Knife River pany(US:KNF)2025-11-04 22:34Financial Performance - Revenue for the three months ended September 30, 2025, increased by $98.4 million to $1,203.7 million, a 9% increase compared to $1,105.3 million in the same period of 2024[145]. - Gross profit for the three months ended September 30, 2025, improved by $11.3 million to $284.3 million, a 4% increase compared to $273.0 million in the same period of 2024[146]. - Net income for the three months ended September 30, 2025, decreased by 3% to $143.2 million compared to $148.1 million in the same period of 2024[1]. - EBITDA for the three months ended September 30, 2025, increased by 10% to $269.2 million, compared to $244.6 million in the same period of 2024[142]. - Total segment revenues for the three months ended September 30, 2025, were $1,229.4 million, up from $1,125.0 million in the same period of 2024[142]. - Revenue for the three months ended September 30, 2025, increased by 34% to $169.2 million compared to $125.9 million in 2024, driven by the acquisition of Albina Asphalt and a new processing plant[176]. - EBITDA for the same period improved by 18% to $39.7 million, although the EBITDA margin decreased to 23.4% from 26.8%[176]. - Revenue increased by $149.1 million for the nine months ended September 30, 2025, driven by contributions from acquired companies and mid-single digit price increases on aggregates and ready-mix[152]. - Revenue for the West segment increased by 1% to $921.7 million for the nine months ended September 30, 2025, with EBITDA rising by 2% to $177.5 million[161]. - Revenue for the Mountain segment decreased by 8% to $471.9 million for the nine months ended September 30, 2025, with EBITDA declining by 32% to $65.4 million[166]. - Revenue for the Central segment increased by 20% to $757.4 million for the nine months ended September 30, 2025, with EBITDA improving by 23% to $119.8 million[171]. Expenses and Costs - Selling, general and administrative expenses increased by $5.2 million to $69.1 million for the third quarter, primarily due to costs associated with acquired companies[147]. - Selling, general and administrative expenses rose by $27.8 million, mainly due to costs associated with acquired companies and increased labor-related expenses[154]. - Interest expense rose by $9.1 million to $23.0 million, driven by higher average debt balances from a new Term Loan B issued in March 2025[149]. - Interest expense increased by $18.8 million due to higher average debt balances from a new Term Loan B issued in March 2025[156]. - The effective tax rate decreased due to lower income before income taxes, resulting in a $600,000 decrease in income tax expense[151]. - Income tax expense decreased by $16.5 million, corresponding with lower income before income taxes[158]. Acquisitions and Growth Strategy - The company acquired High Desert Aggregate and Paving in Q3 2025, adding to its growth strategy through acquisitions[127]. - The acquisition of Albina Asphalt contributed an additional $10.7 million in revenue for the three months ended September 30, 2025[177]. - Total capital expenditures for the nine months ended September 30, 2025, amounted to $154.8 million, with an additional $663.5 million spent on growth initiatives, including $528.0 million on acquisitions[188][189]. Operational Efficiency and Initiatives - In 2023, the implementation of EDGE initiatives began, focusing on higher-margin bidding opportunities and operational efficiency[124]. - The Chief Excellence Officer position was created to lead standardization and process improvement efforts effective January 1, 2025[125]. - The Knife River Training Center provides training for new and existing employees, addressing industry-wide labor shortages[132]. Market and Project Backlog - Contracting services backlog as of September 30, 2025, was $995 million, with approximately 87% related to publicly funded projects[119]. - Expected completion of approximately $764 million of the backlog within 12 months following September 30, 2025[119]. - Public projects account for approximately 80% of historical contracting services revenue, providing stability through market cycles[118]. - Approximately 52% of the Infrastructure Investment and Jobs Act (IIJA) funding remains unspent in the company's operating markets[122]. Financial Position and Cash Flow - The company had unrestricted cash and cash equivalents of $30.7 million and working capital of $660.9 million as of September 30, 2025[184]. - Long-term debt increased by approximately $514.1 million due to the issuance of a new $500 million Term Loan B facility[196]. - Cash provided by operating activities decreased by $67.3 million to $82.6 million, largely due to higher working capital needs and a decrease in net income[191]. - The company expects capital expenditures for maintenance and improvement in 2025 to be between $160 million and $225 million[188]. Commodity and Interest Rate Risks - A hypothetical 1.00% increase in interest rates would raise the company's interest expense by $7.8 million over the next 12 months[210]. - The company had no outstanding interest rate hedges as of September 30, 2025[211]. - There were no material changes to commodity price risk compared to the previous year[212]. Non-GAAP Financial Measures - The company utilizes non-GAAP financial measures such as EBITDA and Adjusted EBITDA to provide clarity on operational results[203].