Stock-Based Compensation

12 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

Prior to the Separation, key employees of the Company participated in the stock-based compensation plans authorized and managed by MDU Resources. In connection with MDU Resources’ separation of Knife River Corporation (“Knife River”) on May 31, 2023, the provisions of the existing MDU Resources’ compensation plans required adjustments to the number and terms of outstanding employee time-vested restricted stock units and performance share awards to preserve the intrinsic value of the awards immediately prior to the Knife River separation.

However, the outstanding performance share awards would no longer be subject to performance-based vesting conditions. The performance share awards were first adjusted for performance. The combined performance factors were determined based on the performance of MDU Resources as of December 31, 2022. Then, at the time of the Knife River separation, all outstanding stock-based compensation awards of MDU Resources were converted into MDU Resources restricted stock units. Following the Knife River separation, no performance share awards existed.

In addition, similar required adjustments were needed to the number and terms of outstanding MDU Resources restricted stock units to preserve the intrinsic value of the awards immediately prior to the Separation. At the time of Separation, all outstanding MDU Resources restricted stock units held by Company employees were converted into Everus restricted stock units.

The number of restricted stock units was determined by taking the closing per share price of MDU Resources on October 31, 2024, and dividing by the closing per share price of Everus on November 1, 2024. The ratio used to convert the MDU Resources’ share-based awards was designed to preserve the aggregate intrinsic value of the award immediately after the Separation when compared to the aggregate intrinsic value of the award immediately prior to the Separation. The existing unvested stock-based awards issued through MDU Resources’ stock-based compensation plans were modified in connection with the Separation to maintain an equivalent value immediately before and after Separation. Everus did not incur any incremental compensation expenses related to the conversion of the restricted stock units. The outstanding awards will continue to vest over the original vesting periods of three years from the respective grant dates, contingent on continued employment.

Following the Separation, the Company has its own stock-based compensation plan under which it currently is authorized to grant 2.5 million restricted stock units and other stock awards. As of December 31, 2024, there were 2.5 million shares

available to grant under this plan. The Company either purchases shares on the open market or issues new shares of common stock to satisfy the vesting of stock-based awards.

Total stock-based compensation expense, including Company participants and non-employee directors, was $1.6 million, $0.8 million, and $1.1 million in 2024, 2023, and 2022, respectively, and is included in Selling, general and administrative expenses in the consolidated statements of income.

Stock Awards

Non-employee directors receive shares of common stock in addition to cash payments for directors’ fees. On November 26, 2024, the Company granted 8,865 shares with a grant date fair value of $0.6 million to non-employee directors.

Restricted Stock Units

In February 2024, 2023, and 2022, key employees of the Company were granted restricted stock units under MDU Resources’ long-term performance-based incentive plan authorized by MDU Resources’ compensation committee. MDU Resources’ compensation committee had the authority to select recipients of awards, determine the type and size of awards, and establish certain terms and conditions of award grants. The restricted stock units vest over three years, contingent on continued employment. Compensation expense is recognized over the vesting period. Upon vesting, participants receive dividends that accumulate during the vesting period.

As previously discussed, adjustments were made to the number of MDU Resources restricted stock units to preserve the intrinsic value of the awards in connection with the separation of Knife River in 2023 and outstanding MDU Resources performance share awards were converted to MDU Resources restricted stock units. And at the time of Separation, MDU Resources restricted stock units were converted to Everus restricted stock units for outstanding restricted stock awards granted to Everus employees.

A summary of restricted stock units, including the conversion to Everus restricted stock units, for the year ended December 31, 2024 was as follows:


	Restricted Stock Units
		Number of Shares	Weighted Average Grant-Date Fair Value**




Nonvested pre-Separation		243,327	$	21.37
Conversion to Everus restricted stock units*		(109,596)

Vested shares		(30,939)	40.72

Nonvested as of December 31, 2024		102,792	$	38.33

__________________

*Includes the conversion adjustments to preserve the intrinsic value of the awards.

** Weighted average grant-date fair values represent post-separations of Knife River Corporation and the Company from MDU Resources in 2023 and 2024, respectively.

As of December 31, 2024, total remaining unrecognized compensation expense related to the restricted stock units was approximately $2.1 million, which will be amortized over a weighted average period of 1.7 years.

Historical Performance Share Awards

In February 2022, key employees of the Company were granted performance share awards under MDU Resources’ long-term performance-based incentive plan authorized by MDU Resources’ compensation committee. The compensation committee had the authority to select recipients of awards, determine the type and size of awards, and establish certain terms and conditions of award grants. Share awards were generally earned over a three-year vesting period and tied to specific financial metrics. Upon vesting, participants may receive dividends that accumulate during the vesting period. However, as previously discussed, the outstanding performance share awards were converted to restricted stock units of MDU Resources in connection with the Knife River separation. As a result, there were no outstanding performance share awards as of December 31, 2024 or 2023, respectively.

Under the market condition for these performance share awards, participants could earn from zero to 200% of the apportioned target grant of shares based on MDU Resources’ total stockholder return relative to that of the selected peer group. Compensation expense was based on the grant-date fair value as determined by a Monte Carlo simulation.