KNF 10-K & 10-Q changes, risk factors and insider trading

We are subject to competition throughout the markets we serve as they are highly fragmented and we compete with a number of regional, national and international companies. These companies may have greater financial and other resources than us, while other competitors are smaller and more specialized, and concentrate their resources in particular areas of expertise. Our results are also affected by the number of competitors in a market, the production capacity that a particular market can accommodate, the pricing practices of other competitors and the entry of new competitors in a market. Significant competition could lead to lower prices, higher wages, lower sales volumes and higher costs, negatively affecting our financial condition, results of operations and liquidity.

Furthermore, new acquisition opportunities are and may continue to be subject to competitive bidding environments, which may increase the prices we must pay to successfully grow our business through acquisitions.

We are exposed to risk of loss resulting from the nonpayment and/or nonperformance ofby our customers and counterparties.

Our customers include public and private entities that have been, and may continue to be, negatively impacted by the economy. A recessionary construction economy can increase the likelihood that we will not be able to collect on all accounts receivable or may experience a delay in payment from some customers. If our customers or counterparties experience financial difficulties, which has occurred and may reoccur, we could experience difficulty in collecting receivables. While nonot one customer accounted for over 10 percent of our revenue in 20242025 or 2023,2024, weour top 15 customers accounted for about 21 percent of our 2025 revenue, of which nine were state-level DOTs. We face collection risk as a normal part of business where we perform services and subsequently bill clients for such services. In the event that we have concentrated credit risk from customers in a specific geographic area or industry, negative trends or a worsening in financial conditions in that specific geographic area or industry, we could become more susceptible to disproportionately high levels of default. Nonpayment and/or nonperformance by our customers and counterparties could have a negative impact on our results of operations and cash flows.

Our success depends, in part, on ourthe ability to execute on our acquisition strategy, to successfully integrate acquired businesses and to retain key employees of acquired businesses.

Our current geographic and asset footprint is the result of a deliberate acquisition growth strategy, which began in 1992 following our first aggregate company acquisition. Since then, we have acquired and integrated over 90 complementary businesses, which have contributed significantly to our growth. Management continues to evaluate and pursue strategic acquisition opportunities as part of our ongoing growth strategy, such as the pending Acquisition.strategy. Management is unable to predict the timing or size of any future acquisitions. Potential risks associated with acquisitions, including the pending Acquisition,acquisitions could include, among other things: our ability to identify attractive acquisitions; our ability to offer potential acquisition targets competitive transaction terms; our ability to raise additional equity and/or incur additional indebtedness, which could increase our leverage; regulatory approval; and reputational or other damage due to the prior conduct of an acquired company.

In addition, the investigation of potential acquisitions and the negotiation, drafting and execution of relevant agreements, disclosure documents, regulatory filings and other instruments require substantial management time and attention and costs for third-party consultants. If a proposed acquisition, including the pending Acquisition,acquisition is not completed for any reason, including events beyond our control,control which have occurred and may reoccur, the costs incurred up to that point for the transaction likely would not be recoverable.

Acquisitions typically require integration of the acquired company’s project management, finance, information technology, risk management, purchasing, human resources and fleet management functions. We may be unable to successfully integrate an acquired business, such as the pending Acquisition,business into our existing business, and an acquired business may not be as profitable as expected or at all. Acquisitions involve risks that the acquired business will not perform as expected and that the expectations concerning the value, strengths and weaknesses of the acquired business will prove incorrect. The inability to successfully integrate new businesses in a timely and orderly manner could increase costs and result in dis-synergies and negatively impact our results of operations and prevent us from realizing expected rates of return on the acquired business. Factors affecting the successful integration of an acquired business include, such as the pending Acquisition,include but are not limited to, the following:

Through the ordinary course of business, we require access to sensitive customer, supplier, employee, financial and other data. A breach of our systems could compromise sensitive data and could go unnoticed for some time. Such an event could result in negative publicity and reputational harm, remediation costs, legal claims and fines that could have an adverse effect on our financial results. Third-party service providers that perform critical business functions for us or have access to sensitive information within Knifeour Rivercompany also may be vulnerable to security breaches and information technology risks that could adversely affect us.

Cyberattacks continue to increase in frequency and sophistication, which could cause our information systems to be a target of ongoing and sophisticated cyberattacks by a variety of sources with the apparent aim to breach our cyber-defenses. Also, we may face increased cyber risk due to the use of employee-owned devices and work from home arrangements. Such incidents could have a material adverse effect on our business, financial condition or results of operations. Management is continuously reevaluating the need to upgrade and/or replace systems and network infrastructure. These upgrades and/or replacements could adversely impact operations by imposing increased costs, creating delays or outages, or creating difficulties transitioning to new systems. System disruptions, if not anticipated and appropriately mitigated, could adversely affect us.

