Knife River (KNF) 10-Q 2024 Q3 Quarterly report

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)

Delaware	92-1008893
(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 class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	KNF	New 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
	Page
Introduction	3
Part I -- Financial Information
Item 1. Financial Statements	4
Consolidated Statements of Operations -- Three and Nine Months Ended September 30, 2024 and 2023	4
Consolidated Statements of Comprehensive Income -- Three and Nine Months Ended September 30, 2024 and 2023	5
Consolidated Balance Sheets -- September 30, 2024 and 2023, and December 31, 2023	6
Consolidated Statements of Equity -- Three and Nine Months Ended September 30, 2024 and 2023	7
Consolidated Statements of Cash Flows -- Nine Months Ended September 30, 2024 and 2023	9
Notes to Consolidated Financial Statements	10
1. Background	10
2. Basis of presentation	10
3. New accounting standards	12
4. Receivables and allowance for expected credit losses	12
5. Inventories	13
6. Net income per share	14
7. Accumulated other comprehensive loss	14
8. Revenue from contracts with customers	16
9. Uncompleted contracts	17
10. Goodwill and other intangible assets	18
11. Fair value measurements	19
12. Debt	21
13. Cash flow information	22
14. Business segment data	22
15. Commitments and contingencies	24
16. Related-party transactions	25
17. Subsequent event	25
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	44
Item 4. Controls and Procedures	44
Part II -- Other Information
Item 1. Legal Proceedings	46
Item 1A. Risk Factors	46
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46
Item 3. Defaults Upon Senior Securities	46
Item 4. Mine Safety Disclosures	46
Item 5. Other Information	46
Item 6. Exhibits	46
Exhibits Index	47
Signatures	48

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

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

Part I -- Financial Information

Item 1. Financial Statements

Knife River Corporation
Consolidated Statements of Operations
(Unaudited)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(In thousands, except per share amounts)
Revenue:
Construction materials	$	545,711	$	553,057	$	1,184,938	$	1,177,726
Contracting services	559,582		537,315		1,056,851		1,005,736
Total revenue	1,105,293		1,090,372		2,241,789		2,183,462
Cost of revenue:
Construction materials	345,046		346,298		865,198		856,606
Contracting services	487,236		474,685		920,867		900,388
Total cost of revenue	832,282		820,983		1,786,065		1,756,994
Gross profit	273,011		269,389		455,724		426,468
Selling, general and administrative expenses	63,874		59,168		183,569		167,276
Operating income	209,137		210,221		272,155		259,192
Interest expense	13,936		15,354		41,848		44,005
Other income	2,487		7		7,541		3,311
Income before income taxes	197,688		194,874		237,848		218,498
Income tax expense	49,584		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:
Basic	56,613		56,566		56,605		56,566
Diluted	56,871		56,735		56,809		56,633

The accompanying notes are an integral part of these consolidated financial statements.

4

Knife River Corporation
Consolidated Statements of Comprehensive Income
(Unaudited)
	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(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 adjustment	78		49		233		127
Other comprehensive income	78		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

Knife River Corporation
Consolidated Balance Sheets
(Unaudited)
	September 30, 2024		September 30, 2023		December 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, net	449,188		491,866		266,785
Costs and estimated earnings in excess of billings on uncompleted contracts	69,309		50,545		27,293
Inventories	347,300		314,711		319,623
Prepayments and other current assets	26,396		38,094		37,522
Total current assets	1,159,635		1,011,375		913,543
Noncurrent assets:
Property, plant and equipment	2,692,182		2,547,577		2,579,734
Less accumulated depreciation, depletion and amortization	1,346,022		1,248,042		1,264,687
Net property, plant and equipment	1,346,160		1,299,535		1,315,047
Goodwill	275,256		274,478		274,478
Other intangible assets, net	9,854		11,463		10,821
Operating lease right-of-use assets	47,430		44,309		44,706
Investments and other	45,782		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 payable	180,572		148,977		107,656
Billings in excess of costs and estimated earnings on uncompleted contracts	44,786		58,785		51,376
Taxes payable	15,991		53,281		9,300
Accrued compensation	42,071		37,922		48,098
Accrued interest	13,772		16,054		7,247
Current operating lease liabilities	13,544		13,702		12,948
Other accrued liabilities	106,576		89,164		103,564
Total current liabilities	426,103		424,967		347,271
Noncurrent liabilities:
Long-term debt	669,672		675,649		674,577
Deferred income taxes	187,915		173,989		174,542
Noncurrent operating lease liabilities	33,886		30,607		31,758
Other	117,611		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 capital	618,799		613,024		614,513
Retained earnings	844,273		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' equity	1,448,930		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.

