Knife River Corp 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read together with our audited consolidated financial statements and related notes included elsewhere in this Annual Report. Among other things, those financial statements include more detailed information regarding the basis of presentation for the financial data included in the following discussion. Certain percentages presented in this discussion and analysis are calculated from the underlying whole-dollar amounts and therefore may not recalculate from the rounded numbers used for disclosure purposes. This discussion contains forward-looking statements about our business, operations and industry that involve risks and uncertainties, such as statements regarding management’s plans, objectives, expectations and intentions. Future results and financial condition may differ materially from those currently anticipated as a result of the factors described under the sections entitled “Forward-Looking Statements” and “Item 1A. Risk Factors.” 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 and 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, as of December 31, 2024, operated through six operating segments 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, Mountain, Central and Energy Services. The geographic segments primarily provide aggregates, asphalt and ready-mix concrete, as well as related contracting services such as heavy-civil construction, asphalt paving, concrete construction, site development and grading. The Energy Services segment produces and supplies liquid asphalt and related services, primarily for use in asphalt road construction. As an aggregates-led construction materials and contracting services provider in the United States, our 1.2 billion tons of aggregate reserves provide the foundation for a vertically integrated business strategy, with 38 Index approximately 37 percent of our aggregates in 2024 being used internally to support value-added downstream products (ready-mix concrete and asphalt) and contracting services (heavy-civil construction, laydown, asphalt paving, concrete construction, site development and grading services, bridges, and in some segments the manufacturing of prestressed concrete products). Our aggregate sites and associated asphalt and ready-mix plants are primarily in strategic locations near mid-sized, high-growth markets, providing us with a transportation advantage for our materials that supports competitive pricing and increased margins. We provide our products and services to both public and private markets, with public markets tending to be more stable across economic cycles, which helps offset the cyclical nature of the private markets. We provide various products and services and operate a variety of facility types, including aggregate quarries and mines, ready-mix concrete plants, asphalt plants and distribution facilities in the following states: • Pacific: Alaska, California and Hawaii • Northwest: Oregon and Washington • Mountain: Idaho, Montana and Wyoming • Central: Iowa, Minnesota, North Dakota, South Dakota and Texas • Energy Services: California, Iowa, Nebraska, Oregon, South Dakota, Texas, Washington and Wyoming The following table presents a summary of products and services provided, as well as modes of transporting those products: Products and Services Modes of Transportation Aggregates Asphalt Ready- Mix Concrete Construction Services Precast/ Prestressed Concrete Liquid Asphalt Cement Heavy Equipment Trucking Rail Barge Pacific X X X X X X X X X X Northwest X X X X X X X X X Mountain X X X X X X Central X X X X X X X X Energy Services X X X Basis of Presentation On May 31, 2023, 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 the periods prior to the Separation were prepared on a “carve-out” basis using a legal entity approach in conformity with GAAP and were derived from the 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. For additional information related to the basis of presentation, see Item 8 - Note 1. Prior to the Separation, we participated in Centennial’s centralized cash management program, including its overall financing arrangements. We also had related party note agreements in place with Centennial for the financing of our capital needs. Interest expense in the Consolidated Statements of Operations, for the periods prior to the Separation, reflects the allocation of interest on the borrowings associated with the related-party note agreements. Upon the completion of the Separation, we implemented our own financing agreements with lenders. For additional information on our current debt financing, see Item 8 - Note 9. All intercompany balances and transactions between the businesses comprising Knife River have been eliminated in the accompanying audited consolidated financial statements. 39 Index Market Conditions and Outlook Our markets remain resilient, and construction activity remains generally strong. Approximately 80 percent of our contracting services revenue each year comes from public-sector projects, enhancing stability through market cycles. For more information on factors that may negatively impact our business, see the section entitled "Item 1A. Risk Factors." Backlog. Contracting services backlog was as follows as of December 31: 2024 2023 2022 (In millions) Pacific $ 100.9 $ 51.2 $ 72.2 Northwest 129.3 196.2 210.7 Mountain 339.9 256.7 313.5 Central 175.5 158.1 222.5 Total $ 745.6 $ 662.2 $ 818.9 Backlog as of December 31, 2024, is 13 percent higher than the prior period and expected margins are comparable. Of the $745.6 million of backlog at December 31, 2024, we expect to complete an estimated $630.5 million during 2025. Approximately 86 percent of our backlog as of December 31, 2024, relates to publicly funded projects, including street and highway construction projects, which are driven primarily by public works projects for state departments of transportation. Further, there continues to be infrastructure development, which is expected to provide bidding opportunities in our markets throughout 2025. Period-over-period increases or decreases in backlog may not be indicative of future revenues, margins, net income or EBITDA. For a discussion of EBITDA and EBITDA margin, see “Non-GAAP Financial Measures” later in this section. While we believe the current backlog of work remains firm, prolonged delays in the receipt of critical supplies and materials, among other things, could result in customers seeking to delay or terminate existing or pending agreements and could reduce expected margins. See the section entitled “Item 1A. Risk Factors” for a list of factors that can cause revenues or margins to be realized in periods and at levels that are different from originally projected. Public Funding . Funding for public projects is dependent on federal and state funding, such as appropriations to the Federal Highway Administration. States have moved forward with allocating funds from federal programs, such as the IIJA, which is authorized to provide $1.2 trillion in funding from 2022 through 2026. As of November 2024, approximately 43 percent of IIJA formula funding has yet to be obligated to projects in our market areas. 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. 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, the Materials Process Improvement Team (Materials PIT Crew) traveled to 10 locations throughout our operational footprint, visiting 67 individual aggregate, asphalt and ready-mix concrete plants. In 2024, the team traveled to eight additional locations and 58 individual plants, in addition to 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. 40 Index Acquisitions . Our management team has also continued to evaluate growth opportunities, both through organic growth and acquisitions they believe will generate shareholder value. In 2024, we invested $131.0 million of capital to close on six acquisitions. The acquisitions include aggregate-specific purchases in key markets and expanding our ready-mix and liquid asphalt operations. In November 2024, we purchased the business of Albina Asphalt, which has operations in Washington, Oregon and California and expanded the footprint of our high-margin liquid asphalt materials product line. In December 2024, we also entered into a definitive agreement to acquire Strata Corporation, a leading construction materials and contracting services provider in North Dakota and northwestern Minnesota. The acquisition of Strata is expected to close in the first half of 2025, subject to customary closing conditions. In addition to cash on hand, we intend to use a portion of the proceeds from the issuance of a new $500 million Term Loan B facility to fund the purchase of Strata. Workforce . As a people-first company, we continually take steps to address safety, recruitment and retention of our employees. Safety is one of our core values, and as part of our safety culture, we believe that all incidents and injuries are preventable. We continue to advance our culture of safety through engagement, and empowering our team members to take action and make meaningful changes that improve the well-being of themselves and others. Focusing on the development and retention of our employees is key to our success. We continue to