Knife River pany(US:KNF)2024-08-06 20:46Introduction Company Overview Knife River is a vertically integrated construction materials provider that recently became an independent public company - Knife River's business strategy is founded on a vertically integrated model, with its extensive aggregate reserves supplying its downstream product and service lines5 - The company's operations are organized into five reportable segments established in Q4 2023 to align with operational strategies78 - On May 31, 2023, Knife River completed its separation from MDU Resources, becoming an independent public company9 Part I -- Financial Information Item 1. Financial Statements The company's unaudited statements show year-over-year growth in revenue, profit, and stockholders' equity Consolidated Statements of Operations The company reported significant year-over-year growth in revenue, net income, and diluted EPS for Q2 and H1 2024 Consolidated Statements of Operations Highlights (In thousands, except per share data) | Metric | Q2 2024 | Q2 2023 | YoY Change | H1 2024 | H1 2023 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $806,906 | $785,189 | +2.8% | $1,136,496 | $1,093,089 | +3.9% | | Gross Profit | $176,220 | $152,983 | +15.2% | $182,713 | $157,078 | +16.3% | | Operating Income | $116,746 | $93,533 | +24.8% | $63,018 | $48,970 | +28.7% | | Net Income | $77,929 | $56,836 | +37.1% | $30,301 | $15,516 | +95.3% | | Diluted EPS | $1.37 | $1.00 | +37.0% | $0.53 | $0.27 | +96.3% | Consolidated Balance Sheets The balance sheet reflects increased total assets and stockholders' equity alongside a reduction in long-term debt Key Balance Sheet Data (In thousands) | Account | June 30, 2024 | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | :--- | | Total Current Assets | $949,687 | $913,543 | $958,326 | | Total Assets | $2,682,862 | $2,599,813 | $2,642,897 | | Total Current Liabilities | $378,309 | $347,271 | $384,356 | | Long-term Debt | $672,466 | $674,577 | $832,047 | | Total Liabilities | $1,384,156 | $1,333,801 | $1,548,045 | | Total Stockholders' Equity | $1,298,706 | $1,266,012 | $1,094,852 | Consolidated Statements of Cash Flows Cash usage increased in operating and investing activities, driven by working capital needs and capital expenditures Cash Flow Summary - Six Months Ended June 30 (In thousands) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | $(89,777) | $(70,378) | | Net cash used in investing activities | $(110,198) | $(64,116) | | Net cash provided by (used in) financing activities | $(5,176) | $192,893 | | Increase (decrease) in cash | $(205,151) | $58,399 | Notes to Consolidated Financial Statements Notes detail revenue recognition, segment performance, debt structure, and a contracting backlog of $988.5 million Revenue by Segment - Q2 2024 vs Q2 2023 (In thousands) | Segment | Q2 2024 Revenue | Q2 2023 Revenue | | :--- | :--- | :--- | | Pacific | $131,827 | $125,079 | | Northwest | $200,225 | $178,734 | | Mountain | $193,769 | $175,754 | | Central | $214,603 | $231,034 | | Energy Services | $66,243 | $73,063 | - As of June 30, 2024, the company's remaining performance obligations (backlog) totaled $988.5 million, with $936.7 million expected to be recognized as revenue within the next 12 months52 EBITDA by Segment - H1 2024 vs H1 2023 (In thousands) | Segment | H1 2024 EBITDA | H1 2023 EBITDA | | :--- | :--- | :--- | | Pacific | $17,046 | $17,605 | | Northwest | $70,916 | $52,868 | | Mountain | $37,054 | $26,570 | | Central | $17,466 | $11,500 | | Energy Services | $16,884 | $18,804 | Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses resilient markets, financial growth driven by pricing, and strong segment performance Market Conditions and Outlook The company reports resilient market conditions supported by public funding and a strong contracting backlog Contracting Services Backlog (In millions) | Date | Backlog | | :--- | :--- | | June 30, 2024 | $988.5 | | June 30, 2023 | $1,040.9 | | Dec 31, 2023 | $662.2 | - Approximately 87% of the backlog at June 30, 2024, relates to publicly funded projects103 - The company is implementing its 'EDGE' strategy to improve margins and completed two strategic acquisitions in Q2 2024105106 Results of Operations Revenue and gross profit grew in Q2 and H1 2024, driven by price increases and strong contracting services - Q2 2024 vs Q2 2023: Revenue increased by $21.7 million, driven by price increases and higher contracting services revenue, while gross margin expanded by 230 basis points120121 - H1 2024 vs H1 2023: Revenue increased by $43.4 million, and gross profit improved by $25.6 million, with gross margin up 170 basis points125126 Average Selling Price by Product | Product (per unit) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | | :--- | :--- | :--- | :--- | :--- | | Aggregates (ton) | $16.84 | $15.95 | $17.76 | $16.37 | | Ready-mix concrete (cubic yard) | $184.12 | $166.11 | $185.63 | $168.30 | | Asphalt (ton) | $65.82 | $65.32 | $66.76 | $66.24 | Liquidity and Capital Resources The company maintains sufficient liquidity with significant borrowing capacity and a defined capital expenditure plan - The company maintains a strong liquidity position with $329.1 million available on its revolving credit agreement as of June 30, 2024176 - Total estimated capital expenditures for 2024 are projected to be between $170 million and $180 million, excluding acquisitions177 - Cash used in operating activities increased by $19.3 million in H1 2024 compared to H1 2023, primarily due to higher working capital needs180 Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations on variable-rate debt and commodity price changes - The company has $268.1 million in variable-rate term loans outstanding, where a 1.00% interest rate increase would result in an additional $2.7 million in annual interest expense198 Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period201 - No material changes occurred in the company's internal control over financial reporting during the three months ended June 30, 2024202 Part II -- Other Information Other Information Items This section confirms no material changes to legal proceedings, risk factors, or other specified items - There were no material changes to the company's legal proceedings or risk factors as of June 30, 2024, compared to the 2023 Annual Report204205