6

Knife River Corporation
Consolidated Statements of Equity
(Unaudited)
	Common Stock			Other Paid-in Capital		Retained Earnings		MDU Resources' Stock Held by Subsidiary			Treasury Stock			Accumula-ted Other Comprehen-sive Loss
	Shares	Amount						Shares	Amount		Shares	Amount				Total
	(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, 2024	57,040,840	$	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, 2024	57,043,841	$	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, 2024	57,043,841	$	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.

7

Knife River Corporation
Consolidated Statements of Equity
(Unaudited)
	Common Stock			Other Paid-in Capital		Retained Earnings		MDU Resources' Stock Held by Subsidiary			Treasury Stock			Accumula-ted Other Comprehen-sive Loss
	Shares	Amount						Shares	Amount		Shares	Amount				Total
	(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 Separation	56,997,350	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.

8

Knife River Corporation
Consolidated Statements of Cash Flows
(Unaudited)
	Nine Months Ended
	September 30,
	2024		2023
	(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 amortization	101,519		92,511
Deferred income taxes	13,432		(1,884)
Provision for credit losses	603		1,386
Amortization of debt issuance costs	2,072		2,425
Employee stock-based compensation costs	5,728		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 assets	11,125		(20,127)
Accounts payable	77,152		91,663
Due to related-party	—		(7,310)
Other current liabilities	17,268		78,006
Pension and postretirement benefit plan contributions	(2,502)		(1,611)
Other noncurrent changes	5,388		35,092
Net cash provided by operating activities	149,890		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 other	7,605		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 cash	5,122		106,069
Cash, cash equivalents and restricted cash -- beginning of year	262,320		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.

9

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

10

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, 2024		September 30, 2023		December 31, 2023
	(In thousands)
Cash and cash equivalents	$	220,368	$	84,006	$	219,324
Restricted cash	47,074		32,153		42,996
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.

11

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:

Standard	Description	Standard Effective Date	Impact 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 Disclosures	In 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, 2024	The 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 Disclosures	In 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, 2024		September 30, 2023		December 31, 2023
	(In thousands)
Trade receivables	$	229,887	$	236,373	$	124,134
Contract receivables	187,622		223,874		112,037
Retention receivables	35,980		37,814		36,782
Receivables, gross	453,489		498,061		272,953
Less expected credit loss	4,301		6,195		6,168
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.

12

Details of the Company's expected credit losses were as follows:

	Pacific		Northwest		Mountain		Central		Energy Services		Total
	(In thousands)
As of December 31, 2023	$	2,053	$	1,004	$	2,293	$	718	$	100	$	6,168
Current expected credit loss provision	177		(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 provision	25		79		27		151		1		283
Less write-offs charged against the allowance	513		11		1,122		212		1		1,859
At June 30, 2024	$	1,795	$	716	$	1,149	$	741	$	100	$	4,501
Current expected credit loss provision	126		(19)		(5)		223		1		326
Less write-offs charged against the allowance	74		108		233		106		5		526
At September 30, 2024	$	1,847	$	589	$	911	$	858	$	96	$	4,301

	Pacific		Northwest		Mountain		Central		Energy Services		Total
	(In thousands)
As of December 31, 2022	$	1,945	$	1,253	$	1,278	$	901	$	100	$	5,477
Current expected credit loss provision	45		313		164		(90)		—		432
Less write-offs charged against the allowance	1		68		18		—		—		87
At March 31, 2023	$	1,989	$	1,498	$	1,424	$	811	$	100	$	5,822
Current expected credit loss provision	8		74		631		(131)		1		583
Less write-offs charged against the allowance	17		512		3		2		1		535
At June 30, 2023	$	1,980	$	1,060	$	2,052	$	678	$	100	$	5,870
Current expected credit loss provision	46		242		(152)		235		—		371
Less write-offs charged against the allowance	26		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, 2024		September 30, 2023		December 31, 2023
	(In thousands)
Finished products	$	240,746	$	213,702	$	225,319
Raw materials	67,830		63,156		61,776
Supplies and parts	38,724		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.

