Management's Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words "anticipates," "estimates," "expects," "intends," "plans," "predicts" and similar expressions, and include statements concerning plans, projections, objectives, goals, strategies, future events or performance, and underlying assumptions (many of which are based, in turn, upon further assumptions) and other statements that are other than statements of historical facts. From time to time, Knife River Corporation ("Knife River," the "Company," "we," "our," or "us") may publish or otherwise make available forward-looking statements of this nature, including statements related to its Competitive EDGE strategy (EDGE) implemented to improve margins and to execute on other strategic initiatives aimed at generating long-term profitable growth, shareholder value creation, expected long-term goals, expected backlog margin, acquisitions, financing plans, expected federal and state funding for infrastructure or other proposed strategies.
Forward-looking statements involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed. Our expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis, including without limitation, management's examination of historical operating trends, data contained in our records and other data available from third parties. Nonetheless, our expectations, beliefs or projections may not be achieved or accomplished and changes in such assumptions and factors could cause actual future results to differ materially.
Any forward-looking statement contained in this document speaks only as of the date on which the statement is made, and we undertake no obligation to update any forward-looking statement or statements to reflect events or circumstances that occur after the date on which the statement is made or to reflect the occurrence of unanticipated events, except as required by law. New factors emerge from time to time, and it is not possible for management to predict all the factors, nor can it assess the effect of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement. All forward-looking statements, whether written or oral and whether made by or on behalf of our Company, are expressly qualified by the risk factors and cautionary statements reported in the section entitled "Item 1A. Risk Factors" in Part I of the Company's 2024 Annual Report on Form 10-K (Annual Report) and subsequent filings with the United States Securities and Exchange Commission (SEC).
Company Overview
At Knife River, we are a people-first construction materials and contracting services company. We provide construction materials and contracting services to build safe roads, bridges, airport runways and other critical infrastructure needs that connect people with where they want to go and with the supplies they need. We also champion a positive workplace culture by focusing on safety, training, inclusion, compensation and work-life balance.
We are one of the leading providers of crushed stone and sand and gravel in the U.S. and operate through four operating segments, which are also our reportable segments, across 14 states: West, Mountain, Central and Energy Services. The geographic segments primarily provide aggregates, asphalt and ready-mix concrete, as well as related contracting services such as heavy-civil construction, asphalt paving, concrete construction, site development and grading. The Energy Services segment produces and supplies liquid asphalt and related services, primarily for use in asphalt road construction.
As an aggregates-led construction materials and contracting services company, we have 1.2 billion tons of aggregate reserves supporting our vertically integrated business strategy. About 37 percent of these aggregates are used internally to support value-added downstream products like ready-mix concrete and asphalt, as well as contracting services such as heavy-civil construction, asphalt paving, concrete construction, bridges and in some segments the manufacturing of prestressed concrete products. Our strategically located aggregate sites and associated asphalt and ready-mix plants near mid-sized, high-growth markets offer transportation advantages, enabling competitive pricing and higher margins. We serve both public and private markets, with public projects making up most of our work and providing stability through economic cycles, which helps offset the cyclical nature of the private markets.
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We provide various products and services and operate a variety of facility types, including aggregate quarries and mines, ready-mix concrete plants, asphalt plants and distribution facilities, in the following states:
•West: Alaska, California, Hawaii, Oregon, and Washington
•Mountain: Idaho, Montana 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 | ||||||||||||||||||||||||||||||||||
| Precast/ | |||||||||||||||||||||||||||||||||||
| Ready-Mix | Construction | Prestressed | Liquid | Heavy | |||||||||||||||||||||||||||||||
| Aggregates | Asphalt | Concrete | Services | Concrete | Asphalt | Cement | Equipment | Trucking | Rail | Barge | |||||||||||||||||||||||||
| West | X | X | X | X | X | X | X | X | X | X | |||||||||||||||||||||||||
| Mountain | X | X | X | X | X | X | |||||||||||||||||||||||||||||
| Central | X | X | X | X | X | X | X | X | |||||||||||||||||||||||||||
| Energy Services | X | X | X | ||||||||||||||||||||||||||||||||
Basis of Presentation
In January 2025, we made a change to our organizational structure to better align with our business strategy. We reorganized our business segments to reflect changes in the way our chief operating decision maker evaluates performance, makes operating decisions and allocates resources. Our former Pacific and Northwest operating segments were combined to form the new West operating segment. Our former North Central and South operating segments were combined to form the new Central operating segment. The reorganization resulted in four operating segments: West, Mountain, Central and Energy Services, each of which is also a reportable segment. Each segment's performance is evaluated based on segment results without allocating corporate expenses, which include corporate costs associated with accounting, legal, treasury, business development, information technology, human resources, and other corporate expenses that support the operating segments. Prior periods have been recast to conform to the current reportable segment presentation.
Market Conditions and Outlook
Federal and state funding remains strong for a majority of our markets with approximately 80 percent of our historical contracting services revenue each year coming from public-sector projects, enhancing stability through market cycles. For more information on factors that may negatively impact our business, see the section entitled "Item 1A. Risk Factors" in Part I of the Company's 2024 Annual Report.
Backlog.Our contracting services backlog was as follows:
| September 30, 2025 | September 30, 2024 | December 31, 2024 | |||||||||
| (In millions) | |||||||||||
| West | $ | 257.5 | $ | 282.9 | $ | 230.2 | |||||
| Mountain | 386.0 | 279.9 | 339.9 | ||||||||
| Central | 351.1 | 192.3 | 175.5 | ||||||||
| $ | 994.6 | $ | 755.1 | $ | 745.6 | ||||||
Expected margins on backlog at September 30, 2025, were slightly lower compared to the expected margins on backlog at September 30, 2024. Of the $995 million of backlog at September 30, 2025, we expect to complete approximately $764 million in the 12 months following September 30, 2025. Approximately 87 percent of our backlog at September 30, 2025, related to publicly funded projects, including street and highway construction projects, which are driven primarily by public works projects for state departments of transportation (DOT). Further, there continues to be infrastructure development, as discussed in the following section on Public Funding, which is expected to continue to provide bidding opportunities in our markets. Oregon, however, has seen challenges with both public and private projects contributing to lower backlog in the West segment. On the public side, delays with the Oregon DOT budget, as discussed in the following section on Public funding, have created a headwind in 2025.
Period-over-period increases or decreases in backlog may not be indicative of future revenues, margins, net income or earnings before interest, taxes, depreciation, depletion and amortization (EBITDA). See the section entitled "Item 1A. Risk Factors" in Part I of the Company's 2024 Annual Report for a list of factors that can cause revenues to be realized in periods and at levels that are different from originally projected.
