 2023 
(In millions)
Revenues:
Liquid Asphalt
$110.9$122.6$187.3$203.8
Other*20.921.838.337.8
Internal sales(5.9)(3.8)(10.7)(7.5)
$125.9$140.6$214.9$234.1
*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 September 30, 2024, Compared to Three Months Ended September 30, 2023
Revenue
Revenue decreased $14.7 million due largely to lower pricing as a result of reduced supply input costs across our market areas. The decrease in pricing was slightly offset by favorable market conditions in California and Texas in the third quarter.
Gross profit and gross margin
Gross profit decreased $12.0 million and gross margin decreased 580 basis points, driven by the reduced market pricing and higher operating costs associated with plant repairs at our California terminal.
EBITDA and EBITDA margin
EBITDA decreased $12.0 million and EBITDA margin decreased 570 basis points, which was related to decreased gross profit, as previously discussed.
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023
Revenue
Revenue decreased $19.2 million due to lower pricing as a result of reduced supply input costs across our market areas. Liquid asphalt sales volumes were up slightly, primarily from strong demand in California and Texas, which were partially offset by decreased volumes in the Midwest due to less carryover jobs year-over-year.
Gross profit and gross margin
Gross profit decreased $14.5 million and gross margin decreased 410 basis points, driven by the reduced market pricing in addition to increased operating costs.
EBITDA and EBITDA margin
EBITDA decreased $13.9 million and EBITDA margin decreased 410 basis points, which was related to decreased gross profit, as previously discussed, offset in part by lower selling, general and administrative costs related to lower payroll-related costs.
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Index
Corporate Services and Eliminations
Corporate Services includes all expenses related to the corporate functions of the Company, as well as insurance activity at our captive insurer; interest expense on a majority of the Company's long-term debt; interest income; and unrealized gains or losses on investments for the Company's nonqualified benefit plans.
Three Months Ended September 30, 2024, Compared to Three Months Ended September 30, 2023
During the third quarter of 2024, Corporate Services contributed negative EBITDA of $13.7 million, compared to negative EBITDA of $15.6 million in the prior year. EBITDA was positively impacted by higher gains on nonqualified benefit plans of $1.3 million and additional income from third-party training courses at the Knife River Training Center. Partially offsetting these benefits was a slight increase in selling, general and administrative costs consisting primarily of $2.2 million of due diligence and integration costs related to corporate development, higher health care costs of $1.9 million and additional information technology costs of $1.1 million. Offsetting these costs were less one-time Separation costs of $3.6 million, primarily related to insurance costs and the transition services agreement with MDU Resources, and a reduction in insurance loss reserves at our captive insurer.
Nine Months Ended September 30, 2024, Compared to Nine Months Ended September 30, 2023
Corporate Services contributed negative EBITDA of $42.3 million, or $10.5 million less EBITDA compared to the prior year. Corporate Services had increased selling, general and administrative costs of $11.5 million. The increase in costs for non-Separation related expenses include higher health care costs of $4.6 million, partly due to 2023 claims being paid from the MDU Resources health and welfare trust, due diligence and integration costs related to corporate development of $2.6 million and higher information technology costs of $1.0 million, partially offset by a reduction in insurance loss reserves at our captive insurer of $2.6 million. As a result of the Separation, Corporate Services experienced higher recurring costs as a publicly traded company of $6.6 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 $2.0 million; fees of $870,000 primarily related to fees on new debt issued in conjunction with the Separation; and insurance costs of $600,000. These recurring costs were partially offset by a reduction in general corporate expenses from MDU Resources of $9.0 million, as discussed in Note 2. Also, as part of the Separation, we incurred less one-time costs of $2.8 million, primarily related to insurance costs and the transition services agreement with MDU Resources.
Liquidity and Capital Resources
At September 30, 2024, we had unrestricted cash and cash equivalents of $220.4 million, working capital of $733.5 million and borrowing capacity of $329.4 million on our revolving credit agreement, net of our outstanding letters of credit. Working capital is calculated as current assets less current liabilities. As of September 30, 2024, 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 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.
Knife River’s ability to fund its cash needs will depend on the ongoing ability to generate cash from operations and obtain debt financing with competitive rates. Knife River relies on access to capital markets as sources of liquidity for capital requirements not satisfied by cash flows from operations, particularly in the first half of the year due to the seasonal nature of the 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 a disciplined use of capital, including reinvesting in the company to maintain fixed assets, improve operations and grow our operations. We allocate capital expenditures in two categories, which align with our EDGE strategy, as follows:
Discipline - Support and Improve Existing Operations
Maintenance: Plant and equipment; aggregate reserve replacement.
Improvements: Productivity, safety, quality and environmental improvements that drive return on invested capital and support our core values.
We estimate 2024 capital expenditures for our Discipline category to be between $170 million and $200 million, with $127.2 million spent as of September 30, 2024. The majority has been spent on routine replacement of vehicles and equipment, plant improvements and buildings.
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Index
Growth - Expand Operations
Organic: Greenfield growth in new markets; additional operations in existing markets.
Acquisition: Purchase bolt-on or new platform operations in mid-sized, high-growth markets; focused on materials.
As of November 4, 2024, we have invested $129.3 million in our Growth category on six acquisitions which include aggregate reserves, ready-mix and liquid asphalt operations. Within the Growth category, we have $23.1 million approved for the remainder of 2024 for the initial stages of approved greenfield projects.
Capital expenditures for future acquisitions and organic opportunities would be incremental to the outlined capital program; these opportunities are dependent upon economic and other competitive conditions. It is anticipated that capital expenditures for 2024 will be funded by various sources, including internally generated cash and debt.