deploy resources to attract, develop and retain qualified and diverse talent. As the United States faces shortages in the availability of individuals to fill careers in our industry, we have taken significant steps to showcase construction as a career of choice. We own and operate a state-of-the-art training facility, the Knife River Training Center, which is used corporate-wide to enhance the skills of both our new and existing employees through classroom education and hands-on experience. One of the most popular courses at the Knife River Training Center is the commercial driver's license training, which is helping to address an industry-wide labor shortage. The training facility also offers a variety of courses around leadership development for all our employees. We employ professional instructors as part of our Training and Development team, which is based out of the Knife River Training Center. This team has a long-standing tradition of offering quality training to both frontline and leadership-level employees. In 2024, the team provided training to nearly 1,100 students through 74 separate courses. Training courses include: commercial driver’s license/new truck driver, experienced truck driver, new and experienced equipment operator, sales, leadership/facilitator development and construction industry engagement. Consolidated Overview 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 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, interest expense and other expenses. 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; and other miscellaneous expenses. 41 Index 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. Income tax expense consists of corporate income taxes related to our net income. 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 before income tax. The discussion that follows focuses on the key financial measures we use to evaluate the performance of our business at the consolidated level, which include revenue, EBITDA and EBITDA margin. EBITDA and EBITDA margin are non-GAAP financial measures as these are measures of profitability used by management and our chief operating decision maker to assess operating results. For more information and reconciliations to the nearest GAAP measures, see the section entitled "Non-GAAP Financial Measures." Comparison for the Years Ended December 31, 2024, 2023 and 2022. Years ended December 31, 2024 2023 2022 2024 vs 2023 % change 2023 vs 2022 % change (In millions) Revenue $ 2,899.0 $ 2,830.3 $ 2,534.7 2 % 12 % Cost of revenue 2,329.2 2,291.4 2,173.8 2 % 5 % Gross profit 569.8 538.9 360.9 6 % 49 % Selling, general and administrative expenses 253.6 242.5 166.6 5 % 46 % Operating income 316.2 296.4 194.3 7 % 53 % Interest expense 55.2 58.1 30.1 (5) % 93 % Other (expense) income 10.0 7.0 (5.4) (43) % 230 % Income before income taxes 271.0 245.3 158.8 10 % 54 % Income taxes 69.3 62.4 42.6 11 % 46 % Net income $ 201.7 $ 182.9 $ 116.2 10 % 57 % EBITDA* $ 454.3 $ 422.0 $ 306.7 8 % 38 % Adjusted EBITDA* $ 463.0 $ 432.4 $ 313.4 7 % 38 % __________________ * 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.” 42 Index The following tables summarize our operating results for the years ended December 31, 2024, 2023 and 2022. Revenues EBITDA 1 EBITDA margin 1 2024 2023 2022 2024 2023 2022 2024 2023 2022 (In millions) Pacific $ 493.1 $ 462.2 $ 418.1 $ 59.9 $ 56.2 $ 44.0 12.1 % 12.2 % 10.5 % Northwest 692.4 666.1 600.2 149.8 121.1 103.9 21.6 % 18.2 % 17.3 % Mountain 663.1 634.0 542.0 113.5 103.2 72.6 17.1 % 16.3 % 13.4 % Central 818.1 825.0 779.8 131.6 116.6 86.6 16.1 % 14.1 % 11.1 % Energy Services 275.7 292.3 238.4 60.2 78.1 28.3 21.8 % 26.7 % 11.9 % Segment totals 2,942.4 2,879.6 2,578.5 515.0 475.2 335.4 17.5 % 16.5 % 13.0 % Corporate Services and Eliminations (43.4) (49.3) (43.8) (60.7) (53.2) (28.7) N.M. N.M. N.M. Total $ 2,899.0 $ 2,830.3 $ 2,534.7 $ 454.3 $ 422.0 $ 306.7 15.7 % 14.9 % 12.1 % __________________ 1 EBITDA and EBITDA margin are non-GAAP financial measures. For more information and reconciliations to the nearest GAAP measures, see the section entitled “Non-GAAP Financial Measures.” 2 N.M: not meaningful Revenues Gross profit Gross margin 2024 2023 2022 2024 2023 2022 2024 2023 2022 (In millions) Aggregates $ 556.1 $ 547.9 $ 496.6 $ 114.3 $ 109.7 $ 69.5 20.6 % 20.0 % 14.0 % Ready-mix concrete 655.5 653.9 609.5 106.0 101.2 85.9 16.2 % 15.5 % 14.1 % Asphalt 441.5 452.4 427.5 68.2 61.5 41.7 15.4 % 13.6 % 9.8 % Liquid asphalt 238.9 253.2 207.5 51.5 69.7 25.4 21.6 % 27.5 % 12.2 % Other* 265.8 249.0 199.8 53.3 47.9 38.3 20.1 % 19.2 % 19.2 % Contracting services 1,358.2 1,307.3 1,187.7 176.5 148.9 100.1 13.0 % 11.4 % 8.4 % Internal sales (617.0) (633.4) (593.9) — — — — % — % — % Total $ 2,899.0 $ 2,830.3 $ 2,534.7 $ 569.8 $ 538.9 $ 360.9 19.7 % 19.0 % 14.2 % __________________ * Other includes cement, merchandise, fabric, spreading and other products and services that individually are not considered to be a major line of business. 2024 2023 2022 Sales (thousands): Aggregates (tons) 31,832 33,637 33,994 Ready-mix concrete (cubic yards) 3,484 3,837 4,015 Asphalt (tons) 6,454 6,760 7,254 Average selling price: Aggregates (per ton)* $ 17.47 $ 16.29 $ 14.61 Ready-mix concrete (per cubic yard) $ 188.11 $ 170.42 $ 151.80 Asphalt (per ton) $ 68.40 $ 66.92 $ 58.93 __________________ * The average selling price includes freight and delivery and other revenues. 43 Index 2024 Compared to 2023 Revenue Revenue increased $68.7 million as increased pricing added $122.9 million during the year as a result of our pricing initiatives across all product lines, except liquid asphalt. In 2024, we saw price increases of low-double-digits for ready-mix concrete, high-single-digits for aggregates and low-single digits for asphalt. Our contracting services revenue also increased in most regions, particularly in the Mountain, Northwest and Pacific regions, as we benefited from additional public-agency work and timing of projects. Partially offsetting these increases were decreased ready-mix, aggregate and asphalt sales volumes of $120.5 million, primarily due to EDGE-related initiatives of quality over quantity of work, timing of projects and lower demand for private projects. Liquid asphalt revenue decreased due to lower pricing as a result of reduced supply input costs across our market areas. Gross Profit and Gross Margin Gross profit improved $30.9 million while gross margin improved 70 basis points. Contracting services margins increased 160 basis points as we saw an increase in revenues along with improved bid margins and favorable project execution during the year. Also contributing to the improvement was higher margins on asphalt, aggregates and ready-mix concrete as higher sales prices outpaced costs while volumes declined as we continue to choose quality of work over quantity of work. Liquid asphalt continued to see a reduction in gross profit, as a result of lower revenues due to the pricing decrease. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $11.1 million. Our reportable segments had higher costs of $4.1 million, which was primarily related to higher payroll-related costs, largely due to additional staffing, competitive wage increases, and higher professional services. These increases were offset in part by higher asset sale gains of $3.4 million and the absence of non-cash asset impairments of $5.8 million on aggregate sites discussed in Item 8 - Note 2. Corporate Services had increased costs of $7.0 million. The increase in costs for non-Separation related expenses totaled $7.4 million, which was primarily higher due diligence and integration costs related to corporate development and completed acquisitions of $7.5 million and higher information technology costs of $3.4 million. These costs were partially offset by lower payroll-related costs of $2.4 million, largely due to lower bonus accruals, and a reduction in insurance loss reserves at our captive insurer of $2.6 million. As a result of the Separation, we experienced higher recurring costs as a publicly traded company of $6.3 million, including payroll-related costs of $9.5 million, largely due to additional staff and stock-based compensation expenses for the management team and board of directors; information technology costs of $2.8 million; professional services of $1.8 million; and fees of $750,000 primarily related to fees on new debt issued in conjunction with the Separation, partially offset by a reduction in general corporate expenses from MDU Resources of $8.9 million. We also incurred less one-time costs of $6.5 million primarily consisting of insurance costs related to the Separation and the transition services agreement with MDU Resources. Interest Expense Interest expense decreased $2.9 million due primarily to lower average debt balances, offset by higher average interest rates. Other Income (Expense) Other income (expense) increased $3.0 million, primarily due to increased interest income on higher cash balances. Income Tax Expense Income tax expense increased $6.9 million corresponding with higher income before income taxes. 