Stock-Based Compensation

12 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

The Company has stock-based compensation plans under which it is currently authorized to grant RSUs and other stock awards. As of December 31, 2024, there were 2.3 million remaining shares available to grant under these plans. The Company either purchases shares on the open market or issues new shares of common stock to satisfy the vesting of stock-based awards.

Separations of Knife River and Everus

In connection with the completed separations of Knife River and Everus through spinoffs, the provisions of the existing compensation plans required adjustments to the number and terms of outstanding employee time-vested RSUs and PSAs to preserve the intrinsic value of the awards immediately prior to each separation. The outstanding awards will continue to vest over the original vesting period, which is generally three years from the grant date. The outstanding PSAs in place at the time of the Knife River spinoff were modified to no longer be subject to performance-based vesting conditions. The number of PSAs were first adjusted for performance. The combined performance factors were determined based on the performance of the Company as of December 31, 2022. As a result, there were no outstanding PSAs at December 31, 2023. Outstanding awards at the time of the spinoffs were converted into awards of the holder’s employer following each separation. The Company incurred $1.7 million of incremental compensation expense related to the conversion of the RSUs associated with the Everus spinoff, of which $854,000 was recognized in 2024 and the remainder will be recognized in expense over the remaining service periods of the applicable awards.

Total stock-based compensation expense (after tax) was $7.1 million, $5.1 million and $6.9 million in 2024, 2023 and 2022, respectively. The Company uses the straight-line amortization method to recognize compensation expense related to RSUs, which only has a service condition. The Company recognized compensation expense related to PSAs with market-based performance metrics on a straight-line basis over the requisite service period. As of December 31, 2024, total remaining unrecognized compensation expense related to stock-based compensation was approximately $8.4 million (before income taxes) which will be amortized over a weighted average period of 1.3 years.

Stock awards

Non-employee directors receive shares of common stock in addition to and in lieu of cash payment for directors' fees. There were 46,341 shares with a fair value of $850,000, 50,717 shares with a fair value of $950,000 and 40,800 shares with a fair value of $1.2 million issued to non-employee directors during the years ended December 31, 2024, 2023 and 2022, respectively.

RSUs

In February 2024, 2023 and 2022, key employees were granted RSUs under the long-term performance-based incentive plan authorized by the Company's compensation committee. The compensation committee has the authority to select the recipients of awards, determine the type and size of awards, and establish certain terms and conditions of unit award grants. The shares 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 RSUs to preserve the intrinsic value of the awards in connection with the spinoffs of Knife River and Everus and outstanding PSAs in place at the time of the Knife River spinoff were converted to RSUs.

Target grants of RSUs outstanding at December 31, 2024, were as follows:


Grant Date	Performance Period	Target Grant of Shares
February 2023/ July 2023	2023-2025	542,233
February 2024/ June 2024	2024-2026	698,284

A summary of the status of the RSUs for the year ended December 31, 2024, was as follows:


	RSUs
	Number of Shares	Weighted Average Grant-Date Fair Value		**
Nonvested at beginning of period	873,300	$	21.16
Granted pre-separation of Everus	478,938	20.89
Forfeited	(112,826)	21.35
Non-vested pre-separation of Everus	1,239,412
Adjustments related to the Everus separation*	663,661
Vested shares	(662,556)	12.04
Nonvested at end of period	1,240,517	$	12.56
Includes the conversion adjustments to preserve the intrinsic value of the awards and the cancellation of outstanding awards held by employees that transferred to Everus, which were replaced with awards issued by Everus as part of the separation. * Weighted average grant-date fair values post-separation of Everus reflects incremental fair value related to modifying the awards and the Company's adjusted stock price due to the separation.

Historical PSAs

In February 2022, key employees were granted PSAs under the long-term performance-based incentive plan authorized by the Company's compensation committee. The compensation committee has the authority to select the recipients of awards, determine the type and size of awards, and establish certain terms and conditions of award grants. Upon vesting, participants receive dividends that accumulate during the vesting period. Share awards were generally earned over a three-year vesting period and tied to financial metrics. However, in connection with the spinoff of Knife River, the outstanding PSAs were converted to RSUs. As a result, there were no outstanding PSAs at December 31, 2024.

Under the market condition for these PSAs, participants could earn from zero to 200 percent of the apportioned target grant of shares based on the Company's total stockholder return relative to that of the selected peer group. Compensation expense was based on the grant-date fair value as determined by Monte Carlo simulation. The blended volatility term structure ranges were comprised of 50 percent historical volatility and 50 percent implied volatility. Risk-free interest rates were based on U.S. Treasury security rates in effect as of the grant date. Assumptions used for initial grants applicable to the market condition for certain PSAs issued in 2022 were:


												2022
Weighted average grant-date fair value												$36.25
Blended volatility range												24.07% - 31.41%
Risk-free interest rate range												.71% - 1.68%
Weighted average discounted dividends per share												$2.93

Under the performance conditions for these PSAs, participants could earn from zero to 200 percent of the apportioned target grant of shares. The performance conditions were based on the Company's compound annual growth rate in earnings from continuing operations. The weighted average grant-date fair value per share for the PSAs applicable to these performance conditions issued in 2022 was $27.73.

The fair value of the PSAs that vested during the year ended December 31, 2022, was $7.6 million.