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Public Funding.Funding for public projects is dependent on federal and state funding, such as appropriations to the Federal Highway Administration. Currently, states have continued moving forward with allocating funds from federal programs, such as the Infrastructure Investment and Jobs Act (IIJA), which is authorized to provide $1.2 trillion in funding from 2022 through 2026. As of August 2025, approximately 52 percent of IIJA formula funding had yet to be spent in our 14 state operating market. Additionally, DOT budgets in most of the states where we operate remain strong, which is expected to favorably affect bidding through the remainder of this year and into next year. Ten of our 14 states have record DOT budgets going into the 2026 fiscal year. In the second quarter of 2025, Washington, Idaho and North Dakota all passed bills that support their transportation funding. We continue to monitor the implementation and impact of these legislative items. Year-to-date, projects in Oregon have been delayed and funding has been diverted from maintenance and repair work, which includes asphalt paving, to megaprojects as a result of the state's DOT budget shortfall and general uncertainty for funding. However, in September 2025, Oregon passed a transportation bill to raise $4.3 billion over the next 10 years; approximately 50% of the funds from the new bill will be routed to cities and counties for road maintenance programs, which we expect will begin to become available in 2026. While the state DOT budget is not yet final, it is expected that the contributions from the new bill will bring total funding for the 2025-27 biennium to approximately $6.1 billion, compared to the record $6.2 billion for the previous two-year cycle.
Earlier this year, the American Society of Civil Engineers published its 2025 Report Card for America's Infrastructure, assigning the United States roads a "D+" grade and estimating that between 2024 and 2033, the country will require more funding than what is currently authorized. It is estimated that a total of $2.2 trillion in funding will be needed for our roadway systems to reach a state of good repair during that time period.
Profitability.The management team consistently monitors profit margins and has adopted a proactive approach in supporting long-term profitability objectives and creating shareholder value. In 2023, we began the implementation of our EDGE initiatives and established specialized teams tasked with delivering training, facilitating the pursuit of higher-margin bidding opportunities across various regions, and identifying growth prospects. Furthermore, these teams have been engaged in the identification and execution of measures aimed at increasing operational efficiency and reducing costs. Since its establishment, the Materials Process Improvement Team, also referred to as the Materials PIT Crew, has conducted visits at 27 locations within the organization's operational footprint, encompassing 178 individual aggregate, asphalt, and ready-mix concrete plants, representing approximately 70% of our materials sales volumes. This PIT Crew has rolled out new technologies and training programs to boost productivity across the product lines and provide more real-time visibility into daily operations.
In 2024, we created the position of Chief Excellence Officer. This newly formed position became effective January 1, 2025, and is focused on expanding our PIT Crews while leading our standardization efforts. Under the leadership of the Chief Excellence Officer, a broader process improvement framework was established, creating more teams focused on standardization, commercial excellence and operational excellence. In June 2025, we appointed a Senior Vice President of Aggregate and Rail. This role adds to the EDGE strategy by working with our PIT Crews to focus on identifying and driving cost reductions at our aggregate production facilities while also helping shape our corporate strategy and evaluating and supporting new aggregate opportunities.
Under the current tariff environment, we have not experienced a material direct impact in the first nine months of 2025. We have clauses in most of our quotes that allows for us to pass-through increased costs associated with tariffs to our customers, and to date, we have been successful with passing those costs on. We continue to closely monitor the effects and changes to these announcements.
Growth.Our management team continues to evaluate growth opportunities, both through organic growth and acquisitions they believe will generate shareholder value. Our business development team is focused on our growth with materials-led businesses in mid-size, high growth markets, and has several targets at various stages of completion in our acquisition pipeline. In the third quarter of 2025, we acquired High Desert Aggregate and Paving, an aggregates-led construction materials and contracting services business in central Oregon. This is in addition to the acquisitions completed in the first half of 2025 that included an aggregates and contracting services business in central Minnesota and Strata Corporation, which are both included in our Central segment, as well as an aggregate quarry operation in Washington, adding to the West segment.
In addition, we are investing in multiple organic projects, including an aggregates expansion project in South Dakota that will increase our production capabilities in the Sioux Falls market. This project is scheduled to be operational in 2027. Earlier this year we completed construction of a processing plant to manufacture polymer modified asphalt (PMA) and add liquid asphalt storage in our South Dakota operations, which will allow us to more cost effectively supply this local market. In Twin Falls, Idaho, we are greenfielding new ready-mix operations, which allows us to build a local team in this high-growth market, and are expected to be operating in the first quarter of 2026.
Seasonality. Our operations have been and may continue to be impacted by weather. Generally, our construction activity in the northern states is from May into the first part of November. An unusually wet spring or early winter can lead to reduced construction activity, which will also impact our aggregate and asphalt product lines. In the second and third quarters of 2025, parts of our Central and Mountain segments were impacted by increased rainfall amounts, causing a delay in work. Further, the tragic July 4 flooding in Central Texas shut down production at our Honey Creek Quarry for 10 days and affected delivery of our products for 51 days while the rail and roads were being repaired.
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Workforce.As a people-first company, we continually take steps to address safety, recruitment and retention of our employees. Safety is one of Knife River's core values. The fundamental tenets of our "I Choose Safety" program are that safety is a choice and that all injuries are preventable. Our team is committed to work safely every day and we continue to advance our culture of safety through engagement and empowering our team members to take action and make meaningful changes that improve their well-being and the well-being of others.
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. In April 2025, we created the position Chief People Officer, which oversees our team member relations, recruitment and retention and training and career development.
We own and operate a state-of-the-art training facility, the Knife River Training Center. This unique, 230-acre facility, used corporatewide, provides ample space to enhance the skills of both 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 (CDL), which is helping to address an industry-wide labor shortage. In addition to CDL training for new truck drivers, the training center offers experienced truck driver training, new and experienced equipment operator training and the center offers a diverse array of courses designed to foster leadership and facilitate professional skills development in sales, instruction, and more. These courses are available to all Knife River employees, ensuring that our team members, from frontline workers to senior leadership, have access to the training and support they need to grow in their roles.
Our training and development team, based out of the Knife River Training Center, is comprised of professional instructors, who bring a wealth of knowledge and experience to the learning environment. This dedicated team has a long-standing tradition of delivering quality training programs that are both comprehensive and practical. Their expertise helps ensure that every employee receives the highest standard of education and skill development.
