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Allowing each business to more effectively pursue its own operating priorities and strategies, and enabling management at each company to pursue unique opportunities for long-term growth and profitability.
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Permitting each company to concentrate its financial resources on its own operations, with greater flexibility to invest capital at a time and in a manner appropriate for its distinct strategy and business needs.
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Giving each publicly traded company direct access to capital markets.
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Allowing investors to separately value MDU Resources and Knife River Holding Company based on each company's unique investment identities, including their respective merits, strategy, performance and business prospects.
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Sincerely,
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David L. Goodin
President and Chief Executive Officer
MDU Resources Group, Inc.
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Sincerely,
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Brian R. Gray
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President and Chief Executive Officer
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Knife River Holding Company
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QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION | | |
1 |
INFORMATION STATEMENT SUMMARY | | |
9 |
RISK FACTORS | | |
19 |
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS | | |
40 |
THE SEPARATION AND DISTRIBUTION | | |
41 |
DIVIDEND POLICY | | |
49 |
CAPITALIZATION | | |
50 |
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA | | |
52 |
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS | | |
54 |
BUSINESS | | |
63 |
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS | | |
79 |
MANAGEMENT | | |
101 |
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | | |
103 |
EXECUTIVE COMPENSATION | | |
110 |
DIRECTOR COMPENSATION | | |
127 |
KNIFE RIVER HOLDING COMPANY LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN | | |
128 |
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS | | |
132 |
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES | | |
138 |
DESCRIPTION OF MATERIAL INDEBTEDNESS | | |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | | |
146 |
DESCRIPTION OF KNIFE RIVER HOLDING COMPANY'S CAPITAL STOCK | | |
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WHERE YOU CAN FIND MORE INFORMATION | | |
153 |
INDEX TO FINANCIAL STATEMENTS | | |
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What is Knife River Holding Company, and why is MDU Resources separating Knife River Holding Company's business and distributing Knife River Holding Company stock?
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Knife River Holding Company, which is currently a wholly owned subsidiary of MDU Resources, was formed to hold Knife River. The separation of Knife River Holding Company from MDU Resources and the distribution of Knife River Holding Company common stock are intended to provide you with equity ownership in two separate publicly traded companies that will be able to focus exclusively on each of their respective businesses. Knife River Holding Company and MDU Resources expect that the separation will result in enhanced long-term performance of each business for the reasons discussed in the section entitled "The Separation and Distribution-Reasons for the Separation."
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Why am I receiving this document?
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MDU Resources is delivering this document to you because you are a holder of MDU Resources common stock. If you are a holder of MDU Resources common stock as of the close of business on May 22, 2023, the record date for the distribution, you will be entitled to receive one share of Knife River Holding Company common stock for every four shares of MDU Resources common stock that you held at the close of business on such date. If you sell your shares of MDU Resources common stock in the "regular-way" market after the record date and before the distribution, you also will be selling your right to receive shares of Knife River Holding Company common stock in the distribution. See "The Separation and Distribution-Trading Between the Record Date and Distribution Date." This document will help you understand how the separation and distribution will affect your post-separation ownership in Knife River Holding Company and MDU Resources, respectively.
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How will the separation of Knife River Holding Company from MDU Resources work?
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MDU Resources will distribute approximately 90% of the outstanding shares of Knife River Holding Company common stock to MDU Resources stockholders on a pro rata basis in a distribution intended to be generally tax-free to MDU Resources stockholders for U.S. federal income tax purposes. As a result of the distribution, Knife River Holding Company will become a separate public company. The number of shares of MDU Resources common stock you own will not change as a result of the separation and distribution.
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What is the record date for the distribution?
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The record date for the distribution will be the close of business on May 22, 2023.
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When will the distribution occur?
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It is expected that approximately 90% of the outstanding shares of Knife River Holding Company common stock will be distributed by MDU Resources at 11:59 p.m. Eastern Time, on May 31, 2023, to holders of record of MDU Resources common stock at the close of business on May 22, 2023, the record date for the distribution.
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What do stockholders need to do to participate in the distribution?
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Stockholders of MDU Resources as of the record date for the distribution will not be required to take any action to receive shares of Knife River Holding Company common stock in the
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distribution, but you are urged to read this entire information statement carefully. No stockholder approval of the distribution is required. You are not being asked for a proxy. You do not need to pay any consideration, exchange or surrender your existing shares of MDU Resources common stock or take any other action to receive your shares of Knife River Holding Company common stock. The distribution will not affect the number of outstanding shares of MDU Resources common stock or any rights of MDU Resources stockholders, although it will affect the market value of each outstanding share of MDU Resources common stock.
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How will shares of Knife River Holding Company common stock be issued?
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You will receive shares of Knife River Holding Company common stock through the same channels that you currently use to hold or trade MDU Resources common stock, whether through a brokerage account or another channel. Receipt of Knife River Holding Company's shares will be documented for you in the same manner that you typically receive stockholder updates, such as monthly broker statements.
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If you own MDU Resources common stock as of the close of business on May 22, 2023, the record date for the distribution, MDU Resources, with the assistance of EQ Shareowner Services ("Equiniti"), the distribution agent for the distribution, will electronically distribute shares of Knife River Holding Company common stock to you or to your brokerage firm on your behalf in book-entry form.
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Equiniti will mail you a book-entry account statement that reflects your shares of Knife River Holding Company common stock, or your bank or brokerage firm will credit your account for the shares.
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How many shares of Knife River Holding Company common stock will I receive in the distribution?
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MDU Resources will distribute to you one share of Knife River Holding Company common stock for every four shares of MDU Resources common stock held by you as of close of business on May 22, 2023, the record date for the distribution. Based on approximately 203.6 million shares of MDU Resources common stock outstanding as of April 30, 2023, and assuming a distribution of approximately 90% of the outstanding shares of Knife River Holding Company common stock, a total of approximately 50.9 million shares of Knife River Holding Company common stock will be distributed. For additional information on the distribution, see "The Separation and Distribution."
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Will Knife River Holding Company issue fractional shares of its common stock in the distribution?
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No. Knife River Holding Company will not issue fractional shares of its common stock in the distribution. Fractional shares that MDU Resources stockholders would otherwise have been entitled to receive will be aggregated and sold in the public market by the distribution agent on behalf of MDU Resources stockholders. The aggregate net cash proceeds of these sales will be distributed pro rata (based on the fractional share such holder would otherwise be entitled to receive) to those stockholders who would otherwise have been entitled to receive fractional shares. Recipients of cash in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.
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What are the conditions to the distribution included in the separation and distribution agreement?