44 Index 2023 Compared to 2022 Revenue Revenue improved $295.6 million as increased pricing added $217.3 million across all regions and product lines, supported by demand, increased market pricing and EDGE-related pricing initiatives. We also saw increased contracting services revenue in most regions, especially in the Mountain and Northwest regions that benefited from strong demand and more available work. Higher liquid asphalt sales volumes also contributed to the increased revenue. Partially offsetting these increases were decreased asphalt, ready-mix concrete and aggregate sales volumes of $69.2 million, primarily attributable to the absence in 2023 of certain impact projects, lower internal sales volumes resulting from the strategy to target improved bid margins, project timing and the sale of non-strategic assets in southeast Texas in December 2022. Gross Profit and Gross Margin Gross profit improved by $178.0 million while gross margin improved 480 basis points. Higher sales prices outpacing costs across our materials product lines contributed $126.0 million in gross profit, which was largely the result of increased market pricing and EDGE-related initiatives, including operating efficiencies and pricing optimization. Higher contracting services margins contributed $48.9 million to gross profit, primarily related to improved bid margins, certain impact projects and job productivity gains. Additionally, liquid asphalt margins benefited from cost improvements and higher sales volumes. Selling, General and Administrative Expenses Selling, general and administrative expenses increased $75.9 million. As a result of the Separation, we experienced increased recurring costs, including payroll-related costs of $12.3 million, largely due to additional staff and stock-based compensation expense for the management team and board of directors; insurance costs of $2.8 million; and professional services of $2.6 million, which were offset in part by a reduction in general corporate expenses from MDU Resources of $7.6 million, as discussed in Item 8 - Note 1. Also, as part of the Separation, we incurred one-time costs of $10.0 million primarily related to professional services, insurance costs and the transition services agreement with MDU Resources. Further contributing to the higher selling, general and administrative costs were increased payroll-related costs of $27.7 million, due in part to higher incentive accruals across the segments based on our performance; non-cash asset impairments of $5.8 million on aggregate sites discussed in Item 8 - Note 2; absence of a gain of $6.7 million recognized in 2022 on the sale of non-strategic assets in southeast Texas; higher office expenses of $2.6 million; increased expected credit losses of $1.5 million directly associated with an increase in receivable balances over 90 days and the absence of bad debt recoveries in 2022; and higher information technology and other costs. Interest Expense Interest expense increased $28.0 million due primarily to higher average interest rates. Interest rates were higher as a result of settling related-party notes payable as part of the Separation and entering into new debt agreements with higher interest rates, which resulted in additional interest expense in the period of $29.5 million. Partially offsetting the increase was lower average debt balances. For additional information, see Item 8 - Notes 9 and 19. Other Income (Expense) Other income (expense) increased $12.4 million, due in part to improved returns on our nonqualified benefit plan investments of $5.5 million; increased interest income of $5.2 million on higher cash balances and on the cash held in escrow for the $425.0 million of senior notes issued prior to the completion of the Separation; and income resulting from the transition services agreement with MDU Resources, as discussed in Item 8 - Note 19. Income Tax Expense Income tax expense increased $19.8 million corresponding with higher income before income taxes. 45 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 measures of profitability used by management and our chief operating decision maker to assess operating results. On January 1, 2025, we completed a reorganization of our operating segments, including the management of the segments, to align with our business strategy. In the first quarter of 2025, we will begin reporting our financial information under four operating segments: West, Mountain, Central and Energy Services. Under the new operating structure, the previous Pacific and Northwest operating segments will become the West operating segment and the North Central and South operating segments will become the Central operating segment. Results of Operations – Pacific Years ended December 31, 2024 2023 2022 2024 vs 2023 % change 2023 vs 2022 % change (In millions) Revenue $ 493.1 $ 462.2 $ 418.1 7 % 11 % EBITDA $ 59.9 $ 56.2 $ 44.0 7 % 28 % EBITDA margin 12.1 % 12.2 % 10.5 % 2024 2023 2022 (In millions) Revenues: Aggregates $ 112.3 $ 104.8 $ 92.3 Ready-mix concrete 145.8 142.3 127.5 Asphalt 30.7 32.2 35.7 Other* 149.3 142.7 114.2 Contracting services 141.9 126.3 129.5 Internal sales (86.9) (86.1) (81.1) $ 493.1 $ 462.2 $ 418.1 __________________ * Other includes cement, precast/prestressed concrete, merchandise, and other products that individually are not considered to be a major line of business for the segment. 2024 Compared to 2023 Our revenue increased $30.9 million in 2024. Price increases across all product lines as a result of EDGE-related initiatives and aggregate product mix contributed $36.9 million of additional revenue in 2024. We also had a $15.5 million increase in contracting services, primarily driven by large public agency-related construction projects in northern California. Partially offsetting the increased revenue was reduced volumes of $27.6 million across the remaining product lines, partly due to increased competition in the California market as well as reduced demand in marine construction. We saw an increase in EBITDA of $3.7 million, while EBITDA margin decreased 10 basis points. The increase in EBITDA was due in part to additional gross profit in northern California’s contracting services, primarily related to increased public agency-related construction projects and operational efficiencies recognized during the year. Also contributing to the increase was lower selling, general and administrative expenses of $2.3 million due to a gain of $2.2 million on equipment sales in California and the absence of a non-cash impairment in 2023 of $2.2 million on a leased aggregate site, as discussed in Item 8 - Note 2, offset in part by higher professional services. Gross profit on our construction materials decreased $4.6 million in 2024 as a result of lower volumes and higher production costs. 46 Index 2023 Compared to 2022 Our revenue increased $44.1 million in 2023. This increase was across most product lines and was the result of increased prices to cover rising costs and the early stages of EDGE-related pricing implementation, as well as increased sales of higher priced products, adding $32.0 million. We saw strong cement product sales volumes to third-party customers in Alaska and strong aggregate sales volumes of $6.0 million, primarily from increased demand in Hawaii as the local economy continues to regain momentum for public and private work. Ready-mix concrete sales volumes increased in northern California as a result of an acquisition in December 2022, which were offset in part by lower sales volumes in Alaska due to fewer projects over the prior year. Partially offsetting the increased revenues was the absence in 2023 of an impact project in California of $11.2 million, which affected both contracting services workloads and asphalt volumes. Northern California experienced mild weather in the fourth quarter which also contributed to a strong finish to the year. We saw an increase in EBITDA of $12.2 million and EBITDA margin of 170 basis points in 2023. These improvements are the direct result of increased pricing outpacing costs and strong demand, as previously discussed. We also experienced lower fuel and asphalt oil costs. Partially offsetting the increase was higher selling, general and administrative expenses of $11.6 million and lower contracting services gross profit of $1.9 million as a result of cost overruns on a project in California. The increased selling, general and administrative expenses includes higher payroll-related costs of $5.9 million, due in part to higher incentive accruals based on the our performance; a non-cash asset impairment of $2.2 million on a leased aggregate site, as discussed in Item 8 - Note 2; higher rent expense of $700,000; increased building repairs of $500,000; and other miscellaneous expenses. Results of Operations – Northwest Years ended December 31, 2024 2023 2022 2024 vs 2023 % change 2023 vs 2022 % change (In millions) Revenue $ 692.4 $ 666.1 $ 600.2 4 % 11 % EBITDA $ 149.8 $ 121.1 $ 103.9 24 % 17 % EBITDA margin 21.6 % 18.2 % 17.3 % 2024 2023 2022 (In millions) Revenues: Aggregates $ 184.8 $ 189.9 $ 171.6 Ready-mix concrete 167.8 163.4 158.0 Asphalt 104.6 103.3 97.3 Other* 18.1 15.8 14.8 Contracting services 324.8 300.4 262.7 Internal sales (107.7) (106.7) (104.2) $ 692.4 $ 666.1 $ 600.2 __________________ * Other includes merchandise, transportation services and other products that individually are not considered to be a major line of business for the segment. 