Consolidated Overview
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||
| (In millions) | ||||||||||||||||||||
| Revenue | $ | 1,203.7 | $ | 1,105.3 | 9 | % | $ | 2,390.9 | $ | 2,241.8 | 7 | % | ||||||||
| Cost of revenue | 919.4 | 832.3 | 10 | % | 1,958.9 | 1,786.1 | 10 | % | ||||||||||||
| Gross profit | 284.3 | 273.0 | 4 | % | 432.0 | 455.7 | (5) | % | ||||||||||||
| Selling, general and administrative expenses | 69.1 | 63.9 | 8 | % | 211.4 | 183.6 | 15 | % | ||||||||||||
| Operating income | 215.2 | 209.1 | 3 | % | 220.6 | 272.1 | (19) | % | ||||||||||||
| Interest expense | 23.0 | 13.9 | 65 | % | 60.6 | 41.8 | 45 | % | ||||||||||||
| Other income | 1.2 | 2.5 | (52) | % | 8.0 | 7.5 | 7 | % | ||||||||||||
Income before income taxes | 193.4 | 197.7 | (2) | % | 168.0 | 237.8 | (29) | % | ||||||||||||
Income tax expense | 50.2 | 49.6 | 1 | % | 42.9 | 59.4 | (28) | % | ||||||||||||
Net income | $ | 143.2 | $ | 148.1 | (3) | % | $ | 125.1 | $ | 178.4 | (30) | % | ||||||||
| EBITDA* | $ | 269.2 | $ | 244.6 | 10 | % | $ | 367.5 | $ | 375.4 | (2) | % | ||||||||
| Adjusted EBITDA* | $ | 272.8 | $ | 245.2 | 11 | % | $ | 377.1 | $ | 381.8 | (1) | % | ||||||||
*EBITDA and Adjusted EBITDA are non-GAAP financial measures. For more information and reconciliations to the nearest GAAP measures, see the section entitled "Non-GAAP Financial Measures."
Revenue includes revenue from the sale of construction materials and contracting services. Revenue for construction materials is recognized at a point in time when delivery of the products has taken place. Contracting services revenue is recognized over time using an input method based on the cost-to-cost measure of progress on a project.
Cost of revenue includes all material, labor and overhead costs incurred in the production process for our products and services. Cost of revenue also includes depreciation, depletion and amortization attributable to the assets used in the production process.
Gross profit includes revenue less cost of revenue, as defined above, and is the difference between revenue and the cost of making a product or providing a service, before deducting selling, general and administrative expenses, income taxes and interest expense.
Selling, general and administrative expenses include the costs for estimating, bidding and corporate development, as well as costs related to segment and corporate management and administrative functions. Selling expenses can vary depending on the volume of
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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; allowance for expected credit losses; gains or losses on the sale of assets; and other miscellaneous expenses.
Other income includes net periodic benefit costs for our benefit plan expenses, other than service costs; interest income; realized and unrealized gains and losses on investments for our nonqualified benefit plans; earnings or losses on joint venture arrangements; gain on bargain purchase; and other miscellaneous income or expenses, including expenses related to the transition services agreement with MDU Resources Group, Inc.
Income tax (benefit) expense consists of corporate income taxes related to our net income (loss). Income taxes are presented at the corporate services level and not at the individual segments. The effective tax rate can be affected by many factors, including changes in tax laws, regulations or rates, new interpretations of existing laws or regulations and changes to our overall levels of income (loss) before income tax.
The discussion that follows focuses on the key financial measures we use to evaluate the performance of our business, which include revenue, EBITDA and EBITDA margin. EBITDA and EBITDA margin are non-GAAP financial measures used to measure profitability by our management and chief operating decision maker. For more information and reconciliations to the nearest GAAP measures, see the section entitled "Non-GAAP Financial Measures."
The following tables summarize our operating results.
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
Dollars |
Margin |
Dollars |
Margin | Dollars | Margin | Dollars | Margin | |||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Revenues by segment: | ||||||||||||||||||||||||||
| West | $ | 396.0 | $ | 383.1 | $ | 921.7 | $ | 914.9 | ||||||||||||||||||
| Mountain | 229.8 | 261.1 | 471.9 | 514.9 | ||||||||||||||||||||||
| Central | 434.4 | 354.9 | 757.4 | 630.5 | ||||||||||||||||||||||
| Energy Services | 169.2 | 125.9 | 280.5 | 214.9 | ||||||||||||||||||||||
| Total segment revenues | 1,229.4 | 1,125.0 | 2,431.5 | 2,275.2 | ||||||||||||||||||||||
| Corporate Services and Eliminations | (25.7) | (19.7) | (40.6) | (33.4) | ||||||||||||||||||||||
| Consolidated revenues | $ | 1,203.7 | $ | 1,105.3 | $ | 2,390.9 | $ | 2,241.8 | ||||||||||||||||||
EBITDA (a): | ||||||||||||||||||||||||||
| West | $ | 91.8 | 23.2% | $ | 85.4 | 22.3% | $ | 177.5 | 19.3% | $ | 173.3 | 19.0% | ||||||||||||||
| Mountain | 50.7 | 22.1% | 59.4 | 22.8% | 65.4 | 13.8% | 96.5 | 18.7% | ||||||||||||||||||
| Central | 99.7 | 23.0% | 79.8 | 22.5% | 119.8 | 15.8% | 97.3 | 15.4% | ||||||||||||||||||
| Energy Services | 39.7 | 23.4% | 33.7 | 26.8% | 48.9 | 17.4% | 50.6 | 23.5% | ||||||||||||||||||
| Total segment EBITDA (a) | 281.9 | 22.9% | 258.3 | 23.0% | 411.6 | 16.9% | 417.7 | 18.4% | ||||||||||||||||||
Corporate Services and Eliminations (b) | (12.7) | N.M. | (13.7) | N.M. | (44.1) | N.M. | (42.3) | N.M. | ||||||||||||||||||
Consolidated EBITDA (a) | $ | 269.2 | 22.4% | $ | 244.6 | 22.1% | $ | 367.5 | 15.4% | $ | 375.4 | 16.7% | ||||||||||||||
(a)EBITDA, total segment EBITDA, EBITDA margin and total segment EBITDA margin are non-GAAP financial measures. For more information and a reconciliation to the nearest GAAP measure, see the section entitled "Non-GAAP Financial Measures."
(b)N.M. - not meaningful
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| Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, | September 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| Sales (thousands): | ||||||||||||||
| Aggregates (tons) | 11,610 | 11,169 | 24,303 | 24,833 | ||||||||||
| Ready-mix concrete (cubic yards) | 1,331 | 1,148 | 2,916 | 2,653 | ||||||||||
| Asphalt (tons) | 3,111 | 3,150 | 4,953 | 5,183 | ||||||||||
| Average selling price:* | ||||||||||||||
| Aggregates (per ton) | $ | 18.78 | $ | 17.32 | $ | 19.15 | $ | 17.56 | ||||||
| Ready-mix concrete (per cubic yard) | $ | 196.43 | $ | 185.97 | $ | 197.49 | $ | 185.78 | ||||||
| Asphalt (per ton) | $ | 64.43 | $ | 68.28 | $ | 66.10 | $ | 67.68 | ||||||
*The average selling price includes freight and delivery and other revenues.