13

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 Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(In thousands, except per share amounts)
Net income	$	148,104	$	146,655	$	178,405	$	162,171
Weighted average common shares outstanding - basic	56,613		56,566		56,605		56,566
Effect of dilutive performance shares and restricted stock units	258		169		204		67
Weighted average common shares outstanding - diluted	56,871		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)

14

	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 loss	46		47		93
Net current-period other comprehensive income	46		47		93
At March 31, 2023	$	(44)	$	(12,215)	$	(12,259)
Other comprehensive loss before reclassification	—		(17)		(17)
Amounts reclassified from accumulated other comprehensive loss	44		48		92
Net current-period other comprehensive income	44		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 Ended				Nine Months Ended				Location on Consolidated Statements of Operations
	September 30,				September 30,
	2024		2023		2024		2023
	(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)

15

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, 2024	Pacific		Northwest		Mountain		Central		Energy Services		Corporate Services and Eliminations		Total
	(In thousands)
Aggregates	$	36,642	$	54,038	$	40,115	$	62,685	$	—	$	—	$	193,480
Ready-mix concrete	40,428		46,999		40,559		85,474		—		—		213,460
Asphalt	11,859		47,170		60,022		95,998		—		—		215,049
Liquid asphalt	—		—		—		—		110,917		—		110,917
Other	48,028		5,416		9		12,242		20,877		3,132		89,704
Contracting services public-sector	48,435		89,271		142,864		198,843		—		—		479,413
Contracting services private-sector	9,316		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, 2023	Pacific		Northwest		Mountain		Central		Energy Services		Corporate Services and Eliminations		Total
	(In thousands)
Aggregates	$	33,624	$	57,398	$	39,519	$	63,044	$	—	$	—	$	193,585
Ready-mix concrete	39,861		46,785		44,053		85,340		—		—		216,039
Asphalt	14,050		43,462		59,673		105,592		—		—		222,777
Liquid asphalt	—		—		—		—		122,596		—		122,596
Other	49,533		4,497		11		10,214		21,797		5,464		91,516
Contracting services public-sector	32,632		68,316		135,700		205,262		—		—		441,910
Contracting services private-sector	17,745		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, 2024	Pacific		Northwest		Mountain		Central		Energy Services		Corporate Services and Eliminations		Total
	(In thousands)
Aggregates	$	87,450	$	146,497	$	80,708	$	121,499	$	—	$	—	$	436,154
Ready-mix concrete	108,316		124,435		89,361		170,722		—		—		492,834
Asphalt	22,828		87,937		93,712		146,324		—		—		350,801
Liquid asphalt	—		—		—		—		187,256		—		187,256
Other	115,714		14,563		22		25,015		38,325		12,786		206,425
Contracting services public-sector	74,623		196,614		258,746		322,696		—		—		852,679
Contracting services private-sector	31,612		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

16

Nine Months Ended September 30, 2023	Pacific		Northwest		Mountain		Central		Energy Services		Corporate Services and Eliminations		Total
	(In thousands)
Aggregates	$	79,768	$	147,937	$	78,051	$	117,766	$	—	$	—	$	423,522
Ready-mix concrete	106,531		125,273		92,929		172,973		—		—		497,706
Asphalt	21,640		84,908		89,955		164,830		—		—		361,333
Liquid asphalt	—		—		—		—		203,802		—		203,802
Other	112,755		11,513		21		22,709		37,838		7,231		192,067
Contracting services public-sector	53,450		138,621		244,320		342,146		—		—		778,537
Contracting services private-sector	37,220		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, 2024		December 31, 2023		Change		Location 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, 2023		December 31, 2022		Change		Location 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.