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The separation and distribution agreement provides that the distribution is subject to final approval by the MDU Resources board of directors, as well as to the satisfaction (or waiver by MDU Resources in its sole discretion) of the following conditions:
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• the transfer of Knife River and the assets and liabilities associated with it and its business from MDU Resources to Knife River Holding Company shall be completed in accordance with the separation and distribution agreement that Knife River Holding Company and MDU Resources will enter into prior to the distribution;
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• MDU Resources shall have received the private letter ruling from the Internal Revenue Service (the "IRS"), satisfactory to the MDU Resources board of directors, regarding certain U.S. federal income tax matters relating to the separation and distribution;
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• MDU Resources shall have received one or more opinions from its tax advisors, in each case satisfactory to the MDU Resources board of directors, regarding certain U.S. federal income tax matters relating to the separation and distribution;
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• an independent appraisal firm acceptable to MDU Resources shall have delivered one or more opinions to the board of directors of MDU Resources at the time or times requested by the board of directors of MDU Resources confirming the solvency and financial viability of MDU Resources before the consummation of the distribution (and each of Knife River Holding Company and MDU Resources after consummation of the distribution), and such opinions shall have been acceptable to MDU Resources in form and substance in MDU Resources' sole discretion and such opinions shall not have been withdrawn or rescinded;
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• the U.S. Securities and Exchange Commission (the "SEC") shall have declared effective the registration statement of which this information statement forms a part, and this information statement shall have been made available to MDU Resources stockholders;
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• all actions or filings necessary or appropriate under applicable U.S. federal, U.S. state or other securities laws shall have been taken and, where applicable, have become effective or been accepted by the applicable governmental entity;
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• the actions and filings necessary or appropriate with respect to applicable state insurance and residential service contract regulators, shall have been taken or made, and, where applicable, have become effective or been accepted by the applicable governmental authority;
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• the transaction agreements relating to the separation shall have been duly executed and delivered by the parties;
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• no order, injunction or decree issued by any court of competent jurisdiction, or other legal restraint or prohibition preventing the consummation of the separation, distribution or any of the related transactions, shall be in effect;
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• the shares of Knife River Holding Company common stock to be distributed shall have been approved for listing on the NYSE, subject to official notice of distribution;
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• Knife River Holding Company shall have entered into the financing transactions described in this information statement that are contemplated to occur on or prior to the separation and distribution; and
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• no other event or development shall exist or have occurred that, in the judgment of MDU Resources' board of directors, in its sole discretion, makes it inadvisable to effect the separation, distribution and other related transactions.
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Neither Knife River Holding Company nor MDU Resources can assure you that any or all of these conditions will be met. In addition, MDU Resources can decline at any time to go forward with the separation and distribution. For a complete discussion of all of the conditions to the distribution provided under the separation and distribution, see "The Separation and Distribution-Conditions to the Distribution."
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What is the expected date of completion of the distribution?
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The completion and timing of the distribution are dependent upon a number of conditions. It is expected that the shares of Knife River Holding Company common stock will be distributed by MDU Resources at 11:59 p.m. Eastern Time, on May 31, 2023, to holders of record of MDU Resources common stock at the close of business on May 22, 2023, the record date for the distribution. However, no assurance can be provided as to the timing of the distribution or that all conditions to the distribution will be met.
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Can MDU Resources decide to cancel the distribution of Knife River Holding Company common stock even if all the conditions provided under the separation and distribution agreement have been met?
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Yes. Pursuant to the separation and distribution agreement, the distribution is subject to the satisfaction or waiver of certain conditions. See the section entitled "The Separation and Distribution-Conditions to the Distribution." Until the distribution has occurred, MDU Resources has the right to terminate the distribution, even if all of the conditions are satisfied.
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What if I want to sell my MDU Resources common stock or my Knife River Holding Company common stock?
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If you sell your shares of MDU Resources common stock prior to or on the distribution date, you may also be selling your right to receive shares of Knife River Holding Company common stock. See "The Separation and Distribution-Trading Between the Record Date and Distribution Date." You are encouraged to consult with your financial advisor regarding the specific implications of selling your MDU Resources common stock prior to or on the distribution date.
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What is "regular-way" and "ex-distribution" trading of MDU Resources common stock?
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Beginning May 25, 2023, and continuing up to and through the distribution date, it is expected that there will be two markets in MDU Resources common stock: a "regular-way" market and an "ex-distribution" market. MDU Resources common stock that trades in the "regular-way" market will trade with an entitlement to shares of Knife River Holding Company common stock distributed pursuant to the distribution. Shares that trade in the "ex-distribution" market will trade without an entitlement to shares of Knife River Holding Company common stock distributed pursuant to the distribution. If you hold shares of MDU Resources common stock on the record date and then decide to sell any MDU Resources common stock before the distribution date, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your MDU Resources common stock with or without your entitlement to Knife River Holding Company common stock pursuant to the distribution.
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Where will I be able to trade shares of Knife River Holding Company common stock?
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Knife River Holding Company common stock has been approved for listing on the NYSE under the symbol "KNF." Knife River Holding Company anticipates that trading in shares of its common stock will begin on a "when-issued" basis on May 25, 2023, and will continue up to and through the distribution date, and that "regular-way" trading in Knife River Holding Company common stock will begin on the first trading day following the completion of the distribution. If trading begins on a "when-issued" basis, you may purchase or sell shares of Knife River Holding Company common stock up to and through the distribution date, but your transaction will not settle until after the distribution date. Knife River Holding Company cannot predict the trading prices for its common stock before, on or after the distribution date.
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What will happen to the listing of MDU Resources common stock?
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MDU Resources common stock will continue to trade on the NYSE under the symbol "MDU."
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Will the number of shares of MDU Resources common stock that I own change as a result of the distribution?
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No. The number of shares of MDU Resources common stock that you own will not change as a result of the distribution.
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Will the distribution affect the market price of my shares of MDU Resources common stock?
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Yes. As a result of the distribution, MDU Resources expects the trading price of MDU Resources common stock immediately following the distribution to be lower than the "regular-way" trading price of such stock immediately prior to the distribution because the trading price will no longer reflect the value of Knife River. There can be no assurance that the aggregate market value of shares of MDU Resources common stock and Knife River Holding Company common stock following the distribution will be higher or lower than the market value of shares of MDU Resources common stock if the separation and distribution did not occur. This means, for example, that the combined trading prices of one share of MDU Resources common stock and one share of Knife River Holding Company common stock after the distribution may be equal to, greater than or less than the trading price of one share of MDU Resources common stock before the distribution.
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What are the material U.S. federal income tax consequences of the separation and distribution?
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It is a condition to the distribution that MDU Resources receive the private letter ruling from the IRS and one or more opinions from its tax advisors, in each case satisfactory to the MDU Resources board of directors, regarding certain U.S. federal income tax matters relating to the separation and distribution. Accordingly, it is expected that MDU Resources stockholders generally will not recognize any gain or loss upon receipt of Knife River Holding Company common stock pursuant to the distribution, except with respect to any cash received in lieu of fractional shares. You should carefully read the section entitled "Material U.S. Federal Income Tax Consequences" and should consult your own tax advisor about the particular consequences of the distribution to you, including the application of U.S. federal, state and local and non-U.S. tax laws.