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||
Dollars |
Margin |
Dollars |
Margin | Dollars | Margin | Dollars | Margin | |||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Revenues by product line: | ||||||||||||||||||||||||||
| Aggregates | $ | 218.1 | $ | 193.4 | $ | 465.4 | $ | 436.2 | ||||||||||||||||||
| Ready-mix concrete | 261.4 | 213.5 | 575.8 | 492.8 | ||||||||||||||||||||||
| Asphalt | 200.4 | 215.1 | 327.4 | 350.8 | ||||||||||||||||||||||
Liquid asphalt | 148.8 | 110.9 | 246.9 | 187.3 | ||||||||||||||||||||||
| Other* | 91.4 | 89.7 | 214.4 | 206.4 | ||||||||||||||||||||||
| Contracting services | 556.4 | 559.6 | 1,036.7 | 1,056.8 | ||||||||||||||||||||||
| Internal sales | (272.8) | (276.9) | (475.7) | (488.5) | ||||||||||||||||||||||
| Total revenues | $ | 1,203.7 | $ | 1,105.3 | $ | 2,390.9 | $ | 2,241.8 | ||||||||||||||||||
| Gross profit by product line: | ||||||||||||||||||||||||||
| Aggregates | $ | 59.4 | 27.2% | $ | 51.7 | 26.7% | $ | 88.0 | 18.9% | $ | 96.1 | 22.0% | ||||||||||||||
| Ready-mix concrete | 52.8 | 20.2% | 39.6 | 18.6% | 93.9 | 16.3% | 78.1 | 15.8% | ||||||||||||||||||
| Asphalt | 40.4 | 20.2% | 43.1 | 20.0% | 51.5 | 15.7% | 54.7 | 15.6% | ||||||||||||||||||
Liquid asphalt | 33.7 | 22.7% | 28.8 | 26.0% | 44.5 | 18.0% | 43.7 | 23.3% | ||||||||||||||||||
| Other* | 34.2 | 37.4% | 37.5 | 41.8% | 38.7 | 18.1% | 47.1 | 22.8% | ||||||||||||||||||
| Contracting services | 63.8 | 11.5% | 72.3 | 12.9% | 115.4 | 11.1% | 136.0 | 12.9% | ||||||||||||||||||
| Total gross profit | $ | 284.3 | 23.6% | $ | 273.0 | 24.7% | $ | 432.0 | 18.1% | $ | 455.7 | 20.3% | ||||||||||||||
*Other includes cement, merchandise, fabric and spreading, and other products and services that individually are not considered to be a core line of business.
Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024
Revenue
Revenue increased $98.4 million, largely driven by contributions from acquired companies, as well as price increases of mid-single digits on aggregates and ready-mix. Partially offsetting the increased revenue was lower contracting services work and asphalt volumes in the Mountain segment, due in part to less public-agency work compared to the prior year. Parts of our Central and Mountain segments also faced increased rainfall in the quarter.
Gross profit
Gross profit improved $11.3 million, largely the result of acquired companies, as well as higher pricing for aggregates and ready-mix. Energy Services also saw a rise in gross profit due to decreased boiler repairs and maintenance costs compared to the prior year. In California, contracting services benefitted from public agency work and favorable project execution. Offsetting these increases was the effects of reduced work activity in the Mountain segment and a $1.9 million negative impact to the aggregates product line as a result of selling acquired inventory after markup to fair value as part of acquisition accounting.
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Selling, general and administrative expenses
Selling, general and administrative expenses increased $5.2 million for the third quarter. Our reportable segments had higher costs of $6.4 million, primarily due to additional costs associated with the acquired companies and increased information technology-related costs of $645,000 to support our EDGE initiatives. This increase was offset in part by higher gains of $2.2 million on the sale of equipment throughout the West and Mountain segments and lower payroll-related costs as a result of lower incentive accruals.
Corporate Services had a decrease in selling, general and administrative costs of $1.2 million compared to third quarter 2024. This decrease is largely related to lower payroll-related and business development costs. Offsetting the cost decrease was a less favorable adjustment to the incurred but not reported losses in our captive insurance program.
Interest expense
Interest expense increased $9.1 million due primarily to higher average debt balances with the issuance of a new Term Loan B in March of 2025 and borrowings under our revolving credit facility, offset in part by lower average interest rates.
Other income
Other income decreased $1.3 million, largely driven by decreased interest income as a result of less cash on hand.
Income tax expense
Income tax expense decreased $600,000, corresponding with lower income before income taxes.
Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024
Revenue
Revenue increased $149.1 million, largely driven by contributions of acquired companies, as well as price increases of mid-single digits on aggregates and ready-mix. California saw an increase in public-agency and commercial work, which positively impacted contracting services and ready-mix revenues. Partially offsetting the increased revenue was less contracting services work in Oregon, primarily the result of less public-agency work, and less contracting services work in the Mountain and Central segments, due in part to less public-agency work and increased rainfall during the second and third quarters, which also impacted asphalt and aggregate volumes.
Gross profit decreased $23.7 million, largely due to less work performed, as previously discussed. The decrease in aggregate volumes further impacted our results as we experienced higher per-unit fixed costs. In addition, Energy Services saw a decrease in gross profit mostly due to competitive market conditions and higher repairs and maintenance costs. Also, the impact of selling acquired inventory after markup to fair value as part of acquisition accounting negatively impacted the aggregates product line by $3.0 million and liquid asphalt by $300,000. These decreases were offset in part by the contributions of acquired companies, higher gross profit in California from favorable construction project execution and higher margins in Alaska and Hawaii.
Selling, general and administrative expenses
Selling, general and administrative expenses increased $27.8 million for the first nine months of 2025. Our reportable segments had higher costs of $26.7 million, primarily due to additional costs associated with the acquired companies, an increase in labor-related costs partly due to additional employees and increased information technology-related costs to support our EDGE initiatives. Partially offsetting these increases was higher gains of $9.3 million on the sale of non-strategic assets and equipment throughout the West and Central segments and lower professional services fees of $1.2 million.
Corporate Services had an increase in selling, general and administrative costs of $1.1 million. This increase was largely the result of higher business development costs of $6.5 million related to corporate development and completed acquisitions and a less favorable adjustment to the incurred but not reported losses in our captive insurance program. Offsetting the increased costs were lower payroll-related costs and the absence of one-time Separation costs in 2024 of $3.8 million.
Interest expense
Interest expense increased $18.8 million due primarily to higher average debt balances with the issuance of a new Term Loan B in March of 2025 and borrowings under our revolving credit facility, offset in part by lower average interest rates.
