Knife River Corp 10-Q

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 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. Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. Our expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Nonetheless, our 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 we undertake 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 our 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 our 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 2025 Annual Report on Form 10-K (Annual Report) and subsequent filings with the United States Securities and Exchange Commission (SEC). Company Overview At Knife River, we are 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, compensation and work-life balance. We are one of the leading providers of crushed stone and sand and gravel in the United States and operate through four reportable segments across 15 states: 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-based construction materials and contracting services company, we have 1.3 billion tons of aggregate reserves supporting our vertically integrated business strategy. About 35 percent of these aggregates are used internally to support value-added downstream products like ready-mix concrete and asphalt, as well as contracting services such as heavy-civil construction, asphalt paving, concrete construction, bridges and in some segments the manufacturing of prestressed concrete products. Our strategically located aggregate sites and associated asphalt and ready-mix plants near mid-sized, higher-growth markets offer transportation advantages, enabling competitive pricing and higher margins. We serve both public and private markets, with public projects making up most of our work and providing stability through economic cycles, which helps offset the cyclical nature of the private markets. 22 Index 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: • West: Alaska, California, Hawaii, Oregon and Washington • Mountain: Idaho, Montana, Utah and Wyoming • Central: Iowa, Minnesota, North Dakota, South Dakota and Texas • Energy Services: California, Iowa, Nebraska, Oregon, South Dakota, Texas, Washington and Wyomin g 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 West X X X X X X X X X X Mountain X X X X X X X Central X X X X X X X X Energy Services X X X Market Conditions and Outlook Federal and state funding remains strong for a majority of our markets with approximately 80 percent of our historical contracting services revenue each year coming from public-sector projects, enhancing stability through market cycles. For more information on factors that may negatively impact our business, see the section entitled "Item 1A. Risk Factors" in Part I of the Company's 2025 Annual Report. Backlog. Our contracting services backlog was as follows: March 31, 2026 March 31, 2025 December 31, 2025 (In millions) West $ 180.3 $ 242.1 $ 203.6 Mountain 500.4 418.3 395.7 Central 488.1 278.3 432.8 $ 1,168.8 $ 938.7 $ 1,032.1 Expected margins on backlog at March 31, 2026, were lower compared to the expected margins on backlog at March 31, 2025. Of the $1.2 billion of backlog at March 31, 2026, we expect to complete approximately $914 million in the 12 months following March 31, 2026. Approximately 88 percent of our backlog at March 31, 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. 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). See the section entitled “Item 1A. Risk Factors” in Part I of the Company's 2025 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. 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 2026. As of March 2026, approximately 43 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. In 2025, the American Society of Civil Engineers published its 2025 Report Card for America's Infrastructure, assigning the United States roads a "D+" grade and estimating that between 2024 and 2033, the country will require more funding than what is currently authorized. It is estimated that a total of $2.2 trillion in funding will be needed for our roadway systems to reach a state of good repair during that time period. Profitability. The management team consistently monitors profit margins and has adopted a proactive approach in supporting long-term profitability objectives and creating shareholder value. In 2023, we launched our EDGE initiatives and established specialized 23 Index teams to deliver training, support higher-margin bidding opportunities across regions and pursue targeted growth opportunities. Process Improvement Teams ("PIT Crews") have focused on improving