Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2024

Prior to the Separation, Everus Construction historically operated as a wholly owned subsidiary of Centennial and an indirect, wholly owned subsidiary of MDU Resources and not as a standalone company. The accompanying unaudited condensed consolidated financial statements and footnotes were prepared on a “carve-out” basis in connection with the Separation and were derived from the unaudited condensed consolidated financial statements of MDU Resources as if the Company operated on a standalone basis during the periods presented. However, the unaudited condensed consolidated financial statements do not necessarily reflect what the Company’s results of

operations, financial position and cash flows would have been had it operated as a separate, publicly traded company during the periods presented and may not be indicative of its future performance.

The accompanying unaudited condensed consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States (“GAAP”). Pursuant to GAAP, certain information and footnote disclosures normally included in the annual audited consolidated financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements included in the Company’s Form 10. The information includes all adjustments that are, in the opinion of management, necessary for a fair presentation of the unaudited condensed consolidated financial statements and are of a normal recurring nature.

The unaudited condensed consolidated balance sheets reflect the assets and liabilities of Centennial that were specifically identifiable as being directly attributable to the Company for the periods presented prior to the Separation.

All revenues and costs as well as assets and liabilities directly associated with the business activity of the Company were included in the unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements also include allocated expenses for certain functions that were 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, internal audit, risk management and other shared services. These general corporate expenses were included in the unaudited condensed consolidated statements of income within Selling, general and administrative expenses.These expenses were allocated to the Company on the basis of direct usage where 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. The allocations may not, however, reflect the expenses the Company would have incurred as a standalone company for the periods presented. These costs also may not be indicative of the expenses that the Company will incur in the future or would have incurred if the Company had obtained these services from a third party.

Earnings per share information has been retrospectively adjusted for all periods presented on the unaudited condensed consolidated statements of income to reflect the Distribution. Refer to Note 8 – Earnings Per Share for more information on the share count used in the earnings per share calculations.

Following the Separation, the Company now performs certain functions using its own resources or purchased services. For an interim period of up to 20 months following the Separation, however, certain functions will continue to be provided by MDU Resources under a transition services agreement.

Prior to the Separation, the Company historically participated in MDU Resources’ centralized cash management program through Centennial, including its overall financing arrangements. The Company had related-party agreements in place with Centennial for the financing of its capital needs, which are reflected as Related-party notes payable on the unaudited condensed consolidated balance sheets. Interest expense in the unaudited condensed consolidated statements of income reflected the allocation of interest on borrowing and funding associated with the related-party agreements. Following the Separation, the Company no longer participates in MDU Resources’ centralized cash management program. The Company has implemented its own centralized cash management program and has access to third-party credit facilities to fund day-to-day operations.

Principles of Consolidation

The unaudited condensed consolidated financial statements were prepared in accordance with GAAP and include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions between the businesses comprising the Company have been eliminated in the accompanying unaudited condensed consolidated financial statements.

Related-party transactions between the Company, MDU Resources, Centennial or other MDU Resources subsidiaries, for general operating activities, the Company's participation in MDU Resources’ centralized cash management program through Centennial, and intercompany debt, were included in the unaudited condensed consolidated financial statements. These related-party transactions were historically settled in cash and were reflected in the unaudited condensed consolidated balance sheets as Due from related-party, Due from related-party - noncurrent, Due to related-party or Related-party notes payable. The aggregate net effect of general related-party operating activities was reflected in the unaudited condensed consolidated statements of cash flows within operating activities. The effects of the Company’s participation in MDU Resources’ centralized cash management program and intercompany debt arrangements were reflected in the unaudited condensed consolidated statements of cash flows within investing and financing activities.

New Accounting Standards

Changes to GAAP are typically established by the Financial Accounting Standards Board (“FASB”) in the form of Accounting Standards Updates (“ASUs”) to the FASB’s Accounting Standards Codification (“ASC”). The Company considers the applicability and impact of all ASUs.