Other income
Other income increased $500,000, largely driven by a one-time gain of $3.5 million on the bargain purchase of an aggregate quarry operation in the West segment, offset in part by a decrease in interest income of $2.2 million as a result of less cash on hand and lower investment returns on our nonqualified defined benefit plans.
Income tax expense
Income tax expense decreased $16.5 million, corresponding with lower income before income taxes.
Index
Business Segment Financial and Operating Data
A discussion of key financial data from our business segments follows. We provide segment-level information by revenue, EBITDA and EBITDA margin, as these are the measures of profitability used by our chief operating decision maker to assess operational results.
In January 2025, we made a change to our organizational structure to better align with our business strategy. We reorganized our business segments to reflect changes in the way our chief operating decision maker evaluates performance, makes operating decisions and allocates resources. Our former Pacific and Northwest operating segments were combined to form the new West operating segment. Our former North Central and South operating segments were combined to form the new Central operating segment. The reorganization resulted in four operating segments: West, Mountain, Central and Energy Services, each of which is also a reportable segment. Each segment's performance is evaluated based on segment results without allocating corporate expenses, which include corporate costs associated with accounting, legal, treasury, information technology, human resources, and other corporate expenses that support the operating segments. Prior periods presented have been recast to conform to the current reportable segment presentation.
Results of Operations - West
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | Sept. 30, | |||||||||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||
| (In millions) | ||||||||||||||||||||
| Revenue | $ | 396.0 | $ | 383.1 | 3% | $ | 921.7 | $ | 914.9 | 1% | ||||||||||
| EBITDA | $ | 91.8 | $ | 85.4 | 8% | $ | 177.5 | $ | 173.3 | 2% | ||||||||||
| EBITDA margin | 23.2 | % | 22.3 | % | 19.3 | % | 19.0 | % | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, | September 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| (In millions) | ||||||||||||||
| Revenues: | ||||||||||||||
| Aggregates | $ | 91.2 | $ | 90.6 | $ | 222.3 | $ | 234.0 | ||||||
| Ready-mix concrete | 98.6 | 87.4 | 258.3 | 232.7 | ||||||||||
| Asphalt | 61.7 | 59.1 | 109.1 | 110.7 | ||||||||||
| Other* | 50.3 | 53.4 | 134.0 | 130.3 | ||||||||||
| Contracting services | 170.4 | 164.6 | 359.2 | 361.0 | ||||||||||
| Internal sales | (76.2) | (72.0) | (161.2) | (153.8) | ||||||||||
| $ | 396.0 | $ | 383.1 | $ | 921.7 | $ | 914.9 | |||||||
*Other includes cement, merchandise, transportation services and other products that individually are not considered to be a core line of business for the segment.
Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024
Revenue increased $12.9 million mainly as a result of increased pricing in aggregates and ready-mix throughout the segment, which accounted for $6.4 million of the increase, and ready-mix volume increases in Alaska and Hawaii of $4.0 million driven by market demand. In addition, California's public agency market remained strong and contributed an additional $6.1 million in contracting services and asphalt volumes, while recent acquisitions in Oregon also positively contributed. Offsetting these increases were slightly lower aggregate volumes throughout the segment.
EBITDA increased 8 percent for the quarter, resulting from increased pricing that outpaced costs for most product lines, along with increased ready-mix volumes in Alaska and Hawaii. California's contracting margins improved as a result of favorable project execution on completed work and higher revenues. The segment also benefitted from an increase of $1.1 million in gains on asset sales throughout the segment. Partially offsetting these increases was reduced contracting services margins in Oregon related to less public-agency and data center work in the quarter.
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Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024
Revenue increased $6.8 million. In California, more available public-agency and private work and increased pricing largely contributed to the increase compared to the prior year. Hawaii experienced increased ready-mix and cement volumes of $10.7 million driven by increased market demand, while Alaska saw its aggregate and ready-mix volumes increase by $6.9 million due to stronger demand in the private sector. Partially offsetting these increases were lower revenues across most Oregon product lines due to less available public-agency and private work.
EBITDA increased 2 percent year-over-year, primarily driven by a $9.4 million improvement in contracting services margins as a result of favorable project executions in California, while Hawaii and Alaska also saw increased margins overall. In addition, the segment benefitted from an increase of $4.0 million in gains on the sale of assets throughout the segment and a one-time gain of $3.5 million on the bargain purchase of an aggregate quarry operation in the first quarter of 2025, as discussed in Note 10. Offsetting theses increases were higher selling, general and administrative costs of $5.3 million, mostly attributed to increased labor-related costs, and lower aggregate and contracting services margins in Oregon as a result of fewer projects, as previously mentioned.
Results of Operations - Mountain
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||
| (In millions) | ||||||||||||||||||||
| Revenue | $ | 229.8 | $ | 261.1 | (12)% | $ | 471.9 | $ | 514.9 | (8)% | ||||||||||
| EBITDA | $ | 50.7 | $ | 59.4 | (15)% | $ | 65.4 | $ | 96.5 | (32)% | ||||||||||
| EBITDA margin | 22.1 | % | 22.8 | % | 13.8 | % | 18.7 | % | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, | September 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| (In millions) | ||||||||||||||
| Revenues: | ||||||||||||||
| Aggregates | $ | 34.9 | $ | 40.1 | $ | 72.2 | $ | 80.7 | ||||||
| Ready-mix concrete | 42.1 | 40.6 | 90.9 | 89.4 | ||||||||||
| Asphalt | 42.2 | 60.0 | 71.5 | 93.8 | ||||||||||
| Contracting services | 155.5 | 185.7 | 314.2 | 356.9 | ||||||||||
| Internal sales | (44.9) | (65.3) | (76.9) | (105.9) | ||||||||||
| $ | 229.8 | $ | 261.1 | $ | 471.9 | $ | 514.9 | |||||||
Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024
Revenue decreased $31.3 million in the quarter, primarily due to decreased contracting services work, which also brought asphalt and aggregate volumes down. The decrease in contracting services revenue was largely due to lower asphalt paving work as a result of competitive bid dynamics, type and location of available DOT projects, the timing of public-agency jobs and increased rainfall amounts in certain markets. Partially offsetting the decrease was higher ready-mix and aggregate pricing of $3.8 million.
EBITDA decreased $8.7 million for the quarter, largely due to lower contracting service margins as a result of less paving work and the type of work performed, as discussed above, which also impacted asphalt and aggregate gross profit. Slightly offsetting was higher ready-mix and aggregate pricing.
Index
Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024
Revenue decreased $43.0 million, primarily due to decreased contracting services work, which was driven by lower asphalt paving work as a result of the type and location of available DOT projects, the timing of public-agency jobs and increased rainfall amounts in certain markets. The decrease in contracting services also brought aggregate and asphalt volumes down by $33.6 million. Partially offsetting the decrease was higher aggregate and ready-mix pricing of $9.7 million.