operational efficiencies, reducing production costs across our materials product lines and optimizing product quality. In addition, we are rolling out new technologies designed to increase productivity and provide enhanced, real-time visibility into daily operations. We could be subject to downward pressure on our margins due to competitive forces and fluctuations in the prices of raw materials, including diesel fuel, gasoline, natural gas, liquid asphalt, cement and steel. To help offset these pressures, we have utilized various mitigation strategies, such as dynamic pricing, energy escalation clauses in our contracting services contracts, securing materials in advance including the prepurchasing of diesel, fuel surcharges and pursuing other cost-saving measures. During the first quarter of 2026, our teams were successful with these mitigating controls and we have not seen a material impact to our results of operations as a result of the conflict in Iran. 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. In addition, we are investing in multiple organic projects, including an aggregates expansion project in South Dakota that will increase our production capabilities in the Sioux Falls market. This project is scheduled to be operational in 2027. In Twin Falls, Idaho, we greenfielded new ready-mix operations, which allows us to build a local team in this higher-growth market. The Twin Falls plant is expected to be fully operational in the second quarter of 2026. Seasonality. We typically experience seasonal losses in the first quarter 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. For this reason, we see more pre-production activity and site improvements in the first quarter as we prepare for the upcoming construction season, which provides a benefit to us for the remainder of the year as volumes and sales increase. Some of this pre-production work includes stripping and harvesting at our aggregate sites as well as repairing and mobilizing equipment. Workforce. As a people-first company, we continually take steps to address safety, recruitment and retention of our employees. Safety is one of Knife River's core values. The fundamental tenets of our "I Choose Safety" program are that safety is a choice and that all injuries are preventable. Our team is committed to work safely every day and we continue to advance our culture of safety through engagement and empowering our team members to take action and make meaningful changes that improve their well-being and the well-being of others. Our training and development team, based out of the Knife River Training Center, is comprised of professional instructors, who bring a wealth of knowledge and experience to the learning environment. This dedicated team has a long-standing tradition of delivering quality training programs that are both comprehensive and practical. Their expertise helps ensure that our team members receive the highest standard of education and skill development. 24 Index Consolidated Overview Three Months Ended March 31, 2026 2025 % Change (In millions) Revenue $ 410.1 $ 353.5 16 % Cost of revenue 412.9 363.1 14 % Gross loss (2.8) (9.6) 71 % Selling, general and administrative expenses 83.5 73.1 14 % Operating loss (86.3) (82.7) (4) % Interest expense 20.7 15.3 35 % Other (expense) income (0.6) 4.6 (113) % Loss before income taxes (107.6) (93.4) (15) % Income tax benefit (28.4) (24.7) (15) % Net loss $ (79.2) $ (68.7) (15) % EBITDA* $ (35.4) $ (41.5) 15 % Adjusted EBITDA* $ (31.8) $ (38.0) 16 % * 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 our products and services. Cost of revenue also includes depreciation, depletion and amortization attributable to the assets used in the production process. 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. 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; healthcare; 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 (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; gain on bargain purchase; and other miscellaneous income or expenses. Income tax (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. The discussion that follows focuses on the key financial measures we use to evaluate the performance of our business, which include revenue, EBITDA and EBITDA margin. EBITDA and EBITDA margin are non-GAAP financial measures used to measure profitability by our management and chief operating decision maker. For more information and reconciliations to the nearest GAAP measures, see the section entitled "Non-GAAP Financial Measures." 