17

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, 2024		Goodwill Acquired During the Year		Measurement Period Adjustments		Reallocation of Goodwill		Balance at September 30, 2024
	(In thousands)
Pacific	$	32,621	$	43	$	—	$	—	$	32,664
Northwest	90,978		—		—		—		90,978
Mountain	26,816		—		—		—		26,816
North Central	75,879		735		—		—		76,614
South	38,708		—		—		—		38,708
Energy Services	9,476		—		—		—		9,476
Total	$	274,478	$	778	$	—	$	—	$	275,256

	Balance at January 1, 2023		Goodwill Acquired During the Year		Measurement Period Adjustments		Reallocation of Goodwill		Balance at September 30, 2023
	(In thousands)
Pacific	$	38,339	$	—	$	(62)	$	—	$	38,277
Northwest	90,978		—		—		—		90,978
Mountain	26,816		—		—		—		26,816
North Central	75,879		—		—		—		75,879
South	38,708		—		—		—		38,708
Energy Services	3,820		—		—		—		3,820
Total	$	274,540	$	—	$	(62)	$	—	$	274,478

	Balance at January 1, 2023		Goodwill Acquired During the Year		Measurement Period Adjustments		Reallocation of Goodwill		Balance at December 31, 2023
	(In thousands)
Pacific	$	38,339	$	—	$	(62)	$	(5,656)	$	32,621
Northwest	90,978		—		—		—		90,978
Mountain	26,816		—		—		—		26,816
North Central	75,879		—		—		—		75,879
South	38,708		—		—		—		38,708
Energy Services	3,820		—		—		5,656		9,476
Total	$	274,540	$	—	$	(62)	$	—	$	274,478

18

Other amortizable intangible assets were as follows:

	September 30, 2024		September 30, 2023		December 31, 2023
	(In thousands)
Customer relationships	$	19,059	$	18,540	$	18,540
Less accumulated amortization	10,419		8,668		9,102
	8,640		9,872		9,438
Noncompete agreements	3,926		4,039		4,039
Less accumulated amortization	3,452		3,358		3,473
	474		681		566
Other	1,796		2,479		2,479
Less accumulated amortization	1,056		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 2024		2025		2026		2027		2028		Thereafter
	(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.

19

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

20

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, 2024		September 30, 2023		December 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, 2024		September 30, 2023		December 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 costs			13,254		16,016		15,326
Total long-term debt			678,463		682,731		681,659
Less current maturities			8,791		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		2025		2026		2027		2028		Thereafter
	(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,
	2024		2023
	(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,
	2024		2023
	(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 Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(In thousands)
External operating revenues:
Pacific	$	164,986	$	157,329	$	375,201	$	348,051
Northwest	217,825		208,919		537,202		503,573
Mountain	261,118		254,722		514,713		491,094
Central	354,815		354,925		630,379		643,579
Energy Services	106,486		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
Northwest	42,614		36,683		91,017		84,937
Mountain	65,281		68,178		106,021		108,888
Central	110,905		123,099		172,079		191,860
Energy Services	25,308		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
Northwest	55,914		48,467		126,831		101,335
Mountain	59,446		59,434		96,500		86,004
Central	79,830		74,779		97,295		86,279
Energy Services	33,708		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 Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(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 revenue	3,132		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 Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(In thousands)
Total consolidated net income before income taxes	$	197,688	$	194,874	$	237,848	$	218,498
Plus:
Depreciation, depletion and amortization	34,796		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 Services							Modes of Transportation
					Precast/
			Ready-Mix	Construction	Prestressed	Liquid		Heavy
	Aggregates	Asphalt	Concrete	Services	Concrete	Asphalt	Cement	Equipment	Trucking	Rail	Barge
Pacific	X	X	X	X	X		X	X	X	X	X
Northwest	X	X	X	X	X			X	X	X	X
Mountain	X	X	X	X				X	X
Central	X	X	X	X	X			X	X	X
Energy Services						X			X	X

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, 2024		September 30, 2023		December 31, 2023
	(In millions)
Pacific	$	114.9	$	69.8	$	51.2
Northwest	168.0		227.4		196.2
Mountain	279.9		251.1		256.7
Central	192.3		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 Ended				Nine 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 revenue	832.3		821.0		1,786.1		1,757.0
Gross profit	273.0		269.4		455.7		426.5
Selling, general and administrative expenses	63.9		59.2		183.6		167.3
Operating income	209.1		210.2		272.1		259.2
Interest expense	13.9		15.3		41.8		44.0
Other income	2.5		—		7.5		3.3
Income before income taxes	197.7		194.9		237.8		218.5
Income tax expense	49.6		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