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What will happen to my tax basis in my MDU Resources stock?
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If you do not sell your MDU Resources stock in advance of the distribution, your tax basis will be adjusted and the aggregate tax basis of the MDU Resources common stock and Knife River Holding Company common stock received in the distribution (including any fractional share interest in Knife River Holding Company common stock for which cash is received) will equal the aggregate tax basis of MDU Resources common stock immediately prior to the distribution, allocated between the MDU Resources common stock and Knife River Holding Company common stock (including any fractional share interest in Knife River Holding Company common stock for which cash is received) in proportion to the relative fair market value of each on the date of the distribution. You should carefully read the section entitled "Material U.S. Federal Income Tax Consequences" and should consult your own tax advisor about the particular consequences of the distribution to you, including the application of U.S. federal, state and local and non-U.S. tax laws.
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What will Knife River Holding Company's relationship be with MDU Resources following the separation and distribution?
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Following the distribution, MDU Resources stockholders will own approximately 90% of the outstanding shares of Knife River Holding Company common stock, and Knife River Holding Company and MDU Resources will be separate companies with separate management teams and separate boards of directors. MDU Resources will retain approximately 10% of the outstanding shares of Knife River Holding Company common stock following the distribution. Prior to the distribution, Knife River Holding Company will enter into a separation and distribution agreement with MDU Resources to effect the separation and distribution and provide a framework for our relationship with MDU Resources after the separation and will enter into certain other agreements, such as a transition services agreement, a tax matters agreement, an employee matters agreement and a stockholder and registration rights agreement with respect to MDU Resources' continuing ownership of shares of Knife River Holding Company common stock. These agreements will provide for the allocation between Knife River Holding Company and MDU Resources of MDU Resources' assets, employees, liabilities and obligations (including its investments, property, employee benefits assets and liabilities and tax liabilities) and its subsidiaries attributable to periods prior to, at and after Knife River Holding Company's separation from MDU Resources and will govern the relationship between Knife River Holding Company and
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MDU Resources subsequent to completion of the separation. For additional information regarding the separation and distribution agreement, other transaction agreements and certain other commercial agreements between Knife River Holding Company and MDU Resources, see the sections entitled "Risk Factors-Risks Related to the Separation and the Distribution" and "Certain Relationships and Related Person Transactions."
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How will MDU Resources vote any shares of Knife River Holding Company common stock it retains?
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It is expected that MDU Resources will agree to vote any shares of Knife River Holding Company common stock that it retains in proportion to the votes cast by Knife River Holding Company's other stockholders and grant Knife River Holding Company a proxy to vote its shares of Knife River Holding Company common stock in such proportion. For additional information on these voting arrangements, see "Certain Relationships and Related Person Transactions-Stockholder and Registration Rights Agreement."
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What does MDU Resources intend to do with any shares of Knife River Holding Company common stock it retains?
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MDU Resources currently plans to dispose of all shares of Knife River Holding Company common stock that it retains; such dispositions may include one or more subsequent exchanges for debt, distributions to MDU Resources stockholders, exchanges for MDU Resources shares or sales of such shares for cash.
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Who will manage Knife River Holding Company after the separation?
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Knife River Holding Company has assembled a management team of highly experienced leaders who have track records of producing profitable growth in a wide variety of industries and economic conditions, led by Brian R. Gray, who will be its President and Chief Executive Officer after the separation. Knife River Holding Company's management team is highly focused on execution and driving growth and profitability. Further, Knife River Holding Company believes that it has a deep pool of talent across the organization, including long-tenured individuals with significant expertise and knowledge of its business. For more information regarding Knife River Holding Company's management, see "Management."
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Are there risks associated with owning Knife River Holding Company common stock?
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Yes. Ownership of Knife River Holding Company common stock is subject to both general and specific risks relating to Knife River Holding Company's business, the industry in which it operates, its ongoing contractual relationships with MDU Resources and its status as a separate, publicly traded company. Ownership of Knife River Holding Company common stock is also subject to risks relating to the separation and the distribution. These risks are described in the "Risk Factors" section of this information statement, beginning on page 19. You are encouraged to read that section carefully.
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Does Knife River Holding Company plan to pay dividends?
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The declaration and payment of any dividends in the future will be subject to the sole discretion of Knife River Holding Company's board of directors and will depend on many factors. See "Dividend Policy."
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Will Knife River Holding Company incur any indebtedness prior to or at the time of the distribution?
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In connection with the separation and distribution, Knife River Holding Company anticipates that it will incur indebtedness in an aggregate principal capacity of up to $1.05 billion. Such indebtedness is expected to consist of Knife River Holding Company's $425 million 7.750% notes due 2031, Knife River Holding Company's expected incurrence of $275 million in aggregate principal amount of term loans and Knife River Holding Company's expected entry into a $350 million revolving credit facility, under which Knife River Holding Company expects (based on projected seasonal borrowing needs, which fluctuate with the timing of the construction season and associated working capital needs) to have $190 million in aggregate principal amount of loans outstanding as of the separation date. Knife River Holding Company expects that all or a portion of the net proceeds of such indebtedness will be used to repay debt owed to Centennial. Knife River Holding Company expects that Centennial will use such net proceeds to repay a portion of its existing third-party indebtedness. Additional details regarding such financing arrangements will be included in an amendment to this information statement. See "Description of Material Indebtedness" and "Risk Factors-Risks Related to the Separation and the Distribution."
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Who will be the distribution agent, transfer agent and registrar for shares of Knife River Holding Company common stock?
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The distribution agent, transfer agent and registrar for shares of Knife River Holding Company common stock will be Equiniti. For questions relating to the transfer or mechanics of the stock distribution, you should contact Equiniti's toll free number at 1-800-468-9716.
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Where can I find more information about MDU Resources and Knife River Holding Company?
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Before the distribution, if you have any questions relating to MDU Resources, you should contact:
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MDU Resources Group, Inc.
1200 West Century Avenue
P.O. Box 5650
Bismarck, North Dakota 58506-5650
Attention: Investor Relations
Phone: (701) 530-1000
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After the distribution, stockholders who have any questions relating to Knife River Holding Company should contact Knife River Holding Company at:
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Knife River Holding Company
1150 West Century Avenue
Bismarck, ND 58503
Attention: Investor Relations
Phone: (701) 530-1400
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Leading vertically integrated, aggregates-based construction materials and contracting provider.
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Attractive geographic footprint across the western U.S. with exposure to areas demonstrating above-average growth.
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Diverse public and private customer base.
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Large exposure to public-sector customers, providing recession resiliency amidst soft macro environment.
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Strong backlog and robust pipeline of projects across public and private infrastructure end markets.
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Resilient financial profile with robust free cash flows.