EBITDA decreased $31.1 million year-over-year. Contracting services experienced lower margins throughout the segment due to less available work, while lower margins on aggregates and asphalt were largely the result of lower sales volumes due to fewer construction projects, as previously discussed, and higher repairs and maintenance costs which contributed to an increase in per-unit fixed costs. Selling, general and administrative costs were $1.9 million higher, largely from increased labor-related costs.
Results of Operations - Central
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||
| (In millions) | ||||||||||||||||||||
| Revenue | $ | 434.4 | $ | 354.9 | 22% | $ | 757.4 | $ | 630.5 | 20% | ||||||||||
| EBITDA | $ | 99.7 | $ | 79.8 | 25% | $ | 119.8 | $ | 97.3 | 23% | ||||||||||
| EBITDA margin | 23.0 | % | 22.5 | % | 15.8 | % | 15.4 | % | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, | September 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| (In millions) | ||||||||||||||
| Revenues: | ||||||||||||||
| Aggregates | $ | 92.0 | $ | 62.7 | $ | 170.9 | $ | 121.5 | ||||||
| Ready-mix concrete | 120.7 | 85.5 | 226.6 | 170.7 | ||||||||||
| Asphalt | 96.5 | 96.0 | 146.8 | 146.3 | ||||||||||
| Other* | 12.2 | 12.2 | 27.2 | 25.0 | ||||||||||
| Contracting services | 230.5 | 209.3 | 363.3 | 338.9 | ||||||||||
| Internal sales | (117.5) | (110.8) | (177.4) | (171.9) | ||||||||||
| $ | 434.4 | $ | 354.9 | $ | 757.4 | $ | 630.5 | |||||||
*Other includes merchandise and other products that individually are not considered to be a core line of business for the segment.
Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024
Revenue increased 22 percent year-over-year to $434.4 million, primarily driven by contributions from acquired companies and price increases across our legacy aggregate and ready-mix product lines. This increase was offset in part by a reduction in contracting services work due to increased rainfall in the period, which also impacted asphalt volumes, and reduced volumes from our Honey Creek Quarry due to the historic flooding as previously mentioned.
EBITDA improved $19.9 million, largely the result of acquired companies. Slightly offsetting the increase was reduced contracting services work primarily due to unfavorable weather in most parts of the segment, as previously discussed. In addition, the impact of selling acquired inventory after markup to fair value as part of acquisition accounting of $1.9 million negatively impacted the aggregate product line.
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Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024
Revenue increased $126.9 million, largely driven by contributions from acquired companies, as well as the impact of our legacy operations price increases in the aggregate product line of $10.3 million and ready-mix product line of $5.0 million. Partially offsetting these increases was less contracting services work throughout the segment due to increased rainfall in the second and third quarters, which also caused decreased aggregate and ready-mix volumes.
EBITDA improved 23 percent, largely the result of acquired companies and $4.9 million of increased gains on asset sales. Offsetting these increases were fewer job incentives compared to 2024, as well as less contracting services work largely due to unfavorable weather in most parts of the segment. In addition, the impact of selling acquired inventory after markup to fair value as part of acquisition accounting of $3.0 million negatively impacted the aggregate product line.
Results of Operations - Energy Services
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2025 | 2024 | % Change | 2025 | 2024 | % Change | |||||||||||||||
| (In millions) | ||||||||||||||||||||
| Revenue | $ | 169.2 | $ | 125.9 | 34% | $ | 280.5 | $ | 214.9 | 31% | ||||||||||
| EBITDA | $ | 39.7 | $ | 33.7 | 18% | $ | 48.9 | $ | 50.6 | (3)% | ||||||||||
| EBITDA margin | 23.4 | % | 26.8 | % | 17.4 | % | 23.5 | % | ||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, | September 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| (In millions) | ||||||||||||||
| Revenues: | ||||||||||||||
Liquid Asphalt | $ | 148.8 | $ | 110.9 | $ | 246.9 | $ | 187.3 | ||||||
| Other* | 25.5 | 20.9 | 42.7 | 38.3 | ||||||||||
| Internal sales | (5.1) | (5.9) | (9.1) | (10.7) | ||||||||||
| $ | 169.2 | $ | 125.9 | $ | 280.5 | $ | 214.9 | |||||||
*Other includes fabric and spreading, burner fuels, merchandise and other products that individually are not considered to be a core line of business for the segment.
Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024
Revenue increased $43.3 million, primarily due to contributions from the acquisition of Albina Asphalt in November 2024. In addition, the new polymer modified asphalt processing plant in South Dakota contributed an additional $10.7 million in revenue. These increases were partially offset by lower volumes and lower pricing in some locations driven by current liquid asphalt market pricing.
EBITDA improved $6.0 million, largely as a result of the addition of Albina Asphalt, as well as lower operating costs associated with the plant repairs made in 2024 at our California terminal. Offsetting were lower volumes and a decrease in margins due to competitive market conditions.
Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024
Revenue increased $65.6 million, primarily due to contributions from the acquisition of Albina Asphalt in November 2024. In addition, the new polymer modified asphalt processing plant in South Dakota contributed an additional $14.3 million in revenue. These increases were partially offset by lower volumes due to unfavorable weather and lower pricing in some locations driven by current liquid asphalt market pricing.
EBITDA decreased $1.7 million, largely decreased pricing that resulted in lower margins due to competitive market conditions, as well as planned and required maintenance expenses related to our railcar fleet, continued tank and equipment repair costs at our terminals and the impact of selling acquired inventory after markup to fair value as part of acquisition accounting for Albina of $295,000. Partially offsetting the decrease was contributions from the acquisition of Albina Asphalt.
Index
Corporate Services and Eliminations
Corporate Services includes all expenses related to the corporate functions of our company, as well as insurance activity at our captive insurer; interest expense on a majority of our long-term debt; interest income; and unrealized gains or losses on investments for nonqualified benefit plans.
Three Months Ended September 30, 2025, Compared to Three Months Ended September 30, 2024
During the third quarter of 2025, Corporate Services contributed negative EBITDA of $12.7 million, compared to negative EBITDA of $13.7 million in the prior year. Corporate Services had lower selling, general and administrative costs of $1.2 million in the quarter, driven largely by lower payroll-related and business development costs. Offsetting the cost decrease was a less favorable adjustment of $2.2 million to the incurred but not reported losses in our captive insurance program.