25 Index The following tables summarize our operating results. Three Months Ended March 31, 2026 2025 Dollars Margin Dollars Margin (In millions) Revenues by segment: West $ 211.8 $ 208.3 Mountain 81.2 66.0 Central 101.2 67.9 Energy Services 20.4 13.9 Total segment revenues 414.6 356.1 Corporate Services and Eliminations (4.5) (2.6) Consolidated revenues $ 410.1 $ 353.5 EBITDA (a): West $ 22.2 10.5 % $ 24.9 12.0 % Mountain (8.2) (10.1) % (16.3) (24.6) % Central (26.8) (26.5) % (24.3) (35.8) % Energy Services (4.6) (22.6) % (7.8) (56.0) % Total segment EBITDA (a) (17.4) (4.2) % (23.5) (6.6) % Corporate Services and Eliminations (b) (18.0) N.M. (18.0) N.M. Consolidated EBITDA (a) $ (35.4) (8.6) % $ (41.5) (11.7) % (a) EBITDA, total segment EBITDA, EBITDA margin and total 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." (b) N.M. - not meaningful Three Months Ended March 31, 2026 2025 Sales (thousands): Aggregates (tons) 4,878 3,867 Ready-mix concrete (cubic yards) 724 544 Asphalt (tons) 283 199 Average selling price:* Aggregates (per ton) $ 21.22 $ 21.05 Ready-mix concrete (per cubic yard) $ 199.76 $ 199.26 Asphalt (per ton) $ 74.06 $ 81.05 * The average selling price includes freight and delivery and other revenues. 26 Index Three Months Ended March 31, 2026 2025 Dollars Margin Dollars Margin (In millions) Revenues by product line: Aggregates $ 103.5 $ 81.4 Ready-mix concrete 144.5 108.5 Asphalt 21.0 16.1 Liquid asphalt 18.2 12.2 Other* 46.6 43.5 Contracting services 147.8 140.1 Internal sales (71.5) (48.3) Total revenues $ 410.1 $ 353.5 Gross (loss) profit by product line: Aggregates $ (3.7) (3.5) % $ (6.0) (7.4) % Ready-mix concrete 15.5 10.7 % 8.7 8.1 % Asphalt (4.9) (23.6) % (5.7) (35.4) % Liquid asphalt (2.7) (15.0) % (4.2) (34.3) % Other* (14.8) (31.8) % (13.2) (30.3) % Contracting services 7.8 5.3 % 10.8 7.7 % Total gross loss $ (2.8) (0.7)% $ (9.6) (2.7)% * 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 March 31, 2026, Compared to Three Months Ended March 31, 2025 Revenue Revenue increased $56.6 million, led mostly by ready-mix volumes contributing $35.8 million to the increase followed by an increase in aggregate volumes of $21.5 million, largely driven by recent acquisitions as well as favorable weather allowing for early season contracting services work. Partially offsetting the increased revenue was lower volumes in Hawaii due to significant flooding in the state. Gross loss Gross loss improved $6.8 million, largely the result of higher revenues noted above, as well as a decrease in maintenance and pre-production costs. Selling, general and administrative expenses As a percentage of revenues, selling, general and administrative expense was 20.4 percent in the first quarter of 2026 compared to 20.7 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 first quarter of 2026, we experienced higher costs, largely as a result of the additional costs associated with the companies acquired in 2025 and the first quarter of 2026, including additional payroll and payroll-related costs and $2.1 million higher purchase accounting-related intangible asset amortization. Interest expense Interest expense increased $5.4 million due primarily to higher average debt balances with the issuance of a Term Loan B in March of 2025 and borrowings under our revolving credit facility, offset in part by lower average interest rates. Other income (expense) Other income decreased $5.2 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 prior year, as well as decreased interest income as a result of less cash on hand. Income tax benefit Income tax benefit increased $3.7 million, corresponding with higher loss before income taxes. Our effective tax rate for 2026 and 2025 was 26.4 percent. 27 Index Business Segment Financial and Operating Data A discussion of key financial data from our business segments follows. We provide segment-level information by revenue, EBITDA and EBITDA margin, as these are the measures of profitability used by our chief operating decision maker to assess operational results. Results of Operations - West Three Months Ended March 31, 2026 2025 % Change (In millions) Revenue $ 211.8 $ 208.3 2 % EBITDA $ 22.2 $ 24.9 (11) % EBITDA margin 10.5 % 12.0 % Three Months Ended March 31, 2026 2025 (In millions) Revenues: Aggregates $ 64.8 $ 56.3 Ready-mix concrete 73.9 69.8 Asphalt 12.7 8.8 Other* 34.7 34.4 Contracting services 67.8 67.6 Internal sales (42.1) (28.6) $ 211.8 $ 208.3 * Other includes cement, merchandise, transportation services and other products that individually are not considered to be a core line of business for the segment. Three Months Ended March 31, 2026, Compared to Three Months Ended March 31, 