29

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 Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
	Dollars		Margin	Dollars		Margin	Dollars		Margin	Dollars		Margin
	(In millions)
Revenues by segment:
Pacific	$	165.0		$	157.3		$	375.2		$	348.1
Northwest	218.1			209.4			539.7			504.2
Mountain	261.1			255.1			514.9			491.5
Central	354.9			354.9			630.5			643.6
Energy Services	125.9			140.6			214.9			234.1
Total segment revenues	1,125.0			1,117.3			2,275.2			2,221.5
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	$	34.3	20.8%	$	33.3	21.1%	$	60.2	16.0%	$	59.8	17.2%
Northwest	57.4		26.3%	50.2		24.0%	129.1		23.9%	107.9		21.4%
Mountain	61.1		23.4%	59.7		23.4%	101.1		19.6%	88.8		18.1%
Central	85.4		24.1%	80.4		22.6%	110.6		17.5%	101.1		15.7%
Energy Services	34.7		27.5%	46.7		33.3%	53.7		25.0%	68.2		29.1%
Total segment gross profit	272.9		24.3%	270.3		24.2%	454.7		20.0%	425.8		19.2%
Corporate Services and Eliminations	.1		(0.6)%	(.9)		3.2%	1.0		(3.0)%	.7		(1.6)%
Consolidated gross profit	$	273.0	24.7%	$	269.4	24.7%	$	455.7	20.3%	$	426.5	19.5%
Net income by segment:
Pacific	$	23.4	14.2%	$	23.1	14.7%	$	28.5	7.6%	$	30.2	8.7%
Northwest	45.2		20.7%	38.7		18.5%	95.1		17.6%	72.9		14.5%
Mountain	52.7		20.2%	53.1		20.8%	76.8		14.9%	67.4		13.7%
Central	70.1		19.8%	66.1		18.6%	69.7		11.1%	61.1		9.5%
Energy Services	32.4		25.8%	44.5		31.6%	46.8		21.8%	60.8		26.0%
Total segment net income	223.8		19.9%	225.5		20.2%	316.9		13.9%	292.4		13.2%
Corporate Services and Eliminations (a)	(75.7)		N.M.	(78.8)		N.M.	(138.5)		N.M.	(130.2)		N.M.
Consolidated net income	$	148.1	13.4%	$	146.7	13.4%	$	178.4	8.0%	$	162.2	7.4%
EBITDA (b):
Pacific	$	29.5	17.9%	$	28.6	18.2%	$	46.5	12.4%	$	46.1	13.3%
Northwest	55.9		25.6%	48.5		23.2%	126.8		23.5%	101.3		20.1%
Mountain	59.4		22.8%	59.4		23.3%	96.5		18.7%	86.0		17.5%
Central	79.8		22.5%	74.8		21.1%	97.3		15.4%	86.3		13.4%
Energy Services	33.7		26.8%	45.7		32.5%	50.6		23.5%	64.5		27.6%
Total segment EBITDA (b)	258.3		23.0%	257.0		23.0%	417.7		18.4%	384.2		17.3%
Corporate Services and Eliminations	(13.7)		N.M.	(15.6)		N.M.	(42.3)		N.M.	(31.8)		N.M.
Consolidated EBITDA (b)	$	244.6	22.1%	$	241.4	22.1%	$	375.4	16.7%	$	352.4	16.1%

(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."

30

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
Sales (thousands):
Aggregates (tons)	11,169		12,022		24,833		26,071
Ready-mix concrete (cubic yards)	1,148		1,271		2,653		2,944
Asphalt (tons)	3,150		3,349		5,183		5,441
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 Ended						Nine Months Ended
	September 30,						September 30,
	2024			2023			2024			2023
	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 concrete	213.5			216.0			492.8			497.7
Asphalt	215.1			222.8			350.8			361.3
Liquid Asphalt	110.9			122.6			187.3			203.8
Other*	89.7			91.5			206.4			192.1
Contracting services	559.6			537.3			1,056.8			1,005.8
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	$	51.7	26.7%	$	51.8	26.7%	$	96.1	22.0%	$	90.6	21.4%
Ready-mix concrete	39.6		18.6%	37.7		17.4%	78.1		15.8%	74.5		15.0%
Asphalt	43.1		20.0%	39.4		17.7%	54.7		15.6%	49.7		13.8%
Liquid Asphalt	28.8		26.0%	39.2		32.0%	43.7		23.3%	57.4		28.1%
Other*	37.5		41.8%	38.7		42.3%	47.1		22.8%	48.9		25.5%
Contracting services	72.3		12.9%	62.6		11.7%	136.0		12.9%	105.4		10.5%
Total gross profit	$	273.0	24.7%	$	269.4	24.7%	$	455.7	20.3%	$	426.5	19.5%

*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.