The SEC has adopted rules that require us to provide greater disclosures around cybersecurity risk management, strategy and governance, as well as to disclose the occurrence of material cybersecurity incidents. We cannot predict or estimate the amount of costs we will incur in order to comply with these rules or the timing of such costs. These rules and regulations may also require us to report a cybersecurity incident before we have been able to fully assess the impact or remediate the underlying issue. Efforts to comply with such reporting requirements could divert management’s attention from ourits incident response and could potentially reveal system vulnerabilities to threat actors. Failure to timely report incidents under these or other similar rules could also result in monetary fines, sanctions, or subject us to other forms of liability. This regulatory environment is increasingly challenging and may present material obligations and risks to our business, including significantly expanded compliance burdens, costs and enforcement risks.

Artificial intelligence presents risks and challenges that can negatively impact our business by posing security risks to our confidential information, proprietary information and personal data.

Issues in the development and use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability or other adverse consequences to our business operations. We haveare notstarting yetto incorporatedintroduce artificial intelligence intotools to our businesstechnology processesusers or systems butand may adopt and integrate generative artificial intelligence tools for specific use cases. Our vendors may incorporate generative artificial intelligence tools into their offerings without disclosing this use to us, and the providers of these generative artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data protection and may inhibit usKnife River or ourits vendors’ ability to maintain an adequate level of service and experience. If we,Knife ourRiver, its vendors, or ourits third-party partners experience an actual or perceived breach of privacy or security incident because of the use of generative artificial intelligence, we may lose valuable intellectual property and confidential information and our reputation and the public perception of the effectiveness of our security measures could be harmed. Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of personal information, confidential information and intellectual property. Any of these outcomes could damage our reputation, result in the loss of valuable property and information, and adversely impact our business.

Moreover, competitors or other third parties may allege that we,Knife River, or consultants or other third parties retained or indemnified by us,it, infringe on theirits intellectual property rights. The potential risks and uncertainties of intellectual property-related litigation and an assertion of an infringement claim against us may cause us to spend significant amounts to defend the claim, and possibly pay significant monetary damages. In the event of a settlement or adverse judgment, our results of operations may materially decline if we are prohibited from using the relevant intellectual property, especially if we are required to pay to the alleged owner of the relevant intellectual property licensing fees, royalties or damages. Even in instances where we believe that claims and allegations of intellectual property infringement against us are without merit, defending against such claims may be time consuming and expensive and may result in the diversion of time and attention of our management and employees.

Pandemics, including COVID-19,Pandemics may have a negative impact on our business operations, revenues, results of operations, liquidity and cash flows.

Pandemics have disrupted national, state and local economies. To the extent a pandemic adversely impacts our businesses, operations, revenues, liquidity or cash flows, it could also have a heightened effect on other risks described in this section. The degree to which a pandemic will impact us depends on future developments, including the resurgence of COVID-19 and its variants, federal and state mandates, actions taken by governmental authorities, effectiveness of vaccines being administered, and the pace and extent to which the economy recovers and remains under relatively normal operating conditions.

Our operations are exposed to fluctuations in prices for labor, energy-related products, cement, asphaltliquid cement,asphalt, fuel, raw materials and utilities, among other things. Prices are generally subject to change in response to fluctuations in supply and demand and other general economic and market conditions beyond our control. The global political environment is out of our control and a primary driver in price changes to commoditiescommodities. and inputs out of our control. In recent years, weWe have experienced elevated commodity and supply chain costs including the costs of labor, raw materials, energy-related products and other inputs used in the production and distribution of our products and services. DuringWhile thewe yearsseek 2023to mitigate some or all cost increases through increases in selling prices of our materials, maintaining positive relationships with numerous critical supplies, escalation clauses in contracting services contracts and 2022,fuel inflationarysurcharges, pressureswe significantlymay increasednot thealways costbe successful which could negatively impact our results of raw materials by greater than 10 percent in comparison to average historical increases of approximately 3 percent.operations.