Cash flows
Nine Months Ended
September 30,
 2024 2023 
(In millions)
Net cash provided by (used in)
Operating activities$149.9 $152.9 
Investing activities(137.8)(82.9)
Financing activities(7.0)36.1 
Increase in cash, cash equivalents and restricted cash5.1 106.1 
Cash, cash equivalents and restricted cash -- beginning of year262.3 10.1 
Cash, cash equivalents and restricted cash -- end of period$267.4 $116.2 
Operating activities 
Nine Months Ended
September 30,
 2024 2023 Variance
(In millions)
Components of net cash provided by operating activities:
Net income$178.4 $162.2 $16.2 
Adjustments to reconcile net income to net cash provided by operating activities
115.1 93.0 22.1 
Changes in current assets and liabilities, net of acquisitions:
Receivables(224.8)(302.5)77.7 
Due from related-party— 16.1 (16.1)
Inventories(27.3)8.6 (35.9)
Other current assets11.1 (20.2)31.3 
Accounts payable77.2 91.6 (14.4)
Due to related-party— (7.3)7.3 
Other current liabilities17.3 78.0 (60.7)
Pension and postretirement benefit plan contributions(2.5)(1.6)(.9)
Other noncurrent charges5.4 35.0 (29.6)
Net cash provided by operating activities$149.9 $152.9 $(3.0)
Cash provided by operating activities at September 30, 2024, decreased $3.0 million, largely related to higher working capital needs. Cash used by working capital components totaled $146.5 million for the nine months ended September 30, 2024, compared to $135.7 million for the nine months ended September 30, 2023. This increase in cash usage in 2024 was the result of higher accrued compensation due in part to additional employees associated with the Separation; higher liquid asphalt and aggregate inventory balances, due in part to higher costs of aggregate inventory; timing of prepaid insurance due to the Separation; the removal of all related-party balances due to the Separation; and fluctuations in the timing of payment on accounts payable. Partially offsetting these decreases were stronger collections on receivables balances during 2024 and higher net income.
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Index
Investing activities
Nine Months Ended
September 30,
 2024 2023 Variance
(In millions)
Capital expenditures$(127.2)$(86.4)$(40.8)
Acquisitions, net of cash acquired(15.0)— (15.0)
Net proceeds from sale or disposition of property and other7.6 5.2 2.4 
Investments(3.2)(1.7)(1.5)
Net cash used in investing activities$(137.8)$(82.9)$(54.9)
The increase in cash used in investing activities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was primarily due to higher capital expenditures, including a liquid asphalt expansion project and routine replacement of vehicles and equipment. In addition, three acquisitions were completed in the first nine months of 2024.
Financing activities
Nine Months Ended
September 30,
 2024 2023 Variance
(In millions)
Issuance of long-term related-party notes, net$— $205.3 $(205.3)
Issuance of long-term debt— 700.0 (700.0)
Repayment of long-term debt(5.3)(1.9)(3.4)
Debt issuance costs— (16.7)16.7 
Tax withholding on stock-based compensation
(1.7)— (1.7)
Net transfers to Centennial— (850.6)850.6 
Net cash provided by (used in) financing activities$(7.0)$36.1 $(43.1)
The decrease in cash flows provided by financing activities for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was largely related to changes in the Company's debt structure 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
There were no material changes in the contractual obligations from those reported in the 2023 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 7 in the 2023 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 September 30, 2024, our purchase commitments reflected a decrease of approximately 22 percent from the balance at December 31, 2023. This decrease is primarily related to our fulfillment of part of the three-year cement contract entered into during 2023. In addition, due to the seasonality of work and the third quarter being its peak construction season, our purchase commitments saw an expected decrease from the balance at June 30, 2024. We expect purchase commitments to continue to decrease throughout the remainder of 2024 as obligations continue to be satisfied during the construction season.
Defined benefit pension plans
We have 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 other material changes to our qualified noncontributory defined benefit pension plans from those reported in the 2023 Annual Report other than increased contributions of approximately $2.1 million made to our pension plans during the third quarter of 2024. The increase was driven by additional discretionary contributions. For more information, see Note 17 and Part II, Item 7 in the 2023 Annual Report.
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Index
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 financial measures. These non-GAAP financial measures, including those measures by segment, as applicable, 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 and unrealized gains and losses on benefit plan investments 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 the Company's 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 those measures by segment, are useful performance measures because they provide clarity as to the operational results of the Company. 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 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 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 September 30, 2024PacificNorthwestMountainCentral Energy ServicesCorporate Services and EliminationsConsolidated
(In millions)
Net income (loss)$23.4 $45.2 $52.7 $70.1 $32.4 $(75.7)$148.1 
Depreciation, depletion and amortization6.1 10.7 6.7 9.7 1.3 .3 34.8 
Interest expense, net— — — — — 12.1 12.1 
Income taxes— — — — — 49.6 49.6 
EBITDA$29.5 $55.9 $59.4 $79.8 $33.7 $(13.7)$244.6 
Unrealized (gains) losses on benefit plan investments$(1.2)$(1.2)
Stock-based compensation expense1.81.8 
Adjusted EBITDA$(13.1)$245.2 
Revenue$165.0 $218.1 $261.1 $354.9 $125.9 $(19.7)$1,105.3 
Net income margin14.2 %20.7 %20.2 %19.8 %25.8 %N.M.13.4 %
EBITDA margin17.9 %25.6 %22.8 %22.5 %26.8 %N.M.22.1 %
Adjusted EBITDA marginN.M.22.2 %
*N.M. - not meaningful
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Index
Three Months Ended September 30, 2023PacificNorthwestMountain
Central
Energy Services
Corporate Services and Eliminations
Consolidated
(In millions)
Net income (loss)$23.1 $38.7 $53.1 $66.1 $44.5 $(78.8)$146.7 
Depreciation, depletion and amortization5.5 9.8 6.3 8.7 1.2 .3 31.8 
Interest expense, net— — — — — 14.7 14.7 
Income taxes— — — — — 48.2 48.2 
EBITDA$28.6 $48.5 $59.4 $74.8 $45.7 $(15.6)$241.4 
Unrealized (gains) losses on benefit plan investments$.6$.6 
Stock-based compensation expense1.51.5 
One-time separation costs
4.04.0 
Adjusted EBITDA$(9.5)$247.5 
Revenue$157.3 $209.4 $255.1 $354.9 $140.6 $(26.9)$1,090.4 
Net income margin14.7 %18.5 %20.8 %18.6 %31.6 %N.M.13.4 %
EBITDA margin18.2 %23.2 %23.3 %21.1 %32.5 %N.M.22.1 %
Adjusted EBITDA marginN.M.22.7 %
*N.M. - not meaningful