31

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.

32

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 Ended							Nine Months Ended
	September 30,							September 30,
	2024			2023			% Change	2024			2023			% Change
	(In millions)
Revenue	$	165.0		$	157.3		5%	$	375.2		$	348.1		8%
Gross profit	$	34.3		$	33.3		3%	$	60.2		$	59.8		1%
Gross margin	20.8		%	21.1		%		16.0		%	17.2		%
EBITDA	$	29.5		$	28.6		3%	$	46.5		$	46.1		1%
EBITDA margin	17.9		%	18.2		%		12.4%			13.3		%

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(In millions)
Revenues:
Aggregates	$	36.6	$	33.6	$	87.5	$	79.7
Ready-mix concrete	40.4		39.9		108.3		106.5
Asphalt	11.9		14.0		22.8		21.7
Other*	48.0		49.5		115.7		112.8
Contracting services	57.8		50.4		106.2		90.7
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.

33

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 Ended							Nine Months Ended
	September 30,							September 30,
	2024			2023			% Change	2024			2023			% Change
	(In millions)
Revenue	$	218.1		$	209.4		4%	$	539.7		$	504.2		7%
Gross profit	$	57.4		$	50.2		14%	$	129.1		$	107.9		20%
Gross margin	26.3		%	24.0		%		23.9		%	21.4		%
EBITDA	$	55.9		$	48.5		15%	$	126.8		$	101.3		25%
EBITDA margin	25.6		%	23.2		%		23.5		%	20.1		%

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(In millions)
Revenues:
Aggregates	$	54.0	$	57.4	$	146.5	$	147.9
Ready-mix concrete	47.0		46.7		124.4		125.3
Asphalt	47.2		43.5		87.9		84.9
Other*	5.4		4.5		14.6		11.5
Contracting services	106.8		93.5		254.8		218.9
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.

34

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 Ended							Nine Months Ended
	September 30,							September 30,
	2024			2023			% Change	2024			2023			% Change
	(In millions)
Revenue	$	261.1		$	255.1		2%	$	514.9		$	491.5		5%
Gross profit	$	61.1		$	59.7		2%	$	101.1		$	88.8		14%
Gross margin	23.4		%	23.4		%		19.6		%	18.1		%
EBITDA	$	59.4		$	59.4		—%	$	96.5		$	86.0		12%
EBITDA margin	22.8		%	23.3		%		18.7		%	17.5		%

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(In millions)
Revenues:
Aggregates	$	40.1	$	39.5	$	80.7	$	78.1
Ready-mix concrete	40.6		44.1		89.4		93.0
Asphalt	60.0		59.7		93.8		89.9
Contracting services	185.7		179.6		356.9		339.0
Internal sales	(65.3)		(67.8)		(105.9)		(108.5)
	$	261.1	$	255.1	$	514.9	$	491.5

35

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

Results of Operations - Central

	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2024			2023			% Change	2024			2023			% Change
	(In millions)
Revenue	$	354.9		$	354.9		—%	$	630.5		$	643.6		(2)%
Gross profit	$	85.4		$	80.4		6%	$	110.6		$	101.1		9%
Gross margin	24.1		%	22.6		%		17.5		%	15.7		%
EBITDA	$	79.8		$	74.8		7%	$	97.3		$	86.3		13%
EBITDA margin	22.5		%	21.1		%		15.4		%	13.4		%

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(In millions)
Revenues:
Aggregates	$	62.7	$	63.1	$	121.5	$	117.8
Ready-mix concrete	85.5		85.3		170.7		172.9
Asphalt	96.0		105.6		146.3		164.8
Other*	12.2		10.2		25.0		22.7
Contracting services	209.3		213.8		338.9		357.2
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.

37

Results of Operations - Energy Services

	Three Months Ended							Nine Months Ended
	September 30,							September 30,
	2024			2023			% Change	2024			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 margin	27.5		%	33.3		%		25.0		%	29.1		%
EBITDA	$	33.7		$	45.7		(26)%	$	50.6		$	64.5		(22)%
EBITDA margin	26.8		%	32.5		%		23.5		%	27.6		%

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2024		2023		2024		2023
	(In millions)
Revenues:
Liquid Asphalt	$	110.9	$	122.6	$	187.3	$	203.8
Other*	20.9		21.8		38.3		37.8
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.