High energy prices, specifically for diesel fuel, natural gas and liquid asphalt, have impacted and could affect thefuture margins realized, as well as demand for construction materials and related contracting services. Increased labor costs, due to labor shortages, competition from other industries, or other factors, could also negatively affect our results of operations. Due to their size and weight, aggregates are costly to transport efficiently. Our products and services are generally localized around our aggregate sites and served by truck or in certain markets by rail or barge. We could be negatively impacted by freight costs due to rising fuel costs; rate increases for third-party freight; truck, railcar or barge shortages, including shortages of truck drivers and rail crews; rail service interruptions; and minimum tonnage requirements, among other things. To the extent price increases or other mitigating factors are not sufficient to offset these increased costs adequately or timely, and/or if the price increases result in a significant decrease in sales volumes, our results of operations, financial position and cash flows could be negatively impacted.

Our business is based in large part on government-funded infrastructure projects and building activities, and any reductions or reallocation of spending or related subsidies in these areas could haveadversely an adverse effect onimpact us.

Government spending is often approved only on a short-term basis and some of the projects in which our products are used require longer-term funding commitments. If government funding is not approved or funding is delayed or lowered as a result of poor economic conditions, lower than expected revenues, competing spending priorities, or other factors, it could limit infrastructure projects available, increase competition for projects, result in excess inventory, and decrease sales, all of which has occurred, and may re-occur, and could adversely affect the financial condition of our business.

Additionally, certain regions or states may require or possess the means to finance only a limited number of large infrastructure projects, which could result in fewer projects andin our markets being released. Also, periods of high demand may be followed by years of little to no activity. There can be no assurances that governments will sustain or increase current infrastructure spending andor taxallocate incentivefunding andto otherprojects subsidyin levels,our markets, and any reductions thereto or delays therein could affect our business, liquidity and financial condition, and results of operations.

Unfavorable economic conditions can negatively affect the level of public and private expenditures on projects and the timing of these projects which, in turn, can negatively affect demand for our products and services. The level of demand for construction materials and contracting services have been, and could bebe, adversely impacted by the economic conditions in the industries and market areas we serve, as well as in the general economy. Local, state and federal budget limitations also affect the funding available for infrastructure spending, which could have an adverse impact on our earnings and results of operations.

We are and/or may become party to, among other things, personal injury, environmental, commercial, contract, warranty, antitrust, tax, property entitlements and land use, product liability, health and safety, wage and hour, and employment claims. The outcome of pending or future lawsuits, claims, investigations or proceedings is often difficult to predict and could be adverse and material in amount. In addition to the monetary cost, litigation can divert management’s attention from ourits core business opportunities. Development of new information in these matters can often lead to changes in management’s estimated liabilities associated with these proceedings including the judge’s rulings or judgements,judgments, jury verdicts, settlements or changes in applicable law. The outcome of such matters is often difficult to predict, and unfavorable outcomes could have a material impact to our results of operations, financial position and cash flows.

We use a combination of insurance and self-insurance to provide for potential liabilities for workers’ compensation, general liability, vehicle accident, property and associated medical benefit claims. Historical claims experience, demographic and severity factors and other actuarial assumptions are subject to a high degree of variability and are used to estimate the liabilities associated with the risks retained by us. Among the causes of this variability are unpredictable external factors affecting future inflation rates, litigation trends, legal interpretations, benefit level changes, medical stop loss coverage and claim settlement patterns. A significant change in external factors could have a material impact to our financial position and liquidity.

We are subject to environmental laws and regulations affecting many aspects of our operations, including air and water quality, wastewaterprocessed water discharge, the generation, transportation and disposal of solid waste and hazardous substances, aggregate permitting and other environmental considerations. These laws and regulations can increase capital, operating and other costs; cause delays as a result of litigation and administrative proceedings; and create environmental compliance, remediation, containment, monitoring and reporting obligations for construction materials facilities. Environmental laws and regulations can also require us to install pollution control equipment at our facilities, clean up spills and other contamination, and correct environmental hazards, including payment of all or part of the cost to remediate sites where we had past activities, or the activities of other parties, caused environmental contamination. These laws and regulations generally require us to obtain and comply with a variety of environmental licenses, permits, inspections and other approvals. Although we strive to comply with all applicable environmental laws and regulations, public and private entities and private individuals may interpret our legal or regulatory requirements differently and seek injunctive relief or other remedies against us. We cannot predict the outcome, financial or operational, of any such litigation or administrative proceedings.

Our operations could be adversely impacted by severesever weather events, including as a result of climate change.

Climate change may impact a region’s economic health, which could impact itsour revenues. Our financial performance is tied to the health of the regional economies served where we provide construction materials and services. Increases in severe weather events or significant changes in temperature and precipitation patterns could adversely affect the economies of the states and communities weaffected serve.by that industry.