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Proven track record of growth through acquisition and highly effective integration playbook, driving both organic and inorganic growth.
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Best-in-class management team with a long history of operating success and integration.
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Knife River Holding Company's business is seasonal and subject to weather conditions that could adversely affect its operations, revenues and the timing of cash flows.
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Knife River Holding Company operates in a highly competitive industry.
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Significant changes in prices for commodities, labor, or other production and delivery inputs could negatively affect Knife River Holding Company's businesses.
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Knife River Holding Company's operations may be negatively affected if it is unable to obtain, develop and retain key personnel and skilled labor forces.
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Economic volatility affects Knife River Holding Company's operations, as well as the demand for its products and services.
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Knife River Holding Company's backlog may not accurately represent future revenue.
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Supply chain disruptions may adversely affect Knife River Holding Company's operations.
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Knife River Holding Company's aggregate resource and reserve calculations are estimates and subject to uncertainty.
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Knife River Holding Company depends on securing, permitting and economically mining strategically located aggregate reserves.
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Knife River Holding Company operates in a capital-intensive industry and is subject to capital market and interest rate risks.
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Reductions in Knife River Holding Company's credit ratings could increase financing costs.
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Knife River Holding Company may be negatively impacted by pending and/or future litigation, claims or investigations.
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Financial market changes could impact Knife River Holding Company's defined benefit pension plans and obligations.
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Increasing costs associated with health care plans may adversely affect Knife River Holding Company's results of operations.
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Changes in tax law may negatively affect Knife River Holding Company's business.
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Knife River Holding Company's operations could be negatively impacted by import tariffs and/or other government mandates.
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Knife River Holding Company's operations could be adversely impacted by climate change.
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Knife River Holding Company's operations are subject to environmental laws and regulations that may increase costs of operations, impact or limit business plans, or expose Knife River Holding Company to environmental liabilities.
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Costs related to obligations under Multiemployer Pension Plans ("MEPPs") could have a material negative effect on Knife River Holding Company's results of operations and cash flows.
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Technology disruptions or cyberattacks could adversely impact Knife River Holding Company's operations.
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Pandemics, including COVID-19, may have a negative impact on Knife River Holding Company's business operations, revenues, results of operations, liquidity and cash flows.
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Knife River Holding Company has no recent history of operating as an independent, public company, and its historical and pro forma financial information is not necessarily representative of the results that it would have achieved as a separate, publicly traded company and may not be a reliable indicator of its future results.
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Until the separation and distribution occur, MDU Resources has sole discretion to change the terms of the separation and distribution in ways that may be unfavorable to Knife River Holding Company, including to determine not to effect the distribution at all.
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Knife River Holding Company may not achieve some or all of the expected benefits of the separation, and the separation may materially and adversely affect its financial position, results of operations and cash flows.
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Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could materially and adversely affect Knife River Holding Company.
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In connection with the separation from MDU Resources, Knife River Holding Company will incur debt obligations that could adversely affect its business, profitability and its ability to meet obligations.
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A lowering or withdrawal of the ratings, outlook or watch assigned to Knife River Holding Company or its debt by rating agencies may increase its future borrowing costs and reduce its access to capital.
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As an independent, publicly traded company, Knife River Holding Company may not enjoy the same benefits that it did as a segment of MDU Resources.
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Knife River Holding Company could experience temporary interruptions in business operations and incur additional costs as it further develops information technology infrastructure and transitions its data to its stand-alone systems.
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If the distribution, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, MDU Resources, Knife River Holding Company and MDU Resources stockholders could be subject to significant tax liabilities and, in certain circumstances, Knife River Holding Company could be required to indemnify MDU Resources for material taxes and other related amounts pursuant to indemnification obligations under the tax matters agreement.
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Knife River Holding Company cannot be certain that an active trading market for its shares of common stock will develop or be sustained after the distribution, and following the distribution, its stock price may fluctuate significantly.
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A significant number of shares of Knife River Holding Company's common stock are or will be eligible for future sale, which may cause the market price of Knife River Holding Company common stock to decline.
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There may be substantial changes in Knife River Holding Company's stockholder base.
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Your percentage of ownership in Knife River Holding Company may be diluted in the future.
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Knife River Holding Company cannot guarantee the timing, declaration, amount or payment of dividends on its common stock.
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Enhanced strategic focus. The separation will allow Knife River Holding Company and MDU Resources to more effectively pursue their distinct operating priorities and strategies and will enable the management of both companies to pursue unique opportunities for long-term growth and profitability. Knife River Holding Company and MDU Resources will each be able to use equity tailored to its own business to enhance acquisition and capital investment programs. Knife River Holding Company's management will be able to focus exclusively on its construction materials and contracting services business, while the management of MDU Resources will remain dedicated to its remaining businesses.
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Tailored capital allocation strategies. The separation will permit each company to concentrate its financial resources solely on its own operations, providing greater flexibility to invest capital in its business at a time and in a manner appropriate for its distinct strategy and business needs. This will facilitate a more efficient allocation of capital based on each company's profitability, cash flow and growth opportunities.
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Optimized capital structures. The separation will allow Knife River Holding Company and MDU Resources to each benefit from distinct capital structures and financial policies tailored to its separate business profile and needs. The separation will create independent equity securities for Knife River Holding Company and MDU Resources, affording each direct access to the capital markets and enabling each of them to use its own industry-focused stock to consummate future acquisitions or other transactions. As a result, Knife River Holding Company and MDU Resources will each have more flexibility to capitalize on its unique strategic opportunities.
|
•
|
Alignment of incentives with performance objectives. The separation will facilitate equity-based and other incentive compensation arrangements for employees more directly tied to the performance of each company's business, and enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives.
|
•
|
Distinct investment opportunities. The separation will allow investors to separately value Knife River Holding Company and MDU Resources based on their distinct investment identities. Knife River Holding Company's business differs from MDU Resources' remaining businesses in several respects, including customer bases, regulatory oversight, competitors, strategic initiatives, sales channels and technology needs. The separation will enable investors to evaluate the merits, strategy, performance, and future prospects of each company's respective business and to invest in each company separately based on these distinct characteristics. The separation may attract new investors who may not have properly assessed the value of Knife River relative to the value it is currently accorded as part of MDU Resources.