38

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.

39

•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 cash	5.1		106.1
Cash, cash equivalents and restricted cash -- beginning of year	262.3		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 assets	11.1		(20.2)		31.3
Accounts payable	77.2		91.6		(14.4)
Due to related-party	—		(7.3)		7.3
Other current liabilities	17.3		78.0		(60.7)
Pension and postretirement benefit plan contributions	(2.5)		(1.6)		(.9)
Other noncurrent charges	5.4		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.

40

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 other	7.6		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.

41

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, 2024	Pacific			Northwest			Mountain			Central			Energy Services			Corporate Services and Eliminations		Consolidated
	(In millions)
Net income (loss)	$	23.4		$	45.2		$	52.7		$	70.1		$	32.4		$	(75.7)	$	148.1
Depreciation, depletion and amortization	6.1			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 expense																1.8		1.8
Adjusted EBITDA																$	(13.1)	$	245.2
Revenue	$	165.0		$	218.1		$	261.1		$	354.9		$	125.9		$	(19.7)	$	1,105.3
Net income margin	14.2		%	20.7		%	20.2		%	19.8		%	25.8		%	N.M.		13.4		%
EBITDA margin	17.9		%	25.6		%	22.8		%	22.5		%	26.8		%	N.M.		22.1		%
Adjusted EBITDA margin																N.M.		22.2		%

*N.M. - not meaningful

42

Three Months Ended September 30, 2023	Pacific			Northwest			Mountain			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 amortization	5.5			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 expense																1.5		1.5
One-time separation costs																4.0		4.0
Adjusted EBITDA																$	(9.5)	$	247.5
Revenue	$	157.3		$	209.4		$	255.1		$	354.9		$	140.6		$	(26.9)	$	1,090.4
Net income margin	14.7		%	18.5		%	20.8		%	18.6		%	31.6		%	N.M.		13.4		%
EBITDA margin	18.2		%	23.2		%	23.3		%	21.1		%	32.5		%	N.M.		22.1		%
Adjusted EBITDA margin																N.M.		22.7		%

*N.M. - not meaningful

Nine Months Ended September 30, 2024	Pacific			Northwest			Mountain			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 amortization	18.0			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 expense																5.4		5.4
One-time separation costs																3.8		3.8
Adjusted EBITDA																$	(35.9)	$	381.8
Revenue	$	375.2		$	539.7		$	514.9		$	630.5		$	214.9		$	(33.4)	$	2,241.8
Net income margin	7.6		%	17.6		%	14.9		%	11.1		%	21.8		%	N.M.		8.0		%
EBITDA margin	12.4		%	23.5		%	18.7		%	15.4		%	23.5		%	N.M.		16.7		%
Adjusted EBITDA margin																N.M.		17.0		%

*N.M. - not meaningful

43

Nine Months Ended September 30, 2023	Pacific			Northwest			Mountain			Central			Energy Services			Corporate Services and Eliminations		Consolidated
	(In millions)
Net income (loss)	$	30.2		$	72.9		$	67.4		$	61.1		$	60.8		$	(130.2)	$	162.2
Depreciation, depletion and amortization	15.9			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 expense																2.3		2.3
One-time separation costs																6.4		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 margin	8.7		%	14.5		%	13.7		%	9.5		%	26.0		%	N.M.		7.4		%
EBITDA margin	13.3		%	20.1		%	17.5		%	13.4		%	27.6		%	N.M.		16.1		%
Adjusted EBITDA margin																N.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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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 Number	Exhibit Description	Filed Herewith	Furnished Herewith	Form	Period Ended	Exhibit	Filing Date	File Number
3(a)	Amended and Restated Certificate of Incorporation of Knife River Corporation			8-K		3.1	6/01/23	1-41642
3(b)	Amended and Restated Bylaws of Knife River Corporation			8-K		3.2	6/01/23	1-41642
10.1+	Knife River Corporation Change in Control Severance Plan			8-K		10.1	8/20/24	1-41642
31(a)	Certification of Chief Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
31(b)	Certification of Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	X
32	Certification of Chief Executive Officer and Chief Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002		X
95	Mine Safety Disclosures	X
101.INS	XBRL 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.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover 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, 2024	BY:	/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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