Fair Value Measurements

12 Months Ended

Dec. 31, 2024

Fair Value Disclosures [Abstract]

Fair Value Measurements

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. ASC 820 - Fair Value Measurement (“ASC 820”) establishes a three-tier hierarchy for grouping assets and liabilities, based on the significance and availability of inputs in active markets. The estimated fair values of the Company’s assets and liabilities measured on a recurring basis are determined using the market approach.

In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs use data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are “unobservable data points” for the asset or liability and include situations where there is little, if any, market activity for the asset or liability.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company measured its investments in certain fixed-income and equity securities at fair value with changes in fair value recognized in the consolidated statements of income. The Company anticipates using these investments, which consist of insurance contracts, to satisfy its obligations under its unfunded, nonqualified deferred compensation plan for the Company’s executive officers and certain key management employees. The Company invests in these fixed-income and equity securities for the purpose of earning investment returns and capital appreciation. Prior to the Separation, the Company was a participant in MDU Resources’ benefit and compensation plans. These investments, which totaled $4.8 million and $5.0 million as of December 31, 2024 and 2023, respectively, were included in Investments on the consolidated balance sheets. The Company recognized net unrealized gains on these investments of $0.6 million for the year ended December 31, 2024. The net unrealized gains and losses on these investments were immaterial for the years ended December 31, 2023 and December 31, 2022, respectively. The changes in fair value were classified in Other income on the consolidated statements of income.

The Company’s Level 2 money market funds were included as a part of Investments on the 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 was based on contractual cash surrender values that were determined primarily by investments in managed separate accounts of the insurer. These amounts approximated fair value. The managed separate accounts were 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 a different estimate of fair value.

The estimated fair values of the Company’s Cash, cash equivalents and restricted cash, Receivables, Accounts payable and Other accrued liabilities approximated their carrying value due to the short-term maturities of these instruments.

The carrying value of the Company’s long-term debt as of December 31, 2023, classified as Related-party notes payable, approximated fair value based on a comparison with current prevailing market rates for borrowings of similar risks and maturities. In connection with the Separation, the Company used the net proceeds of newly issued debt to repay its Related-party notes payable, which were no longer outstanding as of December 31, 2024. Refer to Note 15 – Related-Party Transactions for additional information.

The Company has a captive insurance arrangement in which a Captive Cell within a captive insurance company holds cash, classified as restricted cash, and certain other accrued liabilities and other noncurrent liabilities in order to manage and administer insurance claims on behalf of the Company. The fair value of the assets and liabilities held by the Captive Cell

approximated their fair value as of December 31, 2024. Refer to Note 2 – Basis of Presentation and Summary of Significant Accounting Policies for additional information on the Company’s captive insurance arrangement.

The Company’s assets measured at fair value on a recurring basis were as follows:

	Fair Value Measurements as of December 31, 2024, Using
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Balance as of December 31, 2024
	(In thousands)
Assets:
Insurance contracts	$	—	$	4,766	$	—	$	4,766
Total assets measured at fair value	$	—	$	4,766	$	—	$	4,766

	Fair Value Measurements as of 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 as of December 31, 2023
	(In thousands)
Assets:
Money market funds	$	—	$	1,725	$	—	$	1,725
Insurance contracts	—		5,005		—		5,005
Total assets measured at fair value	$	—	$	6,730	$	—	$	6,730

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

The Company applies the provisions of ASC 820 to its 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 only in certain circumstances. The Company reviews the carrying value of its long-lived assets, excluding goodwill, whenever events or changes in circumstances indicate that such carrying amounts may not be recoverable. Refer to Note 2 – Basis of Presentation and Summary of Significant Accounting Policies for additional information on impairment of long-lived assets.

Assets and Liabilities Not Measured at Fair Value

The Company's long-term debt as of December 31, 2024 was not measured at fair value on the consolidated balance sheet, but the corresponding 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. Refer to Note 7 – Debt for additional information on the Company’s long-term debt.

The estimated fair value of the Company's Level 2 long-term debt was as follows:

	As of December 31, 2024
	(In thousands)
Carrying value	$	300,000
Fair value	$	298,559