The following table provides a brief description of the accounting pronouncements applicable to the Company and the potential impact on its financial statements and/or disclosures:

Standard

Description

Effective Date

Impact on Financial Statements/Disclosures

Recently adopted ASUs

ASU 2022-06 – Reference Rate Reform (Topic 848): Deferral of Sunset Date

In December 2022, the FASB included a sunset provision within ASC 848 based on expectations of when the London Inter-Bank Offered Rate (“LIBOR”) would cease to be published. At the time ASU 2020-04 was issued, the UK Financial Conduct Authority had established its intent to cease overnight tenors of LIBOR after December 31, 2021. In March 2021, the UK Financial Conduct Authority announced that the intended cessation date of the overnight tenors of LIBOR would be June 30, 2023, which is beyond the current sunset date of ASC 848. The amendments in this Update defer the sunset date of ASC 848 from December 31, 2022, to December 31, 2024, after which entities will no longer be permitted to apply the relief in ASC 848. Existing contracts referencing LIBOR or other reference rates expected to be discontinued must have identified a replacement rate by June 30, 2023. New contracts will incorporate a new reference rate, which includes the Secured Overnight Financing Rate (“SOFR”).

Effective upon issuance (December 21, 2022) through December 31, 2024.

The Company has updated its credit agreements to include language regarding the successor or alternate rate to LIBOR. The Company determined the adoption of the guidance did not have a material impact on its unaudited condensed consolidated financial statements.

Standard

Description

Effective Date

Impact on Financial Statements/Disclosures

Recently issued ASUs not yet adopted

ASU 2023-05 - Business Combinations - Joint Venture Formations - Recognition and Initial Measurement

In August 2023, the FASB issued guidance on accounting for contributions made to a joint venture, upon formation, in a joint venture's separate financial statement in order to provide decision useful information to investors and other allocators of capital (collectively investors) in a joint venture's financial statements and reduce diversity in practice. The new basis of accounting will require that a joint venture, upon formation, will recognize and initially measure its assets and liabilities at fair value (with the exceptions to fair value measurement that are consistent with the business combinations guidance). A joint venture that was formed before January 1, 2025, may elect to apply the guidance retrospectively if it has sufficient information.

Effective prospectively for all joint venture formations with a formation date on or after January 1, 2025.

The Company is currently evaluating the impact the guidance will have on its interim and annual disclosures for the year ended December 31, 2025.

ASU 2023-07 - Segment Reporting - Improvements to Reportable Segment Disclosures

In November 2023, the FASB issued guidance on improving financial reporting by requiring disclosure on incremental segment information, primarily through enhanced disclosures about significant segment expenses on an annual and interim basis for all public entities to enable investors to develop more decision-useful financial analyses.

Effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with prior periods disclosed in the period of adoption.

The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2024, and future interim periods.

ASU 2023-09 - Income Taxes - Improvements to Income Tax Disclosures

The FASB issued guidance to address investors’ requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income tax paid information and effectiveness of income tax disclosures.

Effective for fiscal years beginning after December 15, 2024.

The Company is currently evaluating the impact the guidance will have on its disclosures for the year ended December 31, 2025.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with GAAP requires the Company 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 unaudited condensed 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; property depreciable lives; tax provisions; revenue recognized using the cost-to-cost measure of progress for contracts; expected credit losses; loss contingencies; costs on construction contracts; unbilled revenues; actuarially determined benefit costs; lease classification; present value of right-of-use assets and lease liabilities; and the valuation of stock-based compensation. 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.

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 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. The Company is considered an agent for certain taxes collected from customers. As such, the Company presents revenues net of these taxes at the time of sale to be remitted to governmental authorities, including sales and use taxes.

As part of the adoption of Revenue from Contracts with Customers, the Company elected the practical expedient to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the Company otherwise would have recognized is 12 months or less.

Contract Estimates and Changes in Estimates

Changes in cost estimates on certain contracts may result in the issuance of change orders, which can be approved or unapproved by the customer, or the assertion of contract claims. The Company recognizes amounts associated with change orders and claims as revenue if it is probable that the contract price will be adjusted and the amount of any such adjustment can be reasonably estimated. Change orders and claims are negotiated in the normal course of business and represent management's estimates of additional contract revenues that have been earned and are probable of collection.

Fair Value Measurements

The Company’s Level 2 money market funds are included as a part of Investments on the unaudited condensed consolidated balance sheets and 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 the Company believes 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 different estimates of fair value.

The estimated fair values of the Company’s cash and cash equivalents, receivables, accounts payable and other accrued liabilities approximate their carrying value due to the short-term maturities of these instruments.

The carrying value of the Company’s long-term debt, classified as related-party notes payable, approximates fair value based on a comparison with current prevailing market rates for borrowings of similar risks and maturities.

Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the applicable period. Diluted earnings 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 any dilutive securities.