Beyond the commercial pressures implicated by climate change concerns, our operations may face potential adverse physical effects. In August of 2023, Hawaii experienced a series of wildfires across the island of Maui which impacted our operations, however, not materially. If any of our properties and facilities experience a significant operational disruption or catastrophic loss due to the increased frequency or the severity of natural disasters or severe weather events, it could delay or disrupt production, shipments, and revenue, and result in potentially significant expenses to repair or replace these properties, which may negatively affect our business and financial results.

Stakeholder actions and increased regulatory activity related to environmental and other sustainability matters, particularly climate change and reducing GHG emissions, as well as human capital practices and policies, could adversely impact our operations, costs of or access to capital and impact or limit business plans.

We could face stakeholder scrutiny related to environmental and other sustainability matters as well as human capital practices and policies.matters. There has been an increasedis focus from certain stakeholders and regulators related to these matterssustainability across all industries in recent years, with investors (including institutional investors), activists, proxy advisory firms, customers, employees and lenders, placing increasingvarying importance on the impacts and social cost associated with climate change as well as these types ofsustainability practices and policies of companies, including sustainability performance and risk mitigation efforts. There is also risk that we could be perceived as, or accused of, “greenwashing,” i.e., the process of conveying misleading information or making false claims that overstate potential environmental benefits, which could lead to reputational harm. Investors (including certain institutional investors), activists, proxy advisory firms, customers, employees and lenders, may also require us to implement sustainability and/or human capital responsibility procedures or standards before they continue to do business with us. In addition, some investors use these criteria to guide their investment strategies, and may not invest in us, or divest their holdings of us, if they believe our policies on these topics are inadequate or, on the other hand, have a negative response to such policies. Our various stakeholders or regulators may also have divergent opinions on these types of matters as well as conflicting expectations regarding our culture, values, goals and business, which makes it difficult to achieve a consistently positive perception amongst all of our various stakeholders. Moreover, we may determine that it is in the best interest of our company and our stockholders to prioritize other investments over the achievement of our current goals based on economic, technological developments, regulatory and social factors, business strategy or pressure from investors, activists, or other stakeholders.

In addition, the increasing focus on climate change and stricter regulatory requirements may result in us facing adverse reputational risks associated with certain of our operations producing GHG emissions. IfAlthough we arehave not experienced difficulties in these areas, if unable to satisfy the increasing climate-related expectations of certain stakeholders, we may suffer reputational harm, which may cause our stock price to decrease or difficulty in accessing the capital or insurance markets. Such efforts, if successfully directed at us, could increase the costs of or access to capital or insurance and interfere with business operations and the ability to make capital expenditures.

Changes to federal, state and local tax laws have the ability to benefit or adversely affect our earnings and customer costs. For instance, the expiration of certain United States Tax Cuts and Jobs Act provisions in 2026 and ongoing global adoption of minimum tax rules may increase our tax burden and operational complexity. The current United States presidential administration and Congress are actively considering various policy choices which may have the impact of changing, possibly materially, how we are taxed in the future compared to how we are taxed today and potentially in comparison to our competitors. Significant changes to corporate tax rates could result inin, among other things, the impairment of deferred tax assets that are established based on existing law at the time of deferral. A number of factors may increase our future effective income tax rate, including: governmental authorities increasing taxes or eliminating deductions, particularly the depletion deductiondeduction, the mix of earnings from depletable versus non-depletable businesses, the jurisdictions in which earnings and/or revenues are taxed, the resolution of issues arising from tax audits with various tax authorities, changes in the valuation of our deferred tax assets and liabilities, adjustments to estimated taxes upon finalization of various tax returns, changes in available tax credits, changes in stock-based compensation, other changes in tax laws and the interpretation of tax laws and/or administrative practices.

We must attract, develop and retain executive officers and other professional, technical and labor forces with the skills and experience necessary to successfully manage, operate and grow. Competition for these employees is high, due in part to changing workforce demographics, a shortage of younger employees who are qualified to replace employees as they retire, seasonality, and remote work opportunities, among other things. In some cases, competition for these employees is on a regional or national basis. At times of low unemployment, it can be difficult for us to attract and retain qualified and affordable personnel. A shortage in the supply of skilled personnel creates competitive hiring markets, increased labor expenses, decreased productivity and potentially lost business opportunities to support ourits operating and growth strategies. Additionally, if we are unable to hire employees with the requisite skills, we may be forced to incur significant training expenses. As a result, our ability to maintain productivity, relationships with customers, competitive costs, and quality services is limited by the ability to employ, retain and train the necessary skilled personnel and could negatively affect our results of operations, financial position and cash flows.