Nine Months Ended September 30, 2025, Compared to Nine Months Ended September 30, 2024
During the first nine months of 2025, Corporate Services contributed negative EBITDA of $44.1 million, compared to negative EBITDA of $42.3 million in the prior year. Corporate Services had higher selling, general and administrative costs of $1.0 million in the year, driven largely by an increase in business development costs of $6.5 million related to corporate development and completed acquisitions and a less favorable adjustment of $2.2 million to the incurred but not reported losses in our captive insurance program. Offsetting the increased costs was lower payroll-related costs and the absence of one-time Separation costs in 2024 of $3.8 million. Corporate Services also had lower investment returns of $700,000 on our nonqualified defined benefit plans.
Liquidity and Capital Resources
At September 30, 2025, we had unrestricted cash and cash equivalents of $30.7 million, working capital of $660.9 million and borrowing capacity of $456.6 million on our revolving credit facility, net of our outstanding letters of credit. Working capital is calculated as current assets less current liabilities. As of September 30, 2025, we had sufficient liquid assets and borrowing capacity to meet our financial commitments, debt obligations and anticipated capital expenditures for at least the next 12 months.
Given the seasonality of our business, we typically experience significant fluctuations in working capital needs and balances throughout the year. Working capital requirements generally increase in the first half of the year as we build up inventory and focus on preparing our equipment, facilities and crews for our construction season. Working capital levels then decrease as the construction season winds down and we collect on receivables.
The ability to fund our cash needs will depend on the ongoing ability to generate cash from operations and obtain debt financing with competitive rates. We rely on access to capital markets as sources of liquidity for capital requirements not satisfied by cash flows from operations, particularly in the first half of the year due to the seasonal nature of the business. Our principal uses of cash in the future will be to fund our operations, working capital needs, capital expenditures, repayment of debt and strategic business development transactions.
On March 7, 2025, we entered into an amendment to our senior secured credit agreement to increase our revolving credit facility from $350 million to $500 million and extend the maturity to March 7, 2030, refinance our existing $275 million Term Loan A with a maturity of March 7, 2030, and provide for a new Term Loan B in an aggregate principal amount of $500.0 million with a maturity date of March 8, 2032. We used the proceeds from the issuance of the new Term Loan B to fund a portion of Strata's purchase price. Separately, we increased the total commitments under our existing revolving credit facility for future expenditures. For more information on the debt agreements and covenant restrictions, see Note 13.
Capital expenditures
We are committed to disciplined capital allocation, including reinvesting in our company to maintain fixed assets, improve operations and grow our business.
We currently estimate total 2025 capital expenditures for maintenance and improvement to be between $160 million and $225 million. For the nine months ended September 30, 2025, we spent $154.8 million, largely on the replacement of depleting aggregate reserves, construction equipment and plant improvements.
Additionally, for the nine months ended September 30, 2025, we spent $663.5 million on growth initiatives, which comprised of $528.0 million on acquisitions and $135.5 million on aggregate expansion and greenfield projects. In connection with the Strata acquisition, we also received proceeds of $14.5 million on the sale of four ready-mix plant operations. For the remainder of 2025, we estimate to spend $32.2 million on organic growth projects. Capital expenditures for future acquisitions and new organic growth opportunities would be incremental to our outlined capital program. It is anticipated that capital expenditures for the remainder of 2025 will be funded by various sources, including internally generated cash and debt facilities.
Index
Cash flows
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2025 | 2024 | |||||||
| (In millions) | ||||||||
| Net cash provided by (used in) | ||||||||
| Operating activities | $ | 82.6 | $ | 149.9 | ||||
| Investing activities | (783.0) | (137.8) | ||||||
| Financing activities | 500.4 | (7.0) | ||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | (200.0) | 5.1 | ||||||
| Cash, cash equivalents and restricted cash -- beginning of year | 281.1 | 262.3 | ||||||
| Cash, cash equivalents and restricted cash -- end of period | $ | 81.1 | $ | 267.4 | ||||
Operating activities
| Nine Months Ended | |||||||||||
| September 30, | |||||||||||
| 2025 | 2024 | Variance | |||||||||
| (In millions) | |||||||||||
| Components of net cash provided by operating activities: | |||||||||||
| Net income | $ | 125.1 | $ | 178.4 | $ | (53.3) | |||||
Adjustments to reconcile net income to net cash provided by operating activities | 141.2 | 115.1 | 26.1 | ||||||||
| Changes in current assets and liabilities, net of acquisitions: | |||||||||||
| Receivables | (267.5) | (224.8) | (42.7) | ||||||||
| Inventories | (15.3) | (27.3) | 12.0 | ||||||||
| Other current assets | 3.8 | 11.1 | (7.3) | ||||||||
| Accounts payable | 72.5 | 77.2 | (4.7) | ||||||||
| Other current liabilities | 16.7 | 17.3 | (.6) | ||||||||
| Pension and postretirement benefit plan contributions | (.5) | (2.5) | 2.0 | ||||||||
| Other noncurrent charges | 6.6 | 5.4 | 1.2 | ||||||||
| Net cash provided by operating activities | $ | 82.6 | $ | 149.9 | $ | (67.3) | |||||
Cash provided by operating activities at September 30, 2025, decreased $67.3 million, largely related to higher working capital needs and a decrease in net income. Cash used by working capital components totaled $189.8 million for the nine months ended September 30, 2025, compared to $146.5 million for the nine months ended September 30, 2024. This increase in cash usage was primarily the result of higher working capital needs due to the increase in revenues, as discussed in Business Segment Financial and Operating Data, and timing of prepaid insurance, offset in part by lower liquid asphalt and cement inventory balances.
Investing activities
| Nine Months Ended | |||||||||||
| September 30, | |||||||||||
| 2025 | 2024 | Variance | |||||||||
| (In millions) | |||||||||||
| Capital expenditures | $ | (290.3) | $ | (127.2) | $ | (163.1) | |||||
| Acquisitions, net of cash acquired | (528.0) | (15.0) | (513.0) | ||||||||
| Net proceeds from sale or disposition of property and other | 38.3 | 7.6 | 30.7 | ||||||||
| Investments | (3.0) | (3.2) | .2 | ||||||||
| Net cash used in investing activities | $ | (783.0) | $ | (137.8) | $ | (645.2) | |||||
The increase in cash used in investing activities for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was primarily due to additional investments to grow our company. We spent $513.0 million more on acquisitions in 2025, including the acquisition of Strata, as discussed in Note 10. We also spent $163.1 million more on capital expenditures, including the replenishment of depleting aggregate reserves and greenfield projects. The increase in cash usage was offset in part by proceeds from the sale of ready-mix operations in the Central segment in the first quarter of 2025, as discussed in Note 10, and non-strategic asset sales in both the West and Central segments.