2025 Revenue increased $3.5 million for the quarter, primarily due to higher aggregate, ready-mix and asphalt sales volumes in Oregon of $16.8 million, driven by stronger demand in the private sector, timing of projects and contributions from acquisitions completed in 2025. In addition, California's public agency market remained strong and contributed an additional $10.6 million in contracting services and aggregate sales volumes. These improvements were partially offset by lower aggregate, cement and ready-mix sales volumes in Hawaii of $9.3 million due to significant flooding conditions, as well as a decline in contracting services in Oregon due to less available agency work. EBITDA decreased 11 percent for the quarter, primarily related to the absence of a one-time gain of $3.5 million related to an acquisition recognized as a bargain purchase in the first quarter of 2025. In addition, the significant flooding in Hawaii contributed to the EBITDA decrease. This was partially offset by higher aggregate and ready-mix gross margins in Oregon due to improved volumes mentioned above. Results of Operations - Mountain Three Months Ended March 31, 2026 2025 % Change (In millions) Revenue $ 81.2 $ 66.0 23 % EBITDA $ (8.2) $ (16.3) 49 % EBITDA margin (10.1) % (24.6) % 28 Index Three Months Ended March 31, 2026 2025 (In millions) Revenues: Aggregates $ 13.5 $ 8.0 Ready-mix concrete 22.6 13.1 Asphalt 2.9 0.5 Contracting services 50.8 48.0 Internal sales (8.6) (3.6) $ 81.2 $ 66.0 Three Months Ended March 31, 2026, Compared to Three Months Ended March 31, 2025 Revenue increased $15.2 million in the quarter, mainly driven by favorable weather increasing volumes, along with higher pricing for ready-mix, aggregate and asphalt, which contributed $16.9 million of additional revenue to our legacy operations. The favorable weather also allowed for early season contracting services work across the segment, resulting in an additional $1.6 million of revenue. Acquisitions made during the quarter further added to the overall revenue growth. EBITDA improved $8.1 million for the quarter, largely due to higher revenues as noted above, as well as production cost efficiencies for all product lines. Slightly offsetting was $2.4 million higher selling, general and administrative costs mostly related to additional overhead costs from the three acquired companies during the quarter and increased labor costs. Results of Operations - Central Three Months Ended March 31, 2026 2025 % Change (In millions) Revenue $ 101.2 $ 67.9 49 % EBITDA $ (26.8) $ (24.3) (10) % EBITDA margin (26.5) % (35.8) % Three Months Ended March 31, 2026 2025 (In millions) Revenues: Aggregates $ 25.2 $ 17.1 Ready-mix concrete 48.0 25.6 Asphalt 5.4 6.8 Other* 4.0 2.4 Contracting services 29.2 24.5 Internal sales (10.6) (8.5) $ 101.2 $ 67.9 * Other includes merchandise and other products that individually are not considered to be a core line of business for the segment. Three Months Ended March 31, 2026, Compared to Three Months Ended March 31, 2025 Revenue increased $33.3 million for the quarter, primarily driven by contributions from companies acquired in 2025. Among these, the acquisition of Texcrete in December led to ready-mix volumes that were more than twice as high in Texas as the prior year. In addition, legacy contracting services increased $3.3 million across the segment as a result of more available work and aggregate volumes increased $5.6 million, largely as a result of data center projects. 29 Index EBITDA decreased $2.5 million, largely the result of two additional months of seasonal losses at Strata in 2026 and higher selling, general and administrative expenses mostly related to additional overhead costs from the companies acquired in 2025 and increased labor costs. Partially offsetting these decreases was higher ready-mix gross profit as a result of the additional volumes mentioned above and higher contracting services gross profit at our legacy operations. Results of Operations - Energy Services Three Months Ended March 31, 2026 2025 % Change (In millions) Revenue $ 20.4 $ 13.9 47 % EBITDA $ (4.6) $ (7.8) 41 % EBITDA margin (22.6) % (56.0) % Three Months Ended March 31, 2026 2025 (In millions) Revenues: Liquid Asphalt $ 18.2 $ 12.2 Other* 4.0 3.0 Internal sales (1.8) (1.3) $ 20.4 $ 13.9 * 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 March 31, 2026, Compared to Three Months Ended March 31, 2025 Revenue increased $6.5 million, primarily driven by higher sales volumes due to favorable weather across the segment. EBITDA improved $3.2 million, largely as a result of increased sales