It is also critical to develop and train employees, hire new qualified personnel, and successfully manage the short and long-term transfer of critical knowledge and skills, including leadership development and succession planning throughout our company. The loss of key personnel, coupled with an inability to adequately train other personnel, hire new personnel or transfer knowledge and skills, could significantly impact our ability to perform under our contracts and execute on new or growing training programs.

Additionally, approximately 1211 percent of ourKnife River’s workforce is comprised of employees that are covered by collective bargaining agreements with various unions. If we encounter difficulties with renegotiations or renewals of collective bargaining arrangements or are unsuccessful in those efforts, we could incur additional costs and experience work stoppages. Union actions at suppliers also can affect us. Any delays or work stoppages could adversely affect the ability to perform under contracts, which could negatively impact our results of operations, cash flows and financial condition.

We are primarily self-insured for the health care benefits for eligible employees. Health care costs may continue to increase if overall total health care claims increase and could have an adverse impact on operating results, financial position and liquidity, particularly if we cannot continue to carry stop loss insurance. Legislation related to health care could also change our benefit program and costs.

Our operations require significant capital investment to purchase and maintain the property and equipment required to mine and produce our products. In addition, our operations include a significant level of fixed and semi-fixed costs. Consequently, we rely on capital markets, particularly in the first half of the year due to the seasonal nature of the industry, as sources of liquidity for capital requirements not satisfied by cash flows from operations. If we are unable to access capital at competitive rates, the ability to implement business plans, make capital expenditures or pursue acquisitions we would otherwise rely on for future growth may be adversely affected. Market disruptions may increase the cost of borrowing or adversely affect our ability to access one or more financial markets. Higher interest rates on borrowings have impacted and could further impact our results of operations. Such market disruptions could include: a significant economic downturn, financial distress of unrelated industry leaders in the same line of business, deterioration in capital market conditions, turmoil in the financial services industry, volatility in commodity prices, pandemics, terrorist attacks, acts of war, and cyberattacks, among other things.

The debt capital market environment could impact our ability to borrow money in the future. Additional financing or refinancing might not be available and, if available, may not be at economically favorable terms. Further, an increase in our leverage could lead to deterioration in our credit ratings. A downgrade in our credit ratings, regardless of the cause, could also limit the ability to obtain additional financing and/or increase the cost of obtaining financing. There is no guarantee we will be able to access the capital markets at financially economical interest rates, which could negatively affect our business. We are also exposed to interest rate volatility risk on our variable rate debt as changes in central bank federal policies, as well as macro-economic factors, impact interest rates. While we believecurrently we will continueexpect to have adequate credit available to meet our needs, there can be no assurance of that.

We may be required to obtain financing in order to fund certain strategic acquisitions, if they arise, such as the pending Acquisition, or to refinance outstanding debt. It is possible a large strategic acquisition would require us to issue new equity and other debt and could result in a ratings downgrade notwithstanding our issuance of equity securities to fund the transaction. We are also exposed to credit market risk, through the interest payable on any variable-rate debt, including the interest cost on future borrowings under our credit facilities.

Adverse changes in economic indicators, such as consumer spending, inflation data, interest rate changes, political developments and threats of terrorism, among other things, can create volatility in the financial markets. These adverse changes have impacted and could further impact the assumptions and negatively affect the value of assets held in our pension plans and may increase the amount and accelerate the timing of required funding contributions for those plans.

We have substantial indebtedness and may incur substantial additional indebtedness, which could adversely affect our business, profitability and ourits ability to meet obligations.

We had $690.0$1,181.1 million in aggregate principal amount of indebtedness outstanding as of December 31, 2024.2025. Such indebtedness consists of $425 million 7.75%7.750% notes due 2031, $265$756 million in aggregate principal amount of term loans and a $350$500 million revolving credit facility, under which we hadhave no aggregate principal amount of loans outstanding as of December 31, 2024. In addition, in the first half of 2025 we expect to enter into a new senior secured Term Loan B facility of $500 million, increase the total commitments under our existing revolving credit facility from $350 million to $500 million and extend the maturity date of our existing senior secured credit facilities from 2028 to 2030.2025.

•Making it more difficult to satisfy debt service and other obligations.

•And limitingLimiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase ordinary shares.

To the extent that we incur additional indebtedness, the foregoing risks could increase. In addition, our actual cash requirements in the future may be greater than expected and our cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due. Further, we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance our debt.