Nine Months Ended September 30, 2024PacificNorthwestMountain
Central
Energy Services
Corporate Services and Eliminations
Consolidated
(In millions)
Net income (loss)$28.5 $95.1 $76.8 $69.7 $46.8 $(138.5)$178.4 
Depreciation, depletion and amortization18.0 31.7 19.6 27.6 3.8 .8 101.5 
Interest expense, net— — .1 — — 36.0 36.1 
Income taxes— — — — — 59.4 59.4 
EBITDA$46.5 $126.8 $96.5 $97.3 $50.6 $(42.3)$375.4 
Unrealized (gains) losses on benefit plan investments$(2.8)$(2.8)
Stock-based compensation expense5.45.4 
One-time separation costs3.83.8 
Adjusted EBITDA$(35.9)$381.8 
Revenue$375.2 $539.7 $514.9 $630.5 $214.9 $(33.4)$2,241.8 
Net income margin7.6 %17.6 %14.9 %11.1 %21.8 %N.M.8.0 %
EBITDA margin12.4 %23.5 %18.7 %15.4 %23.5 %N.M.16.7 %
Adjusted EBITDA marginN.M.17.0 %
*N.M. - not meaningful
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Index
Nine Months Ended September 30, 2023PacificNorthwestMountainCentralEnergy ServicesCorporate Services and EliminationsConsolidated
(In millions)
Net income (loss)$30.2 $72.9 $67.4 $61.1 $60.8 $(130.2)$162.2 
Depreciation, depletion and amortization15.9 28.4 18.5 25.2 3.7 0.8 92.5 
Interest expense, net— — 0.1 — — 41.3 41.4 
Income taxes— — — — — 56.3 56.3 
EBITDA$46.1 $101.3 $86.0 $86.3 $64.5 $(31.8)$352.4 
Unrealized (gains) losses on benefit plan investments$(1.1)$(1.1)
Stock-based compensation expense2.32.3 
One-time separation costs6.4 6.4 
Adjusted EBITDA$(24.2)$360.0 
Revenue$348.1 $504.2 $491.5 $643.6 $234.1 $(38.0)$2,183.5 
Net income margin8.7 %14.5 %13.7 %9.5 %26.0 %N.M.7.4 %
EBITDA margin13.3 %20.1 %17.5 %13.4 %27.6 %N.M.16.1 %
Adjusted EBITDA marginN.M.16.5 %
*N.M. - not meaningful