2024 Compared to 2023 Our revenue increased $26.3 million in 2024, most of which was due to large public agency-related construction projects driving an increase in contracting services and asphalt sales volumes. In addition, improved pricing on ready-mix concrete and aggregates provided $38.1 million more in revenue. Offsetting the increases were a decrease 47 Index in ready-mix and aggregates sales volumes due to EDGE-related pricing initiatives and lower demand in the residential and commercial markets. We saw an increase in both EBITDA of $28.7 million and EBITDA margin of 340 basis points. These improvements resulted from higher construction gross profit of $15.5 million due to favorable job execution, efficiencies gained at our Spokane prestress facility and more available public agency work. We also benefited from improved ready-mix concrete margins as a result of increased pricing and favorable project execution in southern Oregon and increased asphalt margins due to lower asphalt oil and variable production costs. In addition, our selling, general and administrative expenses decreased $3.0 million due to the absence of a non-cash asset impairment in 2023 of $3.6 million on an aggregate site, as discussed in Item 8 - Note 2; higher gains on the sale of equipment; lower bad debt expense of $500,000; and lower professional services, offset in part by higher payroll-related costs of $3.6 million due to additional staffing. 2023 Compared to 2022 Our revenue increased $65.9 million in 2023, largely the result of EDGE-related pricing initiatives on all product lines, which together contributed $52.0 million. In addition, higher demand for contracting services work related to public agencies and railroad projects, as well as prestress data center and other projects, accounted for an increase in revenues of $37.7 million. Partially offsetting the increases were lower sales volumes across all product lines of $22.2 million, due in large part to the timing of impact projects in 2023 and decreased demand for asphalt paving and residential work. We saw an increase in EBITDA of $17.2 million and EBITDA margin of 90 basis points in 2023. These improvements are the result of higher sales prices outpacing costs across all product lines by $26.1 million, largely resulting from EDGE-related pricing initiatives and product mix, and lower fuel, asphalt oil and equipment costs, which were offset in part by lower volumes across all product lines. Contracting services improved $8.0 million, largely due to the strong backlog of work established and the reduction of job losses as compared to the prior year, which were offset in part by startup costs related to the new prestress facility. We also had higher selling, general and administrative expenses which includes $3.9 million of higher payroll-related costs largely related to higher wages and performance-based incentives; a non-cash asset impairment of $3.6 million on an aggregate site, as discussed in Item 8 - Note 2; and $3.0 million lower asset sale gains. Results of Operations – Mountain Years ended December 31, 2024 2023 2022 2024 vs 2023 % change 2023 vs 2022 % change (In millions) Revenue $ 663.1 $ 634.0 $ 542.0 5 % 17 % EBITDA $ 113.5 $ 103.2 $ 72.6 10 % 42 % EBITDA margin 17.1 % 16.3 % 13.4 % 48 Index 2024 2023 2022 (In millions) Revenues: Aggregates $ 101.8 $ 100.5 $ 83.3 Ready-mix concrete 117.1 120.5 106.7 Asphalt 120.9 112.9 93.3 Contracting services 459.0 433.0 368.7 Internal sales (135.7) (132.9) (110.0) $ 663.1 $ 634.0 $ 542.0 2024 Compared to 2023 Our revenue increased $29.1 million in 2024, primarily from an increase in Idaho public agency construction work and airport work, which drove increases in both contracting services revenue and asphalt volumes. We also benefited from the continued implementation of our EDGE-related pricing initiative throughout all product lines, which contributed $24.6 million in additional revenue. Offsetting these increases were lower ready-mix concrete volumes of $14.4 million due to a decrease in demand for residential and commercial work, as well as lower aggregates sales volumes of $11.0 million, largely due to the timing of wind energy projects and lower internal sales from the lack of large aggregate projects in 2024. We saw an increase in EBITDA of $10.3 million and EBITDA margin of 80 basis points in 2024. These increases are the result of higher pricing across all product lines from our EDGE-related pricing initiatives outpacing cost increases. Gross profit on contracting services and asphalt also benefited from the increase in public agency construction work and airport work, as previously mentioned. Partially offsetting the increase were lower aggregates and ready-mix concrete volumes of $4.9 million, as previously discussed. In addition, selling, general and administrative expenses increased $3.2 million, largely due the absence of asset sale gains in 2023 and higher payroll-related costs. 2023 Compared to 2022 Our revenue improved $92.0 million in 2023, 70 percent of which was derived from contracting services from strong demand for public agency, airport and commercial work throughout the region. Pricing momentum across all product lines and throughout the region contributed $40.3 million. The increased pricing was in response to rising costs, demand and growing markets, as well as the early stages of EDGE-related pricing implementation. Aggregate volumes increased in the majority of locations with Wyoming recognizing an increase due to a number of wind energy projects throughout the state and certain areas of Montana saw higher volumes due to four airport projects. Wyoming also experienced wetter weather conditions in 2023 which negatively impacted both ready-mix concrete and asphalt sales volumes, partially contributing to a $7.3 million decrease to revenue. We saw an increase in EBITDA of $30.6 million and EBITDA margin of 290 basis points in 2023. The improvement was the result of higher contracting services revenues and margins contributing profit of $19.7 million due to strong markets for public agency, airport and commercial work, as well as cost savings and job efficiencies. Higher sales prices outpaced costs across all product lines by $11.9 million. In addition, we also experienced lower fuel and equipment costs and had higher gains on asset sales. Partially offsetting the increase was higher selling, general and administrative expenses, as a result of higher payroll-related costs of $2.4 million, including increased incentive accruals based on our performance. 49 Index Results of Operations – Central Years ended December 31, 2024 2023 2022 2024 vs 2023 % change 2023 vs 2022 % change (In millions) Revenue $ 818.1 $ 825.0 $ 779.8 (1) % 6 % EBITDA $ 131.6 $ 116.6 $ 86.6 13 % 35 % EBITDA margin 16.1 % 14.1 % 11.1 % 2024 2023 2022 (In millions) Revenues: Aggregates $ 157.2 $ 152.7 $ 149.4 Ready-mix concrete 224.8 227.7 217.3 Asphalt 185.3 204.0 201.2 Other* 31.7 28.8 25.0 Contracting services 432.5 447.6 426.8 Internal sales (213.4) (235.8) (239.9) $ 818.1 $ 825.0 $ 779.8 __________________ * Other includes merchandise and other products that individually are not considered to be a major line of business for the segment. 2024 Compared to 2023 Our revenue decreased $6.9 million in 2024 as a result of lower asphalt and ready-mix concrete volumes and $15.1 million less contracting services revenues, largely due to our EDGE-related initiative of quality of work over quantity of work. The north central region also saw less contracting services work and asphalt sales volumes in 2024 related to the timing of projects with more work completed in late 2023 due to favorable weather later in the construction season. Partially offsetting the decrease in volumes was the benefit of higher prices on ready-mix concrete and asphalt of $24.4 million with the continued implementation of EDGE-related pricing initiatives. Overall, our aggregate sales volumes across the segment increased $4.7 million. We saw an increase in EBITDA of $15.0 million and EBITDA margin of 200 basis points in 2024. These improvements are the result of increased margins across all product lines, largely due to continued EDGE-related pricing initiatives. Our contracting services work contributed an additional $4.9 million of gross profit, largely due to higher margin work, disciplined project bidding and favorable project execution. Offsetting these increases were higher selling, general and administrative expenses of $5.4 million, largely due to additional payroll-related costs of $5.7 million, due in part to additional staffing, and increased professional services fees, offset by higher gains on the sale of non-strategic assets in Texas of $2.3 million. 2023 Compared to 2022 Our revenue increased $45.2 million in 2023, as a result of higher selling prices across all product lines providing $76.1 million of additional revenue, largely due to EDGE-related pricing initiatives. Contracting services saw a benefit of $20.8 million from improved bid margins and favorable weather across the regions, a large concrete and asphalt paving job in the north central region and increased paving work in Texas. Partially offsetting these increases were lower sales volumes of $33.0 million across most product lines largely as the regions continue to target improved bid margins on projects which also impacts internal sales volumes and the absence of an impact project in South Dakota. Also, decreased ready-mix concrete and aggregates sales due to a sale of non-strategic assets in southeast Texas in December 2022 impacted revenue. 