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Pro Forma
| | |
Historical
| |||||||
| |
Year Ended
December 31,
| | |
Years Ended December 31,
| |||||||
| |
2022
| | |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands, except per share amounts)
| ||||||||||
Total revenue
| | |
$2,534,729
| | |
$2,534,729
| | |
$2,228,930
| | |
$2,178,002
|
Total cost of revenue
| | |
2,187,455
| | |
2,173,835
| | |
1,881,981
| | |
1,807,424
|
Gross profit
| | |
347,274
| | |
360,894
| | |
346,949
| | |
370,578
|
Selling, general and administrative expenses
| | |
182,725
| | |
166,599
| | |
155,872
| | |
156,080
|
Operating income
| | |
164,549
| | |
194,295
| | |
191,077
| | |
214,498
|
Interest expense
| | |
61,061
| | |
30,121
| | |
19,218
| | |
20,577
|
Other (expense) income
| | |
(4,069)
| | |
(5,353)
| | |
1,355
| | |
835
|
Income before income taxes
| | |
99,419
| | |
158,821
| | |
173,214
| | |
194,756
|
Income taxes
| | |
26,503
| | |
42,601
| | |
43,459
| | |
47,431
|
Net income
| | |
$72,916
| | |
$116,220
| | |
$129,755
| | |
$147,325
|
Earnings per share - basic
| | |
$1.29
| | |
$1,452.74
| | |
$1,621.93
| | |
$1,841.56
|
Earnings per share - diluted
| | |
$1.29
| | |
$1,452.74
| | |
$1,621.93
| | |
$1,841.56
|
Weighted average common shares outstanding - basic
| | |
56,566
| | |
80
| | |
80
| | |
80
|
Weighted average common shares outstanding - diluted
| | |
56,566
| | |
80
| | |
80
| | |
80
|
| |
Pro Forma
| | |
Historical
| ||||
| |
As of
December 31,
| | |
As of December 31,
| ||||
| |
2022
| | |
2022
| | |
2021
| |
| |
(In thousands)
| |||||||
Working capital
| | |
$527,687
| | |
$91,677
| | |
$185,429
|
Due from related-party - noncurrent
| | |
-
| | |
-
| | |
7,626
|
Total assets
| | |
2,505,750
| | |
2,294,319
| | |
2,181,824
|
| | | | | | ||||
Related-party notes payable
| | |
-
| | |
446,449
| | |
575,457
|
Total liabilities
| | |
1,478,290
| | |
1,265,730
| | |
1,228,980
|
Total stockholder's equity
| | |
1,027,460
| | |
1,028,589
| | |
952,844
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A significant economic downturn.
|
•
|
The financial distress of unrelated industry leaders in the same line of business.
|
•
|
Deterioration in capital market conditions.
|
•
|
Turmoil in the financial services industry.
|
•
|
Volatility in commodity prices.
|
•
|
Pandemics, including COVID-19.
|
•
|
Terrorist attacks.
|
•
|
War.
|
•
|
Cyberattacks.
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•
|
Governmental authorities increasing taxes or eliminating deductions, particularly the depletion deduction.
|
•
|
The mix of earnings from depletable versus non-depletable businesses.
|
•
|
The jurisdictions in which earnings are taxed.
|
•
|
The resolution of issues arising from tax audits with various tax authorities.
|
•
|
Changes in the valuation of our deferred tax assets and liabilities.
|
•
|
Adjustments to estimated taxes upon finalization of various tax returns.
|
•
|
Changes in available tax credits.
|
•
|
Changes in stock-based compensation.
|
•
|
Other changes in tax laws.
|
•
|
The interpretation of tax laws and/or administrative practices.
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Hacking.
|
•
|
Human error.
|
•
|
Theft.
|
•
|
Sabotage.
|
•
|
Malicious software.
|
•
|
Ransomware.
|
•
|
Third-party compromise.
|
•
|
Acts of terrorism.
|
•
|
Acts of war.
|
•
|
Acts of nature.
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Or other causes.
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Acquisition, disposal and impairments of assets or facilities.
|
•
|
The cyclical nature of large construction projects.
|
•
|
Labor negotiations or disputes.
|
•
|
Succession planning.
|
•
|
Inability of contract counterparties to meet their contractual obligations.
|
•
|
The inability to effectively integrate the operations and the internal controls of acquired companies.
|
•
|
Prior to the distribution, Knife River Holding Company's business has been operated by MDU Resources as part of its broader corporate organization, rather than as an independent company, and MDU Resources or one of its affiliates performed certain corporate functions for Knife River Holding Company. Knife River Holding Company's historical and pro forma financial results reflect allocations of corporate expenses from MDU Resources for such functions and are likely to be less than the expenses Knife River Holding Company would have incurred had it operated as a separate publicly traded company.
|
•
|
Historically, Knife River Holding Company shared economies of scope and scale in costs, employees and vendor relationships. Although Knife River Holding Company will enter into a transition services agreement with MDU Resources prior to the distribution, these arrangements may not retain or fully capture the benefits that Knife River Holding Company has enjoyed as a result of being integrated with MDU Resources and may result in it paying higher charges than in the past for these services. This could have a material adverse effect on Knife River Holding Company's business, financial position, results of operations and cash flows following the completion of the distribution.
|
•
|
Generally, Knife River Holding Company's working capital requirements and capital for its general corporate purposes, including acquisitions and capital expenditures, have in the past been satisfied as part of the corporatewide cash management policies of Centennial. Following the completion of the distribution, Knife River Holding Company's results of operations and cash flows are likely to be more volatile, and it may need to obtain additional financing from banks, through public offerings or private placements of debt or equity securities, strategic relationships or other arrangements, which may or may not be available and may be more costly.
|
•
|
After the completion of the distribution, the cost of capital for Knife River Holding Company's business may be higher than MDU Resources' cost of capital prior to the distribution.
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•
|
Knife River Holding Company's historical financial information does not reflect the debt that it expects to incur in connection with the separation.
|
•
|
As a public company, Knife River Holding Company will become subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the Dodd-Frank Act and will be required to prepare its financial statements according to the rules and regulations required by the SEC. Complying with these requirements could result in significant costs and require Knife River Holding Company to divert substantial resources, including management time, from other activities.
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•
|
Entering into any transaction pursuant to which all or a portion of Knife River Holding Company common stock or assets would be acquired, whether by merger or otherwise.
|
•
|
Issuing equity securities beyond certain thresholds.
|
•
|
Repurchasing shares of its capital stock other than in certain open-market transactions.
|
•
|
Ceasing to actively conduct certain aspects of its business.
|
•
|
And/or taking or failing to take any other action that would jeopardize the expected U.S. federal income tax treatment of the distribution and certain related transactions.
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•
|
A distinct investment identity allowing investors to evaluate the merits, strategy, performance and future prospects of Knife River Holding Company's business separately from MDU Resources.
|
•
|
Enhanced strategic focus to more effectively pursue individualized strategies specific to the industries in which each operates and use equity tailored to its own business to enhance acquisition and capital programs.
|
•
|
More efficient allocation of capital for both Knife River Holding Company and MDU Resources based on each company's profitability, cash flow and growth opportunities.
|
•
|
Direct access for Knife River Holding Company to the capital markets, while at the same time creating an independent equity structure that will facilitate its ability to deploy capital toward its specific growth opportunities.
|
•
|
And enhanced employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives.