volumes, 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. Corporate Services and Eliminations Corporate Services includes all expenses related to the corporate functions of our company, as well as insurance activity at our captive insurer; interest expense on a majority of our long-term debt; interest income; and unrealized gains or losses on investments for nonqualified benefit plans. Three Months Ended March 31, 2026, Compared to Three Months Ended March 31, 2025 During the first quarter of 2026, Corporate Services contributed negative EBITDA of $18.0 million, which was comparable to the prior year, as a result of flat selling, general and administrative costs year-over-year. Lower due diligence and integration costs related to corporate development and completed acquisitions were offset by increased salaries and burden. Liquidity and Capital Resources At March 31, 2026, we had unrestricted cash and cash equivalents of $13.3 million, working capital of $590.0 million and borrowing capacity of $178.2 million on our revolving credit facility, net of our outstanding letters of credit. Working capital is calculated as current assets less current liabilities. As of March 31, 2026, we had sufficient liquid assets 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. 30 Index The ability to fund our cash needs will depend on the ongoing ability to generate cash from operations and obtain debt financing with competitive rates. We rely 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 disciplined capital allocation, including reinvesting in our company to maintain fixed assets, improve operations and grow our business. We currently estimate total 2026 capital expenditures for maintenance and improvement to be between $170 million and $235 million. For the three months ended March 31, 2026, we spent $42.3 million, largely on the replacement of construction equipment and plant improvements. Additionally, for the three months ended March 31, 2026, we spent $209.2 million on growth initiatives, which comprised of $174.2 million on acquisitions and $35.0 million on aggregate expansion and greenfield projects. For the remainder of 2026, we estimate to spend $101.4 million on organic growth projects. Capital expenditures for future acquisitions and new organic growth opportunities would be incremental to our outlined capital program. It is anticipated that capital expenditures for the remainder of 2026 will be funded by various sources, including cash flows from operations and debt. Cash flows Three Months Ended March 31, 2026 2025 (In millions) Net cash provided by (used in) Operating activities $ (58.6) $ (125.3) Investing activities (251.0) (503.6) Financing activities 261.7 486.3 Decrease in cash, cash equivalents and restricted cash (47.9) (142.6) Cash, cash equivalents and restricted cash -- beginning of year 123.4 281.1 Cash, cash equivalents and restricted cash -- end of period $ 75.5 $ 138.5 Operating activities Three Months Ended March 31, 2026 2025 Variance (In millions) Components of net cash used in operating activities: Net loss $ (79.2) $ (68.7) $ (10.5) Adjustments to reconcile net loss to net cash used in operating activities 51.8 38.2 13.6 Changes in current assets and liabilities, net of acquisitions: Receivables 52.5 41.1 11.4 Inventories (41.1) (50.4) 9.3 Other current assets (33.5) (35.5) 2.0 Accounts payable (5.3) (12.8) 7.5 Other current liabilities (8.5) (40.3) 31.8 Pension and postretirement benefit plan contributions (0.1) (0.1) — Other noncurrent charges 4.8 3.2 1.6 Net cash used in operating activities $ (58.6) $ (125.3) $ 66.7 Cash used in operating activities at March 31, 2026, decreased $66.7 million, largely related to lower working capital needs, offset by a higher net loss in the period. Cash used by working capital components totaled $35.9 million for the three months ended March 31, 2026, compared to $97.9 million for the three months ended March 31, 2025. This reduction in cash usage in 2026 was primarily the result of decreased incentive payments, higher collections on receivables balances, timing of taxes paid, decreased aggregate inventory and the fluctuation in payments on accounts payable. 