50 Index We saw an increase in EBITDA of $30.0 million and EBITDA margin of 300 basis points in 2023. The increase in EBITDA was largely due to higher sales prices across all product lines which contributed $30.0 million and higher contracting services margins of $22.5 million related to improved bid margins, impact projects and job productivity gains. The increase was offset in part by higher selling, general and administrative expenses and decreased sales volumes. Selling, general and administrative expenses increased $14.6 million, largely the absence of a gain of $6.7 million recognized in 2022 on the sale of non-strategic assets in southeast Texas; additional payroll-related costs of $6.0 million, due in part to higher incentive accruals based on our performance; and increased insurance costs of $1.4 million. Results of Operations – Energy Services Years ended December 31, 2024 2023 2022 2024 vs 2023 % change 2023 vs 2022 % change (In millions) Revenue $ 275.7 $ 292.3 $ 238.4 (6) % 23 % EBITDA $ 60.2 $ 78.1 $ 28.3 (23) % 176 % EBITDA margin 21.8 % 26.7 % 11.9 % 2024 2023 2022 (In millions) Revenues: Liquid asphalt $ 238.9 $ 253.2 $ 207.5 Other* 50.6 49.3 45.2 Internal sales (13.8) (10.2) (14.3) $ 275.7 $ 292.3 $ 238.4 __________________ * Other includes transportation services, fabric, spreading and other products that individually are not considered to be a major line of business for the segment. 2024 Compared to 2023 Our revenue decreased $16.6 million in 2024, largely due to lower pricing as a result of reduced supply input costs across our market areas. Liquid asphalt sales volumes were up 4 percent, primarily from strong demand in California and Texas, which were partially offset by decreased volumes in the Midwest due to less carryover jobs year-over-year. The acquisition of Albina during the fourth quarter of 2024 also contributed additional liquid asphalt sales volumes. Our EBITDA decreased $17.9 million and EBITDA margin decreased 490 basis points in 2024. The decrease in EBITDA was driven by reduced market pricing bringing our margins back within a normal range and an increase in operating costs, primarily $1.5 million in plant repairs at our California terminal. Higher selling, general and administrative expenses of $735,000, largely due to higher payroll-related costs with the addition of Albina employees in the fourth quarter of 2024, also reduced EBITDA. 2023 Compared to 2022 Our revenue improved $53.9 million in 2023, largely driven by higher liquid asphalt sales volumes from additional sales opportunities across most of our primary markets, higher sales to other reportable segments and sales late in the year due to favorable weather conditions. Higher liquid asphalt sales prices also positively impacted revenue. We saw an increase in EBITDA of $49.8 million and EBITDA margin of 1,480 basis points in 2023. This increase was primarily related to increased market pricing and higher sales volumes. Partially offsetting these increases were higher operating costs for scheduled tank repair and maintenance costs and higher selling, general and administrative expenses, primarily $1.4 million of payroll-related costs. 51 Index Corporate Services and Eliminations Corporate Services includes all expenses related to the corporate functions of our company, as well as insurance activity of our captive insurer; interest expense on a majority of our long-term debt; interest income; and unrealized gains and losses on investments for our nonqualified benefit plans. 2024 Compared to 2023 Corporate Services had negative EBITDA of $60.7 million, or $7.5 million less EBITDA in 2024, compared to the prior year. Corporate Services had increased selling, general and administrative expenses of $7.0 million. The increase in costs for non-Separation related expenses totaled $7.4 million, which was primarily due to higher due diligence and integration costs related to corporate development and completed acquisitions of $7.5 million and higher information technology costs of $3.4 million. These costs were partially offset by lower payroll-related costs of $2.4 million, largely due to lower bonus accruals, and a reduction in insurance loss reserves at our captive insurer of $2.6 million. As a result of the Separation, we experienced higher recurring costs as a publicly traded company of $6.3 million, including payroll-related costs of $9.5 million, largely due to additional staff and stock-based compensation expenses for the management team and board of directors; information technology costs of $2.8 million; professional services of $1.8 million; and fees of $750,000 primarily related to fees on new debt issued in conjunction with the Separation, partially offset by a reduction in general corporate expenses from MDU Resources of $8.9 million. We also incurred less one-time costs of $6.5 million primarily consisting of insurance costs related to the Separation and the transition services agreement with MDU Resources. 2023 Compared to 2022 Corporate Services contributed negative EBITDA of $53.2 million, or $24.5 million less EBITDA in 2023 than the prior year. The decrease was due primarily to higher selling, general and administrative expenses of $31.8 million directly related to the Separation from MDU Resources. In 2023, we experienced increased recurring costs, including payroll-related costs of $12.3 million, largely due to additional staff and stock-based compensation expense for the management team and board of directors; professional services of $2.6 million; fees of $1.2 million, primarily related to fees on the new debt issued in conjunction with the Separation; and insurance costs of $400,000. These recurring costs were offset in part by a reduction in general corporate expenses from MDU Resources of $7.6 million, as discussed in Item 8 - Note 1. Also, as part of the Separation, we incurred one-time costs of $10.0 million primarily related to professional services, insurance costs and the transition services agreement with MDU Resources. Further contributing to higher selling, general and administrative costs were increased payroll-related costs due to higher incentive accruals based on our performance. Partially offsetting these increased costs were improved returns on our nonqualified benefit plan investments of $5.5 million. Liquidity and Capital Resources At December 31, 2024, we had unrestricted cash and cash equivalents of $236.8 million and working capital of $617.6 million. Working capital is calculated as current assets less current liabilities. We have a centralized cash management model and intend to use cash on hand and third-party credit facilities to fund day-to-day operations. We believe we have sufficient liquid assets, cash flows from operations and borrowing capacity to meet our financial commitments, debt obligations and anticipated capital expenditures for at least the next 12 months. Given the seasonality of our business, we typically experience significant fluctuations in working capital needs and balances throughout the year. Working capital requirements generally increase in the first half of the year as we build up inventory and focus on preparing equipment and facilities and other start-up costs for our construction season. Working capital levels then typically decrease as the construction season winds down and we collect on receivables. Our 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 industry. 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. 52 Index Debt Financing Activities Facility Facility Limit Amount Outstanding Letters of Credit Expiration Date (In millions) Revolving credit agreement $ 350.0 $ — $ 20.6 5/31/2028 Term loan A 275.0 264.7 — 5/31/2028 Senior notes 425.0 425.0 — 4/30/2031 On April 25, 2023, we issued $425.0 million of 7.75 percent senior notes due May 1, 2031, pursuant to an indenture. On May 31, 2023, we entered into a senior secured credit agreement consisting of a $275.0 million term loan and a $350.0 million revolving credit facility, each with a SOFR-based interest rate and a maturity date of May 31, 2028. Outstanding letters of credit reduce the amount available under the revolving credit agreement. 