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•
|
Labor, tax, employee benefit, indemnification and other matters arising from Knife River Holding Company's separation from MDU Resources.
|
•
|
Employee retention and recruiting.
|
•
|
Business combinations involving Knife River Holding Company.
|
•
|
And the nature, quality and pricing of services that Knife River Holding Company and MDU Resources have agreed to provide each other.
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•
|
Requiring a substantial portion of its cash flow from operations to make interest payments on this debt following the separation.
|
•
|
Making it more difficult to satisfy debt service and other obligations.
|
•
|
Increasing the risk of a future credit ratings downgrade of its debt, which could increase future debt costs and limit the future availability of debt financing.
|
•
|
Increasing its vulnerability to general adverse economic and industry conditions.
|
•
|
Reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow its business.
|
•
|
Limiting its flexibility in planning for, or reacting to, changes in its business and the industry.
|
•
|
Placing it at a competitive disadvantage relative to its competitors that may not be as highly leveraged with debt.
|
•
|
And limiting its ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase ordinary shares.
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Actual or anticipated fluctuations in Knife River Holding Company's operating results.
|
•
|
Declining operating revenues derived from Knife River Holding Company's core business.
|
•
|
The operating and stock price performance of comparable companies.
|
•
|
Changes in Knife River Holding Company's stockholder base due to the separation.
|
•
|
Changes in the regulatory and legal environment in which Knife River Holding Company operates.
|
•
|
And market conditions in the construction materials and contracting market, and the domestic and worldwide economy as a whole.
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|
Distinct investment opportunities. The separation will allow investors to separately value Knife River Holding Company and MDU Resources based on their distinct investment identities. Knife River Holding Company's business differs from MDU Resources' remaining businesses in several respects, including customer bases, regulatory oversight, competitors, strategic initiatives, sales channels and technology needs. The separation will enable investors to evaluate the merits, strategy, performance, and future prospects of each company's respective business and to invest in each company separately based on these distinct characteristics. The separation may attract new investors who may not have properly assessed the value of Knife River relative to the value it is currently accorded as part of MDU Resources.
|
•
|
Enhanced strategic focus. The separation will allow Knife River Holding Company and MDU Resources to more effectively pursue their distinct operating priorities and strategies and will enable the management of both companies to pursue unique opportunities for long-term growth and profitability.
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•
|
Tailored capital allocation strategies. The separation will permit each company to concentrate its financial resources solely on its own operations, providing greater flexibility to invest capital in its business at a time and in a manner appropriate for its distinct strategy and business needs. This will facilitate a more efficient allocation of capital based on each company's profitability, cash flow and growth opportunities.
|
•
|
Optimized capital structures. The separation will allow Knife River Holding Company and MDU Resources to each benefit from distinct capital structures and financial policies tailored to their separate business profiles and needs. The separation will create independent equity securities for Knife River Holding Company and MDU Resources, affording each direct access to the capital markets and enabling each of them to use its own industry-focused stock to consummate future acquisitions or other transactions. As a result, Knife River Holding Company and MDU Resources will each have more flexibility to capitalize on its unique strategic opportunities.
|
•
|
Alignment of incentives with performance objectives. The separation will facilitate equity-based and other incentive compensation arrangements for employees more directly tied to the performance of each company's business, and enhance employee hiring and retention by, among other things, improving the alignment of management and employee incentives with performance and growth objectives.
|
•
|
Risk of Failure to Achieve Anticipated Benefits of the Separation. Knife River Holding Company may not achieve the anticipated benefits of the separation for a variety of reasons, including, among others: the separation will demand significant management resources and require significant amounts of management's time and effort, which may divert management's attention from operating the business; and following the separation, Knife River Holding Company may be more susceptible to market fluctuations and other adverse events than if it were still a part of MDU Resources because its business will be less diversified than MDU Resources' business prior to the completion of the separation and distribution.
|
•
|
Disruptions and Costs Related to the Separation. The actions required to separate Knife River Holding Company from MDU Resources could disrupt its operations. In addition, Knife River Holding Company will incur substantial costs in connection with the transition to being a stand-alone, public company, which may include financial reporting, tax, legal and other professional services costs. Knife River could also experience some disruption costs for employee benefits, including health care costs, due to the new structure that will be adopted for the health care plan. Once the program has been in place for a full year and trends are developed, the risks are expected to lessen. Additionally, Knife River will be implementing stop loss insurance to assist with the volatility of high dollar claims.
|
•
|
Loss of Scale and Increased Administrative Costs. Prior to the separation, as part of MDU Resources, Knife River Holding Company takes advantage of MDU Resources' size and purchasing power in procuring certain goods and services. After the separation and distribution, as a stand-alone company, Knife River Holding Company may be unable to obtain these goods and services at prices or on terms as favorable as those MDU Resources obtained prior to completion of the separation and distribution. In addition, as part of MDU Resources, Knife River Holding Company benefits from certain functions performed by MDU Resources, such as financial reporting, tax, legal, human resources and other general and administrative functions. After the separation and distribution, MDU Resources will not perform these functions for Knife River Holding Company, other than certain functions that will be provided for a limited time pursuant to the transition services agreement, and, because of the smaller scale as a stand-alone company, Knife River Holding Company's cost of performing such functions could be higher than the amounts reflected in its historical financial statements, which would cause its profitability to decrease.
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•
|
Uncertainty Regarding Stock Prices. The effect of the separation on the trading prices of Knife River Holding Company or MDU Resources common stock is not predictable nor can it be known with certainty whether the combined market value of one Knife River Holding Company common stock and one share of MDU Resources common stock will be less than, equal to or greater than the market value of one share of MDU Resources common stock prior to the distribution.
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The transfer of Knife River and the assets and liabilities associated with it and its business from MDU Resources to Knife River Holding Company shall be completed in accordance with the separation and distribution agreement that MDU Resources and Knife River Holding Company will enter into prior to the distribution.
|
•
|
MDU Resources shall have received the private letter ruling from the IRS, satisfactory to the MDU Resources board of directors, regarding certain U.S. federal income tax matters relating to the separation and distribution.
|
•
|
MDU Resources shall have received one or more opinions from its tax advisors, in each case satisfactory to the MDU Resources board of directors, regarding certain U.S. federal income tax matters relating to the separation and distribution.
|
•
|
An independent appraisal firm acceptable to MDU Resources shall have delivered one or more opinions to the board of directors of MDU Resources at the time or times requested by the board of directors of MDU Resources confirming the solvency and financial viability of MDU Resources before the consummation of the distribution and each of MDU Resources and Knife River Holding Company after the consummation of the distribution, and such opinions shall have been acceptable to MDU Resources in form and substance in MDU Resources' sole discretion and such opinions shall not have been withdrawn or rescinded.
|
•
|
The SEC shall have declared effective Knife River Holding Company's registration statement on Form 10, of which this information statement forms a part, and this information statement shall have been made available to MDU Resources stockholders.