31 Index Investing activities Three Months Ended March 31, 2026 2025 Variance (In millions) Capital expenditures $ (77.3) $ (75.0) $ (2.3) Acquisitions, net of cash acquired (174.2) (443.4) 269.2 Net proceeds from sale or disposition of property and other 3.1 17.5 (14.4) Investments (2.6) (2.7) 0.1 Net cash used in investing activities $ (251.0) $ (503.6) $ 252.6 The decrease in cash used in investing activities for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, was primarily the result of decreased cash used in acquisition activity, partially offset by the absence of prior year proceeds from the sale of ready-mix operations in the Central segment. Financing activities Three Months Ended March 31, 2026 2025 Variance (In millions) Issuance of long-term debt $ 270.0 $ 500.0 $ (230.0) Debt issuance costs — (11.1) 11.1 Repayment of long-term debt (2.9) — (2.9) Tax withholding on stock-based compensation (5.4) (2.6) (2.8) Net cash provided by financing activities $ 261.7 $ 486.3 $ (224.6) Cash flows provided by financing activities for the three months ended March 31, 2026 decreased compared to the three months ended March 31, 2025. In the first quarter of 2026, we borrowed $270 million against our revolving credit facility while in 2025 we issued a $500 million Term Loan B. Material cash requirements There were no material changes in the contractual obligations from those reported in the 2025 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 8 in the 2025 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 March 31, 2026, our long-term debt reflected an increase of approximately $267.1 million from the balance at December 31, 2025. This increase is due to borrowing $270 million under our revolving credit facility to fund seasonal working capital needs and additional acquisitions. At March 31, 2026, our total estimated interest payments over the life of our debt reflected an increase of approximately $67.7 million from the total estimated interest payments at December 31, 2025. This increase is primarily due to the borrowings under our revolving credit facility, as previously mentioned. At March 31, 2026, our purchase commitments reflected an increase of approximately 12 percent from the balance at December 31, 2025. This increase is primarily due to the seasonality of work and preparing for our peak construction season during the first quarter. We expect purchase commitments to continue to decrease throughout the remainder of 2026 as obligations continue to be satisfied during the construction season. Defined benefit pension plans We have frozen 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. 32 Index There were no material changes to our qualified noncontributory defined benefit pension plans from those reported in the 2025 Annual Report. We do not expect to make any pension plan contributions in 2026 as the plan is fully funded. For more information, see Part II, Item 8 in the 2025 Annual Report. 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, as well as total segment measures, as applicable, that 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 (loss) and net income (loss) 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 unrealized gains and losses on benefit plan investments and stock-based compensation as they are considered non-cash and not part of our core operations. 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 our 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 total segment measures, as applicable, are useful performance measures because they provide clarity as to our operational results. 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 (loss). EBITDA margin is calculated by dividing EBITDA by revenues. Adjusted EBITDA is calculated by adding back unrealized gains and losses on benefit plan investments and stock-based compensation 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 total 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 March 31, 2026 2025 (In millions) Net loss $ (79.2) $ (68.7) Depreciation, depletion and amortization 52.2 38.8 Interest expense, net 20.0 13.1 Income taxes (28.4) (24.7) EBITDA $ (35.4) $ (41.5) Unrealized (gains) losses on benefit plan investments 0.7 0.7 Stock-based compensation expense 2.9 2.8 Adjusted EBITDA $ (31.8) $ (38.0) Revenue $ 410.1 $ 353.5 Net loss margin (19.3) % (19.4) % EBITDA margin (8.6) % (11.7) % Adjusted EBITDA margin (7.8) % (10.7) % 33 Index New Accounting Standards For information regarding new accounting standards, see Note 3, which is incorporated by reference. Critical Accounting Estimates Our critical accounting estimates include revenue recognized using the cost-to-cost measure of progress for contracts; fair values of acquired assets and liabilities assumed under the acquisition method of accounting; impairment testing of goodwill; and impairment testing of long-lived assets excluding goodwill. There were no material changes in our critical accounting estimates from those that were previously reported in our 2025 Annual Report.