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. In order to borrow under the debt instruments, we must be in compliance with the applicable covenants and certain other conditions, all of which we are in compliance at December 31, 2024. In the event that we do not comply with the applicable covenants and other conditions, we would be in default on our agreements and alternative sources of funding may need to be pursued and there can be no assurance that, if needed, we will be able to secure additional debt or equity financing on terms acceptable to us or at all. For additional information on our debt, see Item 8 - Note 9. Off-Balance Sheet Arrangements As of December 31, 2024, we had aggregate outstanding letters of credit issued under our revolving credit facility in the amount of $ 20.6 million. Other than these letters of credit further discussed in Item 8 - Note 18, we do not currently have any off-balance sheet arrangements that have, or are reasonably likely to have, a material impact on current or future financial conditions, results of operations or cash flows. Capital Expenditures We are committed to disciplined capital allocation, including reinvesting in our company to maintain fixed assets, improve operations and grow our business. In 2024, we spent $170.5 million, compared to $124.3 million in 2023, on the replacement of depleting aggregate reserves, construction equipment, plant improvements and buildings. In 2024, we spent $132.9 million on six acquisitions, which include aggregate, ready-mix and liquid asphalt operations, and initial greenfield projects. Capital expenditures for 2024 and 2023 were funded by internally generated funds and borrowings under credit facilities. For 2025, we have estimated capital expenditures for maintenance and improvement to be between $155 million and $215 million and approximately $522 million for the pending acquisition of Strata and organic growth projects. Capital expenditures for future acquisitions and future organic growth opportunities would be incremental to our outlined capital program; these opportunities are dependent upon economic and other competitive conditions. It is anticipated that capital expenditures for 2025 will be funded by various sources, including internally generated cash and debt. In addition to cash on hand, we intend to use a portion of the proceeds from the issuance of a new $500 million Term Loan B facility to fund the purchase of Strata. Separately, we also intend to 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. 53 Index Cash Flows Years ended December 31, 2024 2023 2022 (In millions) Net cash provided by (used in) Operating activities $ 322.3 $ 335.7 $ 207.5 Investing activities (294.8) (117.9) (155.9) Financing activities (8.7) 34.4 (55.3) Increase (decrease) in cash, cash equivalents and restricted cash 18.8 252.2 (3.7) Cash, cash equivalents and restricted cash – beginning of year 262.3 10.1 13.8 Cash, cash equivalents and restricted cash – end of year $ 281.1 $ 262.3 $ 10.1 Operating activities Years ended December 31, 2024 2023 2022 (In millions) Net income $ 201.7 $ 182.9 $ 116.2 Adjustments to reconcile net income to net cash provided by operating activities 137.4 128.8 112.4 Changes in current assets and current liabilities, net of acquisitions: Receivables 14.1 (54.8) (32.5) Due from related-party — 16.1 (8.0) Inventories (44.3) 3.7 (31.0) Other current assets 10.9 (19.6) — Accounts payable 7.3 33.1 17.5 Due to related-party — (7.3) 3.6 Other current liabilities (4.0) 49.0 21.4 Pension and postretirement benefit plan contributions (2.7) (1.8) (.4) Other noncurrent changes 1.9 5.6 8.3 Net cash provided by operating activities $ 322.3 $ 335.7 $ 207.5 Cash provided by operating activities for the year ended December 31, 2024, decreased $13.4 million, largely related to higher working capital needs. Cash used by working capital components increased $36.1 million in 2024. This increased usage of cash was driven largely by higher accrued compensation due in part to additional employees associated with the Separation; higher liquid asphalt and aggregate volumes as well as higher costs of aggregate inventory; timing of prepaid insurance due to Separation; the removal of all related-party balances due to the Separation; and fluctuations in the timing of payment on accounts payable. In addition, stronger collections on receivable balances during 2024 and higher net income partially offset the decrease in cash. Cash provided by operating activities for the year ended December 31, 2023, increased $128.2 million, largely related to increased earnings in 2023 and lower working capital needs. Cash provided by working capital components totaled $20.2 million in 2023, compared to $29.0 million in 2022. This decreased usage of cash was driven largely by lower payments on operating expenses at the end of the period and decreased liquid asphalt inventory balances, partially offset by increased accounts receivable balances at the end of the year associated with higher revenues during 2023. In addition, the timing of insurance costs associated with the captive insurer had a positive impact on cash. 54 Index Investing activities Years ended December 31, 2024 2023 2022 (In millions) Capital expenditures $ (172.4) $ (124.3) $ (178.2) Acquisitions, net of cash acquired (131.0) — 1.7 Net proceeds from sale or disposition of property and other 12.0 8.3 22.9 Investments (3.4) (1.9) (2.3) Net cash used in investing activities $ (294.8) $ (117.9) $ (155.9) The increase in cash used in investing activities from 2024 to 2023 was primarily due to the completion of six acquisitions in 2024 and higher capital expenditures, including a liquid asphalt expansion project, aggregate reserve replacements and routine replacement of construction equipment. The increase in cash usage was offset in part by additional proceeds from asset sales, largely as a result of the sale of non-strategic assets in Texas in 2024. The decrease in cash used in investing activities from 2023 to 2022 was primarily due to a reduction in capital expenditures for the prestress facility in Washington that was completed during the third quarter of 2023, offset in part by decreased proceeds from asset sales as a result of the sale of non-strategic assets in southeast Texas in December 2022. Financing activities Years ended December 31, 2024 2023 2022 (In millions) Issuance of current related-party notes, net $ — $ — $ 208.0 Issuance (repayment) of long-term related-party notes, net — 205.3 (207.0) Issuance of long-term debt — 700.0 — Repayment of long-term debt (7.0) (3.6) (.3) Debt issuance costs — (16.7) (.8) Tax withholding on stock-based compensation (1.7) — — Net transfers to Centennial — (850.6) (55.2) Net cash provided by (used in) financing activities $ (8.7) $ 34.4 $ (55.3) The increase in cash flows used in financing activities from 2024 to 2023 was largely related to changes in our debt structure in 2023 as a result of the Separation, which included the issuance of senior notes, term loans, and a revolving credit facility and a transfer of the majority of the proceeds to Centennial. For further information, see Item 8 - Note 9. The increase in cash flows provided by financing activities from 2023 to 2022 was largely related to the changes in debt as a result of the Separation, which included the issuance of senior notes, term loans and a revolving credit facility, and a transfer of the majority of the proceeds to Centennial. 55 Index Material Cash Requirements For more information on our contractual obligations on long-term debt, operating leases and purchase commitments, see Item 8 - Notes 9, 10 and 18. At December 31, 2024, our material cash requirements under these obligations were as follows: Less than 1 year 1-3 years 3-5 years More than 5 years Total (In millions) Long-term debt maturities 1 $ 10.5 $ 31.1 $ 223.4 $ 425.0 $ 690.0 Estimated interest payments 2 49.3 96.2 71.7 49.4 266.6 Operating leases 15.5 21.1 10.3 11.3 58.2 Purchase commitments 52.8 30.7 4.0 7.6 95.1 $ 128.1 $ 179.1 $ 309.4 $ 493.3 $ 1,109.9 __________________ 1 Unamortized debt issuance costs are excluded from the table. 2 Represents the estimated interest payments using our long-term debt outstanding at December 31, 2024, assuming current interest rates and consistent amounts outstanding until their respective maturity dates over the periods indicated in the table above. Material short-term cash requirements include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations. At December 31, 2024, the current portion of asset retirement obligations was $7.1 million and was included in other accrued liabilities on the Consolidated Balance Sheets. Our material long-term cash requirements include repayment of outstanding borrowings and interest payments on those agreements, payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations. At December 31, 2024, we had total liabilities of $59.4 million related to asset retirement obligations that are excluded from the table above. Due to the nature of these obligations, we cannot determine precisely when the payments will be made to settle these obligations. For more information, see Item 8 - Note 11. Defined Benefit Pension Plans Our company has noncontributory qualified defined benefit pension plans for certain employees. Plan assets consist of investments in equity and fixed income securities. Various assumptions are used in calculating the benefit expense (income) and liability (asset) related to the pension plans. Actuarial assumptions include assumptions about the discount rate and expected return on plan assets. For 2024, we assumed a discount rate of 5.4 percent and long-term rate of return on our qualified defined pension plan assets of 6.0 percent. Increased discount rates for 2024 compared to 2023 resulted in actuarial gains. Differences between actuarial assumptions and actual plan results are deferred and amortized into expense when the accumulated differences exceed 10 percent of the greater of the projected benefit obligation or the market-related value of plan assets. Therefore, this change in asset values will be reflected in future expenses of the plans beginning in 2025. The funded status of the plans did not change significantly with the gains on the assets because the liabilities decreased as well due to the increase in the discount rate. At December 31, 2024, the pension plans’ accumulated benefit obligations exceeded the plans’ assets by approximately $345,000. Pretax pension expense (income) reflected in the Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022, was $289,000, $343,000 and $10,000, respectively. Our pension expense is currently projected to be approximately $350,000 in 2025. We do not expect to make any pension plan contributions in 2025, as the plan is fully funded and is based on using a full yield curve. During 2024, we contributed $2.1 million to our pension plans which was driven by additional discretionary contributions to increase the funded status of the plans. There were no minimum required contributions for the years ended December 31, 2023 and 2022. For more information on our pension plans, see Item 8 - Note 17. 