Despite our current level of indebtedness, we may be able to incur substantially more debt, which could increase the risks to our financial condition described above.condition.

We may be able to incur substantial additional indebtedness in the future, such as the debt we plan to incur to finance the Acquisition in part.future. Although certain of the agreements governing our existing indebtedness contain restrictions on the incurrence of additional indebtedness and entering into certain types of other transactions, these restrictions are subject to a number of qualifications and exceptions, including compliance with various financial conditions. Additional indebtedness incurred in compliance with our existing debt instruments could be substantial. To the extent new debt is added to our current debt levels, the leverage risks described in the immediately preceding risk factor would increase. The foregoing risks would also apply to the credit agreement governing the Term Loan B facility we expect to enter into upon consummation of the Acquisition.

A lowering or withdrawal of the ratings, outlook or watch assigned to usKnife River or ourits debt by rating agencies may increase our future borrowing costs and reduce our access to capital.

The rating, outlook or watch assigned to usKnife River or ourits debt could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, current or future circumstances relating to the basis of the rating, outlook, or watch such as adverse changes to our business, so warrant. Our credit ratings may also change as a result of the differing methodologies or changes in the methodologies used by the rating agencies. Any future lowering of ourKnife River’s or its debt’s ratings, outlook or watch likely would make it more difficult or more expensive for us to obtain additional debt financing.

We are one of the leading providers of crushed stone and sand and gravel in the United States and,and as of December 31, 2024, operatedoperate through sixfour operatingreportable segmentssegments, across 14 states: Pacific, Northwest, Mountain, North Central, South and Energy Services. These operating segments are used to determine our reportable segments and are based on our method of internal reporting and management of our business, as discussed in Item 8 - Note 15. Our reportable segments are: Pacific, Northwest,West, 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-ledaggregates-based construction materials and contracting services provider in the United States, our 1.21.3 billion tons of aggregate reserves provide the foundation for a vertically integrated business strategy, with approximately 3735 percent of our aggregates in 20242025 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-growthhigher-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.

•NorthwestWest: Alaska, California, Hawaii, Oregon and Washington

On May 31, 2023, we became a stand-alone publicly traded company. Prior to the Separation, we operated as a wholly owned subsidiary of Centennial and an indirect, wholly owned subsidiary of MDU Resources and not as a stand-alone company. The accompanying audited consolidated financial statements and footnotes for theall 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 audited consolidated financial statements of MDU Resources as if we operated on a stand-alone basis during these periods. For periods subsequent to the Separation, the financial statements are presented on a consolidated basis in conformity with GAAP. All intercompany balances and transactions between the businesses comprising Knife River have been eliminated in the accompanying audited consolidated financial statements. For additional information related to the basis of presentation, see Item 8 - Note 1.

Backlog as of December 31, 2024,2025, iswas 1338 percent percent higher than the prior period andwith lower expected margins are comparable.margins. Of the $745.6$1.0 millionbillion of backlog at December 31, 2024,2025, we expect to complete an estimated $630.5$768.8 millionmillion, or 75 percent, during 2025.2026. Approximately 8689 percent of our backlog as of December 31, 2024,2025, 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,development across our segments, which is expected to provide bidding opportunities in our markets throughout 2025.2026.

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 IIJA, which is authorized to provide $1.2 trillion in funding from 2022 through 2026. As of November 2024,2025, approximately 4346 percent of IIJA formula funding hashad yet to be obligated to projectsdistributed in our market14-state areas.operating Also in 2024, six of the 14 states where we operate have passed ballot measures to increase their transportation investment. Additionally, DOT budgets in the states where we operate remain strong, which favorably affects our bidding season in early 2025. We continue to monitor the implementation and impact of these legislative items and the state DOT budgets.market.

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 identifying ways to increase efficiencies and reduce costs. In 2023, its first year of operation, theThe Materials Process Improvement Team (Materials PIT Crew) traveledhas rolled out new technologies and training programs to 10boost locations throughout our operational footprint, visiting 67 individual aggregate, asphaltproductivity and ready-mixcontrol concretecosts plants. In 2024,across the teamproduct traveled to eight additional locationslines and 58provide individualmore plants,real-time invisibility additioninto todaily follow-up trips to sites visited in the prior year. The Materials PIT Crew also hosted a Plant Equipment Best Practices training seminar at our training center in Oregon in December of 2024. This training was attended by approximately 150 front line plant operators and maintenance personnel and was supported by our internal subject matter experts and a number of plant equipment manufacturers. Also in 2024, a broader process improvement framework was established with teams focused on standardization, commercial excellence and operational excellence, due in part to the success of the Materials PIT Crew.operations.