|
•
|
All actions and filings necessary or appropriate under applicable U.S. federal, U.S. state or other securities laws shall have been taken and, where applicable, have become effective or been accepted by the applicable governmental authority.
|
•
|
The actions and filings necessary or appropriate with respect to applicable state insurance and residential service contract regulators, shall have been taken or made, and, where applicable, have become effective or been accepted by the applicable governmental authority.
|
•
|
The transaction agreements relating to the separation that MDU Resources and Knife River Holding Company will enter into prior to the distribution shall have been duly executed and delivered by the parties.
|
•
|
No order, injunction, or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the separation, distribution or any of the related transactions shall be in effect.
|
•
|
The shares of Knife River Holding Company common stock to be distributed shall have been approved for listing on the NYSE, subject to official notice of distribution.
|
•
|
Knife River Holding Company shall have entered into the financing transactions described in this information statement that are contemplated to occur on or prior to the separation and distribution.
|
•
|
No event or development shall have occurred or exist that, in the judgment of MDU Resources' board of directors, in its sole and absolute discretion, makes it inadvisable to effect the separation, the distribution and other related transactions.
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| |
As of December 31, 2022
| ||||
| |
Historical
| | |
Pro Forma
| |
| |
(In thousands, except share and per share amounts)
| ||||
Assets | | | | | ||
Cash and cash equivalents(1) | | |
$10,090
| | |
$221,294
|
Liabilities | | | | | ||
Debt, including current and long-term: | | | | | ||
Long-term debt - current portion(1) | | |
211
| | |
211
|
Related-party notes payable - current portion(1) | | |
238,000
| | |
-
|
Long-term debt(1) | | |
427
| | |
879,205
|
Related-party notes payable(1) | | |
446,449
| | |
-
|
Total debt
| | |
$685,087
| | |
$879,416
|
Stockholder's Equity | | | | | ||
Historical Common stock, $10.00 par value: 80,000 shares authorized, issued and outstanding; Pro Forma Common stock, $0.01 par value: 300,000,000 shares authorized, 57,018,074 shares issued, and 56,566,215 shares outstanding on a pro forma basis(2) | | |
$800
| | |
$566
|
Other paid-in-capital(2) | | |
549,106
| | |
548,211
|
Retained earnings
| | |
494,661
| | |
494,661
|
Parent stock held by subsidiary(3) | | |
(3,626)
| | |
-
|
Treasury stock at cost- 451,859 shares(3) | | |
-
| | |
(3,626)
|
Accumulated other comprehensive loss
| | |
(12,352)
| | |
(12,352)
|
Total stockholder's equity
| | |
$1,028,589
| | |
$1,027,460
|
Total capitalization
| | |
$1,713,676
| | |
$ 1,906,876
|
1. |
The pro forma figures reflect the issuance by Knife River Holding Company of $425 million 7.750% notes due 2031, and the expected incurrence of term loans by Knife River Holding Company in an aggregate principal amount of up to $275 million. The debt maturities are expected to range from five years to eight years with an estimated weighted average interest rate of approximately 7.3 percent. Total deferred debt issuance costs associated with such indebtedness are estimated to be $11,222 thousand, which will be amortized to Interest expense over the terms of the respective instruments and are reflected as a reduction to Long-term debt. It is expected that Knife River will use all or a portion of the net proceeds of such indebtedness to repay its outstanding indebtedness with Centennial of $238 million that is reflected as Related-party notes payable - current portion and $446,449 thousand reflected as Related-party notes payable on the historical audited consolidated balance sheet as of December 31, 2022. |
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2. |
Reflects the historical common stock with a par value of $10.00 of Knife River Corporation and the issuance of 57,018,074 shares of Knife River Holding Company common stock with a par value of $0.01 per share on a pro forma basis pursuant to the separation and distribution agreement. Knife River Holding Company has assumed the number of issued and outstanding shares on a pro forma basis based on, among other things, (i) 203,638,373 shares of MDU Resources common stock outstanding as of April 30, 2023, (ii) the distribution ratio on the basis of one share of Knife River Holding Company common stock distributed for every four shares of MDU Resources common stock outstanding, (iii) a distribution of approximately 90% of the outstanding shares of Knife River Holding Company common stock to MDU Resources stockholders, on a pro rata basis and (iv) the hook stock exchange (as defined below). The number of shares shown outstanding on a pro forma basis and the amount used to calculate pro forma earnings per share differs from the shares issued on a pro forma basis due to the 451,859 hook stock shares retained as Treasury stock. The actual number of shares issued and outstanding will not be known until the record date for the distribution. Knife River Holding Company expects approximately 10% of Knife River Holding Company's common stock to be owned by MDU Resources at the time of separation.
|
3. |
Knife River Corporation, presented here as a subsidiary of Knife River Holding Company, historically held 538,921 shares of MDU Resources common stock, through a subsidiary. The historical shares are presented as Parent stock held by subsidiary. In connection with the separation, the subsidiary of Knife River Corporation will enter into an exchange agreement with MDU Resources to transfer, prior to the record date, the Parent stock held by subsidiary to MDU Resources in exchange for MDU Resources agreeing to transfer, on or before the distribution date, 451,859 shares of Knife River Holding Company common stock to the subsidiary of Knife River Corporation (such transactions, the "hook stock exchange"). Management assumed the historical Parent stock held by subsidiary of 538,921 shares of MDU Resources common stock at MDU's stock price as of April 30, 2023, to determine the estimated value of Knife River Holding Company common stock. Management assumed an estimated implied share price based on industry peer trading multiple data to determine the 451,859 shares of Knife River Holding Company that would be received in Treasury stock to the subsidiary of Knife River. The historical Parent stock held by subsidiary of $3,626 thousand reflects the value of the MDU Resources common stock at the time it was granted to the Knife River Corporation subsidiary and will remain at the historical value since the exchange is between related parties.