56 Index New Accounting Standards For information regarding new accounting standards, see Item 8 - Note 2, which is incorporated herein by reference. Critical Accounting Estimates We have prepared our financial statements in conformity with GAAP. The preparation of our financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management reviews these estimates and assumptions based on historical experience, changes in business conditions and other relevant factors believed to be reasonable under the circumstances. Critical accounting estimates are defined as estimates that require management to make assumptions about matters that are uncertain at the time the estimate was made, and changes in the estimates could have a material impact on our financial position or results of operations. Our critical accounting estimates are subject to judgments and uncertainties that affect the application of the significant accounting policies discussed in Item. 8 - Note 2. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised. Consequently, our financial position or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of the following critical accounting estimates. Revenue Recognition Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The recognition of revenue requires us to make estimates and assumptions that affect the reported amounts of revenue. The accuracy of revenues reported on the audited consolidated financial statements depends on, among other things, management’s estimates of total costs to complete projects because we use the cost-to-cost measure of progress on contracting services contracts for revenue recognition. To determine the proper revenue recognition method for contracts, we evaluate whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. For most contracts, the customer contracts with us to provide a significant service of integrating a complex set of tasks and components into a single project. Hence, our contracts are generally accounted for as one performance obligation. We recognize contracting services revenue over time using an input method based on the cost-to-cost measure of progress for contracts because it best depicts the transfer of assets to the customer which occurs as we incur costs on the contract. Under the cost-to-cost measure of progress, the costs incurred are compared with total estimated costs of a performance obligation. Revenues are recorded proportionately to the costs incurred. This method depends largely on the ability to make reasonably dependable estimates related to the extent of progress toward completion of the contract, contract revenues, and contract costs. Since contract prices are generally set before the work is performed, the estimates pertaining to every project could contain significant unknown risks such as volatile labor, material and fuel costs, weather delays, adverse project site conditions, unforeseen actions by regulatory agencies, performance by subcontractors, job management and relations with project owners. Changes in estimates could have a material effect on our results of operations, financial position and cash flows. For the years ended December 31, 2024, 2023 and 2022, our total contracting services revenue was $1.4 billion, $1.3 billion and $1.2 billion, respectively. Several factors are evaluated in determining the bid price for contract work. These include, but are not limited to, the complexities of the job, past history performing similar types of work, seasonal weather patterns, competition and market conditions, job site conditions, workforce safety, reputation of the project owner, availability of labor, materials and fuel, project location and project completion dates. As a project commences, estimates are continually 57 Index monitored and revised as information becomes available and actual costs and conditions surrounding the job become known. If a loss is anticipated on a contract, the loss is immediately recognized. Contracts are often modified to account for changes in contract specifications and requirements. We consider contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Generally, contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration of services provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis. Our contracts for contracting services generally contain variable consideration including liquidated damages, performance bonuses or incentives, claims, unpriced change orders and penalties or index pricing. The variable amounts usually arise upon achievement of certain performance metrics or change in project scope. We estimate the amount of revenue to be recognized on variable consideration using one of the two prescribed estimation methods, the expected value method or the most likely amount method, depending on which method best predicts the most likely amount of consideration we expect to be entitled to or expect to incur. Assumptions as to the occurrence of future events and the likelihood and amount of variable consideration are made during the contract performance period, using estimates of variable consideration and assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available to management. We only include variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Changes in circumstances could impact management’s estimates made in determining the value of variable consideration recorded. When determining if the variable consideration is constrained, we consider if factors exist that could increase the likelihood or the magnitude of a potential reversal of revenue. We update our estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis. We believe our estimates surrounding the cost-to-cost method are reasonable based on the information that is known when the estimates are made. We have contract administration, accounting and management control systems in place that allow our estimates to be updated and monitored on a regular basis. Because of the many factors that are evaluated in determining bid prices, it is inherent that our estimates have changed in the past and will continually change in the future as new information becomes available for each job. Business Combinations We account for acquisitions on the audited consolidated financial statements starting from the date of the acquisition, which is the date that control is obtained. The acquisition method of accounting requires acquired assets and liabilities assumed be recorded at their respective fair values as of the date of the acquisition. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The estimation of fair values of acquired assets and liabilities assumed requires significant judgment and various assumptions. Although independent appraisals may be used to assist in the determination of the fair value of certain assets and liabilities, the appraised values may be based on significant estimates provided by management. The amounts and useful lives assigned to depreciable and amortizable assets compared to amounts assigned to goodwill, which is not amortized, can affect the results of operations in the period of and periods subsequent to a business combination. In determining fair values of acquired assets and liabilities assumed, we use various observable inputs for similar assets or liabilities in active markets and various unobservable inputs, which includes the use of valuation models. Fair values are based on various factors including, but not limited to, age and condition of property, maintenance records, auction values for equipment with similar characteristics, recent sales and listings of comparable properties, data collected from drill holes and other subsurface investigations and geologic data. We primarily use the market and cost approaches in determining the fair value of land and property, plant and equipment. A combination of the market and income approaches are used for aggregate reserves and intangibles, primarily a discounted cash flow model. Although we may engage independent third-party consultants to assist with 58 Index the valuation of aggregate reserves and intangibles, the valuations are based on significant estimates that are approved