Selling, general and administrative expenses include the costs for estimating, bidding and business development, as well as costs related to corporate 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; healthcare; allowance for expected credit losses; gains or losses on the sale of assets; expenses for the transition services agreement with MDU Resources in 2023; and other miscellaneous expenses.

Other income (expense) includes net periodic benefit costs for our benefit plan expenses, other than service costs; interest income; realized and unrealized gains and losses on our nonqualified benefit plan investments; earnings or losses on joint venture arrangements; and other miscellaneous income or expenses, including income related to the transition services agreement with MDU Resources.Resources in 2023.

Other Income (Expense)

Other income (expense) increased $3.0 million, primarily due to increased interest income on higher cash balances.

Income tax expense increased $6.9 million corresponding with higher income before income taxes. Our effective tax rate for 2024 was 25.6 percent, compared to 25.5 percent in 2023. For a reconciliation of the federal tax rate to our effective tax rate, see Item 8 - Note 16.

Our revenue increased $65.9$57.0 million in 2023,2024, largely the result of EDGE-related pricing initiatives on all product lines, which together contributed $52.0$76.5 million.million Inas addition,well as higher demand for contracting services work relatedprimarily todriven by large public agenciesagency-related andconstruction railroad projects, as well as prestress data center and other projects, accounted for an increase in revenues of $37.7 million.projects. Partially offsetting the increases were lower aggregate and ready-mix sales volumes acrossdue allto productEDGE-related linespricing ofinitiatives $22.2and million,lower duedemand in large part to the timing of impact projects in 2023residential and decreasedcommercial demand for asphalt paving and residential work.markets.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and 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, projections, 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, shareholder value creation, expected long-term goals, expected backlog margin, acquisitions, financing plans, expected federal and state funding for infrastructure or other proposed strategies.

Expected margins on backlog at MarchJune 31,30, 2026, were slightly lower compared to the expected margins on backlog at MarchJune 31,30, 2025. Of the $1.2 billion of backlog at MarchJune 31,30, 2026, we expect to complete approximately $914$984 million in the 12 months following MarchJune 31,30, 2026. Approximately 8885 percent of our backlog at MarchJune 31,30, 2026, is related to publicly funded projects, including street and highway construction projects, which are driven primarily by public works projects for state departments of transportation (DOT). 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.

Public Funding. Funding for public projects is dependent on federal and state funding, such as appropriations to the Federal Highway Administration. Currently, states have continued moving forward with allocating funds from federal programs, such as the Infrastructure Investment and Jobs Act (IIJA), which is authorized to provide $1.2 trillion in funding from 2022 through September 30, 2026. As of MarchMay 2026, approximately 4338 percent of IIJA formula funding had yet to be spent in our 15 state operating market. While each market is unique, the DOT budgets in most of the states where we operate remain strong. Eleven of our 15 states have record DOT budgets for the 2026 fiscal year, representing a combined 15 percent increase over 2025.

WeTo could be subject to downward pressure on our margins due to competitive forces and fluctuations incounteract the priceseffects of raw materials,material includingprice diesel fuel, gasoline, natural gas, liquid asphalt, cement and steel. To help offset these pressures,fluctuations, we have utilized various mitigationmitigating strategies, such as dynamic pricing,pricing; energy escalation clauses in our contracting services contracts,contracts; securing materials in advance including the prepurchasing of diesel,diesel; fuel surcharges and pursuing other cost-saving measures. Energy escalation adjustments within contracting services are often subject to a recognition delay of a few months and are not reflected immediately in our results of operations. During the first quarterhalf of 2026, our teams were successful with these mitigating controlscontrols, and we have not seen a material impact tohowever, our results of operations were still impacted, largely as a result of the conflicttiming inof Iran.contract billings. We will continue to monitor the effects these economic conditions could have on our business.

Growth. Our management team continues to evaluate growth opportunities, both through organic growth and acquisitions they believe will generate shareholder value. Our business development team is focused on our growth with materials-led businesses in mid-size, higher growth markets, and has several targets at various stages of completion in our acquisition pipeline. During the first quarter of 2026, we finalized three acquisitions within the Mountain region. Two of these transactions will allow us to broaden our presence in Montana, enhancing our ability to supply aggregates and ready-mix concrete to the expanding market in western Montana. Additionally, the acquisition of Morgan Asphalt marks our entry into the Utah market. This acquisition includes aggregate crushing and production operations with reserves projected to last over 30 years, an asphalt manufacturing facility and a range of contracting services such as asphalt paving, excavation and grading, serving both public and private sector customers.