Index
Financing activities
| Nine Months Ended | |||||||||||
| September 30, | |||||||||||
| 2025 | 2024 | Variance | |||||||||
| (In millions) | |||||||||||
| Issuance of long-term debt | $ | 520.0 | $ | - | $ | 520.0 | |||||
| Debt issuance costs | (11.1) | - | (11.1) | ||||||||
| Repayment of long-term debt | (5.9) | (5.3) | (.6) | ||||||||
Tax withholding on stock-based compensation | (2.6) | (1.7) | (.9) | ||||||||
| Net cash provided by (used in) financing activities | $ | 500.4 | $ | (7.0) | $ | 507.4 | |||||
The increase in cash flows provided by financing activities for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, was largely related to the funding of a new Term Loan B in March of 2025, as well as borrowings under our revolving credit facility, as discussed in Note 13. Offsetting the cash provided by long-term debt were higher debt issuance costs associated with the amendment of our senior secured credit agreement to increase our revolving credit facility capacity, extend the maturity date of the revolving credit facility and Term Loan A, and the issuance of a new Term Loan B.
Material cash requirements
There were no material changes in the contractual obligations from those reported in the 2024 Annual Report other than as set forth below. For more information on our contractual obligations on long-term debt, operating leases and purchase commitments, see Part II, Item 8 in the 2024 Annual Report.
Our material short-term and long-term cash requirements include repayment of third-party long-term debt and related interest payments, payments on operating lease agreements, payments of obligations on purchase commitments and asset retirement obligations.
At September 30, 2025, our long-term debt reflected an increase of approximately $514.1 million from the balance at December 31, 2024. This increase is due to issuing a new $500 million Term Loan B facility with the proceeds being used to fund a portion of Strata's purchase price in addition to borrowing $20 million under our revolving credit facility.
At September 30, 2025, our total estimated interest payments over the life of our debt reflected an increase of approximately $184.1 million from the total estimated interest payments at December 31, 2024. This increase is primarily due to the change in long-term debt outstanding related to the new Term Loan B and borrowings under our revolving credit facility, as previously mentioned.
At September 30, 2025, our purchase commitments reflected a decrease of approximately 22 percent from the balance at December 31, 2024. This decrease is primarily due to the seasonality of work and the third quarter being in our peak construction season, our purchase commitments saw an expected decrease from the balance at June 30, 2025. We expect purchase commitments to continue to decrease throughout the remainder of 2025 as obligations continue to be satisfied during the construction season.
Defined benefit pension plans
We have frozen noncontributory qualified defined benefit pension plans for certain employees. Various assumptions are used in calculating the benefit expense (income) and liability (asset) related to these plans. Costs of providing these benefits are dependent upon assumptions of future conditions and bear the risk of changing.
There were no material changes to our qualified noncontributory defined benefit pension plans from those reported in the 2024 Annual Report. We do not expect to make any pension plan contributions in 2025 as the plan is fully funded. For more information, see Part II, Item 8 in the 2024 Annual Report.
Non-GAAP Financial Measures
The Business Segment Financial and Operating Data includes financial information prepared in accordance with GAAP, as well as EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin, as well as total segment measures, as applicable, that are considered non-GAAP measures of financial performance. These non-GAAP financial measures are not measures of financial performance under GAAP. The items excluded from these non-GAAP financial measures are significant components in understanding and assessing financial performance. Therefore, these non-GAAP financial measures should not be considered substitutes for the applicable GAAP metric.
EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are most directly comparable to the corresponding GAAP measures of net income and net income margin. We believe these non-GAAP financial measures, in addition to corresponding
Index
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, unrealized gains and losses on benefit plan investments and the impact of selling acquired inventory after markup to fair value as part of acquisition accounting 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.
EBITDA is calculated by adding back income taxes, interest expense (net of interest income) and depreciation, depletion and amortization expense to net income (loss). EBITDA margin is calculated by dividing EBITDA by revenues. Adjusted EBITDA is calculated by adding back unrealized gains and losses on benefit plan investments, stock-based compensation, impact of selling acquired inventory after markup to fair value as part of acquisition accounting, 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 total segment and consolidated metrics and should not be considered as alternatives to, or more meaningful than, GAAP financial measures such as net income or net income margin, and are intended to be helpful supplemental financial measures for investors' understanding of our operating performance. Our non-GAAP financial measures are not standardized; therefore, it may not be possible to compare these financial measures with other companies' EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin measures having the same or similar names.
The following information reconciles segment and consolidated net income (loss) to EBITDA and Adjusted EBITDA and provides the calculation of EBITDA margin and Adjusted EBITDA margin. Interest expense, net, is net of interest income that is included in other income on the Consolidated Statements of Operations.
| Three Months Ended | Nine Months Ended | |||||||||||||
| September 30, | September 30, | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||
| (In millions) | ||||||||||||||
Net income | $ | 143.2 | $ | 148.1 | $ | 125.1 | $ | 178.4 | ||||||
| Depreciation, depletion and amortization | 53.4 | 34.8 | 142.4 | 101.5 | ||||||||||
| Interest expense, net | 22.4 | 12.1 | 57.1 | 36.1 | ||||||||||
| Income taxes | 50.2 | 49.6 | 42.9 | 59.4 | ||||||||||
| EBITDA | $ | 269.2 | $ | 244.6 | $ | 367.5 | $ | 375.4 | ||||||
| Unrealized (gains) losses on benefit plan investments | (1.1) | (1.2) | (2.2) | (2.8) | ||||||||||
| Stock-based compensation expense | 2.9 | 1.8 | 8.5 | 5.4 | ||||||||||
Impact of selling acquired inventory after markup to fair value as part of acquisition accounting | 1.8 | - | 3.3 | - | ||||||||||
One-time separation costs | - | - | - | 3.8 | ||||||||||
| Adjusted EBITDA | $ | 272.8 | $ | 245.2 | $ | 377.1 | $ | 381.8 | ||||||
| Revenue | $ | 1,203.7 | $ | 1,105.3 | $ | 2,390.9 | $ | 2,241.8 | ||||||
Net income margin | 11.9 | % | 13.4 | % | 5.2 | % | 8.0 | % | ||||||
| EBITDA margin | 22.4 | % | 22.1 | % | 15.4 | % | 16.7 | % | ||||||
| Adjusted EBITDA margin | 22.7 | % | 22.2 | % | 15.8 | % | 17.0 | % | ||||||
New Accounting Standards
For information regarding new accounting standards, see Note 3, which is incorporated by reference.
Critical Accounting Estimates
Our critical accounting estimates include revenue recognized using the cost-to-cost measure of progress for contracts; fair values of acquired assets and liabilities assumed under the acquisition method of accounting; impairment testing of goodwill; and impairment testing of long-lived assets excluding goodwill. There were no material changes in the Company's critical accounting estimates from those that were previously reported in the Company's 2024 Annual Report.
Index