by management. The process is highly subjective and requires a large degree of management judgement. Assumptions used may vary for each specific business combination due to unique circumstances of each transaction. Assumptions may include discount rate, time period, terminal value and growth rate. The values generated from the discounted cash flow model are sensitive to the assumptions used. Inaccurate assumptions can lead to deviations from the values generated. There is a measurement period after the acquisition date during which we may adjust the amounts recognized for a business combination. Any such adjustments are recorded in the period the adjustment is determined with the corresponding offset to goodwill. These adjustments are typically based on obtaining additional information that existed at the acquisition date regarding the assets acquired and the liabilities assumed. The measurement period ends once we have obtained all necessary information that existed as of the acquisition date, but does not extend beyond one year from the date of the acquisition. Once the measurement period has ended, any adjustments to assets acquired or liabilities assumed are recorded in income from continuing operations. Goodwill We perform our goodwill impairment testing annually in the fourth quarter. In addition, the test is performed on an interim basis whenever events or circumstances indicate that the carrying amount of goodwill may not be recoverable. Examples of such events or circumstances may include a significant adverse change in business climate, weakness in an industry in which our reporting units operate or recent significant cash or operating losses with expectations that those losses will continue. We have determined that the reporting units for our goodwill impairment test are our operating segments as they constitute a business for which discrete financial information is available and for which segment management regularly reviews the operating results. Goodwill impairment, if any, is measured by comparing the fair value of each reporting unit to its carrying value. If the fair value of a reporting unit exceeds its carrying value, the goodwill of the reporting unit is not impaired. If the carrying value of a reporting unit exceeds its fair value, we must record an impairment loss for the amount that the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. For the years ended December 31, 2024, 2023 and 2022, there were no impairment losses recorded. At October 31, 2024, the fair value of each of our reporting units substantially exceeded the carrying value. Determining the fair value of a reporting unit requires judgment and the use of significant estimates, which include assumptions about our future revenue, profitability and cash flows, long-term growth rates, amount and timing of estimated capital expenditures, inflation rates, weighted average cost of capital, operational plans, and current and future economic conditions, among others. The fair value of each reporting unit is determined using a weighted combination of income and market approaches. We believe the estimates and assumptions used in our impairment assessments are reasonable and based on available market information. A discounted cash flow methodology is used for our income approach. Under the income approach, the discounted cash flow model determines fair value based on the present value of projected cash flows over a specified period and a residual value related to future cash flows beyond the projection period. Both values are discounted using a rate that reflects the best estimate of our weighted average cost of capital. Under the market approach, we estimate fair value using various multiples derived from enterprise value to EBITDA for comparative peer companies as well as comparable market transaction multiples to EBITDA for each respective reporting unit. These multiples are applied to operating data for each reporting unit to arrive at an indication of fair value. In addition, we add a reasonable control premium when calculating the fair value utilizing the peer multiples, which is estimated as the premium that would be received in a sale in an orderly transaction between market participants. Significant judgment is used in estimating our five-year forecast. The assumptions underlying cash flow projections are in sync as applicable with our strategy and assumptions. Future projections are heavily correlated with the current year results of operations. Future results of operations may vary due to economic and financial impacts. The long-term growth rates used in the five-year forecast are developed by management based on industry 59 Index data, management’s knowledge of the industry and management’s strategic plans. The long-term growth rate used was 3 percent in 2024, 2023 and 2022. Long-Lived Assets Excluding Goodwill Long-lived assets, which include aggregate reserves and related assets, represent 55 percent of our total assets as of December 31, 2024. We review the carrying values of our long-lived assets when events or changes in circumstances indicate that such carrying values may not be recoverable. We test long-lived assets for impairment at a level significantly lower than that of goodwill impairment testing. Long-lived assets or groups of assets are evaluated for impairment at the lowest level of largely independent identifiable cash flows at an individual operation or group of operations collectively serving a local market. When indications of or triggers for impairment are noted, impairment testing is completed. The impairment testing requires the use of significant estimates, judgements and uncertainties by management, which may vary from actual results. Estimates and judgements may include, among other things, whether triggering events have occurred, estimates of future cash flows, the asset’s useful life, disposal activity obligations, growth and production. The determination of whether an impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, compared to the carrying value of the assets. If impairment has occurred, the amount of the impairment recognized is determined by estimating the fair value of the assets and recording a loss if the carrying value is greater than the fair value. No impairment losses were recorded in 2024 or 2022. During the year ended December 31, 2023, we recognized non-cash asset impairments of $5.8 million as a result of certain aggregate sites no longer being economically feasible to mine and having no remaining value. Unforeseen events and changes in circumstances could require the recognition of impairment losses at some future date. Non-GAAP Financial Measures This Annual Report 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 and net income margin We believe these non-GAAP financial measures, in addition to corresponding GAAP measures, are useful to investors by providing meaningful information about operational efficiency compared to our peers by excluding the impacts of differences in tax jurisdictions and structures, debt levels and capital investment. We believe Adjusted EBITDA and Adjusted EBITDA margin are useful performance measures because they allow for an effective evaluation of our operating performance by excluding stock-based compensation and unrealized gains and losses on benefit plan investments as they are considered non-cash and not part of our core operations. We also exclude the one-time, non-recurring costs associated with the Separation as those are not expected to continue. We believe EBITDA and Adjusted EBITDA assist rating agencies and investors in comparing operating performance across operating periods on a consistent basis by excluding items management does not believe are indicative of 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. 60 Index EBITDA is calculated by adding back income taxes, interest expense (net of interest income) and depreciation, depletion and amortization expense to net income. EBITDA margin is calculated by dividing EBITDA by revenues. Adjusted EBITDA is calculated by adding back unrealized gains and losses on benefit plan investments, stock-based compensation and one-time Separation costs to EBITDA. Adjusted EBITDA margin is calculated by dividing Adjusted EBITDA by revenues. These non-GAAP financial measures are calculated the same for both the segment and consolidated metrics and should not be considered as alternatives to, or more meaningful than, GAAP financial measures such as net income and 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 consolidated net income 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 (expense) on the Consolidated Statements of Operations. Years ended December 31, 2024 2023 2022 (In millions) Net income $ 201.7 $ 182.9 $ 116.2 Depreciation, depletion and amortization 136.9 123.8 117.8 Interest expense, net 46.4 52.9 30.1 Income taxes 69.3 62.4 42.6 EBITDA $ 454.3 $ 422.0 $ 306.7 Unrealized (gains) losses on benefit plan investments (2.9) (2.7) 4.0 Stock-based compensation expense 7.8 3.1 2.7 One-time separation costs 3.8 10.0 — Adjusted EBITDA $ 463.0 $ 432.4 $ 313.4 Revenue $ 2,899.0 $ 2,830.3 $ 2,534.7 Net income margin 7.0 % 6.5 % 4.6 % EBITDA margin 15.7 % 14.9 % 12.1 % Adjusted EBITDA margin 16.0 % 15.3 % 12.4 %