Seasonality. WeOur typicallyoperations experiencecan seasonalbe lossesimpacted inby theweather first quarterespecially due to a large portion of our markets being geographically located in the northern part of the country. Generally, construction activity increases in the second quarter and continues throughout the year, contributing to both materials and contracting services volumes. ForHowever, thisan reason,unusually wewet seespring moreor pre-productionlonger activitywinter andcan sitelead improvementsto in the first quarter as we prepare for the upcomingreduced construction season,activity, which provideswould aalso benefit to us for the remainder of the year as volumes and sales increase. Some of this pre-production work includes stripping and harvesting atimpact our aggregate sites as well as repairing and mobilizingasphalt equipment.product lines.

Gross (loss) 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.

Other (expense) income includes net periodic benefit costs for our benefit plan expenses, other than service costs; interest income; realized and unrealized gains and losses on investments for our nonqualified benefit plans; earnings or losses on joint venture arrangements; gaingains on bargain purchasepurchases; and other miscellaneous income or expenses.

Income tax expense (benefit) expense consists of corporate income taxes related to our net income (loss). 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 our overall levels of income (loss) before income tax.

Gross lossProfit

As a percentage of revenues, selling, general and administrative expense was 20.48.7 percent in the firstsecond quarter of 2026 compared to 20.78.3 percent in 2025. Due to the seasonality of our operations, our first quarter selling, general and administrative costs as a percent of revenue are higher than our annualized costs. For the firstsecond quarter of 2026, we experienced higher costs, largely asrelated ato resultthe absence of gains on asset sales recognized in the second quarter of 2025 of $10.3 million. Also contributing was the additional costs associated with the companies acquired in 2025 and the first quarter of 2026,acquired, including additional payroll and payroll-related costscosts, andwhich $2.1was offset slightly by $1.7 million higherlower purchase accounting-related intangible asset amortization.

Interest expense increased $5.4$2.2 million due primarily to higher average debt balances with the issuanceadditional $400 million of aborrowings under the Term Loan B amended in MarchMay of 2025 and borrowings under our revolving credit facility,2026, offset in part by lower average interest rates.

Other income (expense)

Other income decreased $5.2$4.2 million, largely due to the absence of a one-time gain of $3.5 million on the bargain purchase of an aggregate quarry operation in the West segment in the prior year,year. asIn welladdition, aswe decreasedhad a decrease in interest income of $1.7 million as a result of less cash on hand.hand, which was mostly offset by increased investment returns on our nonqualified defined benefit plans.

Income tax benefit increased $3.7$5.2 million, corresponding with higher loss before income taxes.taxes, offset in part by lower effective tax rate. Our effective tax rate for the first half of 2026 and 2025 was 26.426.1 percent.percent and 28.7 percent, respectively. The decrease in the effective tax rate is due to non-deductible expenses for tax purposes in the first half of 2025.

EBITDA improved $8.1 million$100,000 for the quarter, largely due to higher revenuesrevenues, as notedpreviously above,mentioned, and production cost efficiencies on our asphalt and ready-mix product lines. Mostly offsetting the increase was lower margin contracting services work due to the type of work and the impact of increased competition, as well as productiontiming costof efficienciesproject forperformance allgains. product lines. Slightly offsetting was $2.4 million higherFurther, selling, general and administrative costs mostlywere $3.5 million higher, primarily related to additional overhead costs from the three companies acquired companies duringin the first quarter andof 2026, as well as increased laborpayroll-related costs.

Revenue increased $6.5$5.6 million, primarily driven by higher pricing and sales volumes due to favorableimproved weathermarket acrossopportunities thein segment.California. Partially offsetting were lower volumes in other markets resulting from competitive market dynamics.

EBITDA improved $3.2$2.7 million, largely as a result of increased salesrevenue, volumes,as mentioned previously, as well as lower operating costs due to lower input costs and the absence of boiler repairs and railcar maintenance incurred in the prior year.

During the firstsecond quarter of 2026, Corporate Services contributed negative EBITDA of $18.0$13.4 million, which was comparable to the prior year, as a result of flat selling, general and administrative costs year-over-year. LowerIncreased investment returns on our nonqualified defined benefit plans and lower due diligence and integration costs related to corporate development and completed acquisitions were offset by increased salaries and burden.