New Accounting Standards
For information regarding new accounting standards, see Note 3, which is incorporated by reference.
Critical Accounting Estimates
Knife River's critical accounting estimates include revenue recognized using the cost-to-cost measure of progress for contracts; impairment testing of goodwill; and impairment testing of long-lived assets excluding goodwill. There were no material changes in the Company's critical accounting estimates from those that were previously reported in the Company's 2023 Annual Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to the impact of market fluctuations associated with interest rates and commodity prices. We have policies and procedures to assist in controlling these market risks and from time to time have utilized derivatives to manage a portion of our risk.
Interest rate risk
As of September 30, 2024, the Company had $266.4 million in term loans outstanding which bear interest at a variable rate. As of September 30, 2024, the rate in effect was 6.45 percent, therefore, a hypothetical increase of 1.00 percent to the interest rate at September 30, 2024, would increase the all-in rate to 7.45 percent, the effect of which would increase the Company's interest expense by $2.7 million over the next 12 months based on the balances outstanding for these borrowings as of September 30, 2024.
At September 30, 2024, the Company had no outstanding interest rate hedges.
Commodity price risk
There were no material changes to commodity price risk faced by the Company from those reported in the 2023 Annual Report.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. The Company's disclosure controls and other procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The Company's disclosure controls and other procedures are designed to provide reasonable assurance that information required to be disclosed is accumulated and communicated to management, including the Company's chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure. The Company's management, with the participation of the Company's chief executive officer and chief financial
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Index
officer, has evaluated the effectiveness of the Company's disclosure controls and other procedures as of the end of the period covered by this report. Based upon that evaluation, the chief executive officer and the chief financial officer have concluded that, as of the end of the period covered by this report, such controls and procedures were effective at a reasonable assurance level.
Changes in internal controls
No change in the Company's internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.
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Part II -- Other Information
Item 1. Legal Proceedings
There were no material changes to the Company's legal proceedings that were previously reported in Part 1, Item 3 - Legal Proceedings in the 2023 Annual Report.
Item 1A. Risk Factors
Refer to the Company's risk factors that are disclosed in Part I, Item 1A. Risk Factors in its 2023 Annual Report that could be materially harmful to the Company's business, prospects, financial condition or financial results if they occur.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
For information regarding mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K, see Exhibit 95 to this Form 10-Q, which is incorporated herein by reference.
Item 5. Other Information
During the three months ended September 30, 2024, no director or officer of the Company adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
See the index to exhibits immediately preceding the signature page to this report.
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Exhibits Index
Incorporated by Reference
Exhibit NumberExhibit DescriptionFiled
Herewith
Furnished
Herewith
FormPeriod
Ended
ExhibitFiling
Date
File Number
3(a)8-K3.16/01/231-41642
3(b)8-K3.26/01/231-41642
10.1+
8-K10.18/20/241-41642
31(a)X
31(b)X
32

X
95X
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHXBRL Taxonomy Extension Schema Document
101.CALXBRL Taxonomy Extension Calculation Linkbase Document
101.DEFXBRL Taxonomy Extension Definition Linkbase Document
101.LABXBRL Taxonomy Extension Label Linkbase Document
101.PREXBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
+ Management contract, compensatory plan or arrangement.

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Signatures
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
  Knife River Corporation
    
DATE:November 4, 2024BY:/s/ Nathan W. Ring
   Nathan W. Ring
   Vice President and Chief Financial Officer
    
    
  BY:/s/ Marney L. Kadrmas
   Marney L. Kadrmas
   Chief Accounting Officer


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