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Pro Forma
Year Ended December 31,
| | |
Historical
Years Ended December 31,
| |||||||
| |
2022
| | |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| ||||||||||
Results for Year: | | | | | | | | | ||||
Revenues
| | |
$2,534,729
| | |
$2,534,729
| | |
$2,228,930
| | |
$2,178,002
|
Gross profit
| | |
$347,274
| | |
$360,894
| | |
$346,949
| | |
$370,578
|
Gross margin
| | |
13.7 %
| | |
14.2 %
| | |
15.6 %
| | |
17.0 %
|
Net income
| | |
$72,916
| | |
$116,220
| | |
$129,755
| | |
$147,325
|
Net income margin
| | |
2.9 %
| | |
4.6 %
| | |
5.8 %
| | |
6.8 %
|
Other Data: | | | | | | | | | ||||
EBITDA
| | |
$278,278
| | |
$306,740
| | |
$293,406
| | |
$304,959
|
EBITDA margin
| | |
11.0%
| | |
12.1%
| | |
13.2%
| | |
14.0%
|
Adjusted EBITDA
| | |
$296,423
| | |
$313,413
| | |
$294,749
| | |
$304,290
|
Adjusted EBITDA margin
| | |
11.7%
| | |
12.4%
| | |
13.2%
| | |
14.0%
|
Balance Sheet Data: | | | | | | | | | ||||
Working capital
| | |
$527,687
| | |
$91,677
| | |
$185,429
| | | |
Total assets
| | |
2,505,750
| | |
2,294,319
| | |
2,181,824
| | | |
Total equity
| | |
1,027,460
| | |
1,028,589
| | |
952,844
| | |
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Pro Forma
Year Ended December 31,
| | |
Historical
Years Ended December 31,
| |||||||
| |
2022
| | |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| ||||||||||
Net income
| | |
$72,916
| | |
$116,220
| | |
$129,755
| | |
$147,325
|
Adjustments: | | | | | | | | | ||||
Income taxes
| | |
26,503
| | |
42,601
| | |
43,459
| | |
47,431
|
Depreciation, depletion and amortization
| | |
117,798
| | |
117,798
| | |
100,974
| | |
89,626
|
Interest
| | |
61,061
| | |
30,121
| | |
19,218
| | |
20,577
|
EBITDA
| | |
$278,278
| | |
$306,740
| | |
$293,406
| | |
$304,959
|
Unrealized (gains) losses on benefit plan investments
| | |
4,029
| | |
4,029
| | |
(2,294)
| | |
(4,026)
|
Stock-based compensation expense
| | |
4,098
| | |
2,644
| | |
3,637
| | |
3,357
|
One-time separation costs
| | |
10,018
| | |
-
| | |
-
| | |
-
|
Adjusted EBITDA
| | |
$296,423
| | |
$313,413
| | |
$294,749
| | |
$304,290
|
Revenues
| | |
$2,534,729
| | |
$2,534,729
| | |
$2,228,930
| | |
$2,178,002
|
Net income margin
| | |
2.9 %
| | |
4.6 %
| | |
5.8 %
| | |
6.8 %
|
EBITDA margin
| | |
11.0%
| | |
12.1%
| | |
13.2%
| | |
14.0%
|
Adjusted EBITDA margin
| | |
11.7%
| | |
12.4%
| | |
13.2%
| | |
14.0%
|
TABLE OF CONTENTS
•
|
The expected incurrence of indebtedness by Knife River Holding Company, in an aggregate principal capacity of up to $1.05 billion, consisting of Knife River Holding Company's $425 million 7.750% notes due 2031, the expected incurrence of $275 million in aggregate principal amount of term loans and the expected entry into a $350 million 5-Year Revolving Credit Facility, under which Knife River Holding Company expects to have $190 million in aggregate principal amount of loans outstanding as of the separation date based on projected seasonal borrowing needs, which fluctuate with the timing of the construction season and associated working capital requirements. Knife River Holding Company's expectation is that all or a portion of the net proceeds of such indebtedness will be used to repay debt owed to Centennial;
|
•
|
The issuance of 57,018,074 shares of common stock, of which 56,566,215 shares will be outstanding and approximately 90% will be distributed to MDU Resources' stockholders on a pro rata basis in connection with the separation. MDU Resources expects to retain approximately 10% of the outstanding shares of Knife River Holding Company common stock following the distribution;
|
•
|
The one-time transaction expenses associated with the separation of Knife River Holding Company;
|
•
|
Incremental costs expected to be incurred as an autonomous entity and specifically related to the separation;
|
•
|
Management adjustments which consist of reasonably estimated transaction effects related to synergies and dis-synergies expected to occur; and
|
•
|
The impact of, and transactions contemplated by, the separation and distribution agreement, the transition services agreement, the employee matters agreement, the stockholder and registration rights agreement and other transaction agreements described under "Certain Relationships and Related Person Transactions."
|
TABLE OF CONTENTS
TABLE OF CONTENTS
| |
Historical
(Note 1)
| | |
Transaction
Accounting
Adjustments
(Note 2)
| | | | |
Autonomous
Entity
Adjustments
(Note 3)
| | | | |
Pro Forma
| |||
| |
(In thousands, except per share amounts)
| ||||||||||||||||
Revenue: | | | | | | | | | | | | | ||||||
Construction materials
| | |
$1,347,008
| | |
$-
| | | | |
$-
| | | | |
$1,347,008
| ||
Contracting services
| | |
1,187,721
| | |
-
| | | | |
-
| | | | |
1,187,721
| ||
Total revenue
| | |
2,534,729
| | |
-
| | | | |
-
| | | | |
2,534,729
| ||
Cost of revenue: | | | | | | | | | | | | | ||||||
Construction materials
| | |
1,086,193
| | |
-
| | | | |
10,750
| | |
(K)
| | |
1,096,943
| |
Contracting services
| | |
1,087,642
| | |
-
| | | | |
2,870
| | |
(K)
| | |
1,090,512
| |
Total cost of revenue
| | |
2,173,835
| | |
-
| | | | |
13,620
| | | | |
2,187,455
| ||
Gross profit
| | |
360,894
| | |
-
| | | | |
(13,620)
| | | | |
347,274
| ||
| | | | | | | | | | | | |||||||
Selling, general and administrative expenses
| | |
166,599
| | |
747
| | |
(C)
| | |
15,379
| | |
(J),(K),(L)
| | |
182,725
|
Operating income
| | |
194,295
| | |
(747)
| | | | |
(28,999)
| | | | |
164,549
| ||
Interest expense
| | |
30,121
| | |
30,940
| | |
(B)
| | |
-
| | | | |
61,061
| |
Other (expense) income
| | |
(5,353)
| | |
-
| | | | |
1,284
| | |
(J)
| | |
(4,069)
| |
Income before income taxes
| | |
158,821
| | |
(31,687)
| | | | |
(27,715)
| | | | |
99,419
| ||
Income taxes
| | |
42,601
| | |
(8,587)
| | |
(E)
| | |
(7,511)
| | |
(M)
| | |
26,503
|
Net income
| | |
$116,220
| | |
$ (23,100)
| | | | |
$(20,204)
| | | | |
$72,916
| ||
| | | | | | | | | | | | |||||||
Unaudited Pro Forma Earnings Per Share | | | | | | | | | | | | | ||||||
Basic
| | |
$116,220.00
| | | | | | | | |
(H)
| | |
$1.29
| |||
Diluted
| | |
$116,220.00
| | | | | | | | |
(I)
| | |
$1.29
| |||
Average number of shares used in calculating Unaudited Pro Forma Earnings Per Share: | | | | | | | | | | | | | ||||||
Basic
| | |
1
| | | | | | | | |
(H)
| | |
56,566
| |||
Diluted
| | |
1
| | | | | | | | |
(I)
| | |
56,566
|
TABLE OF CONTENTS
| |
Historical
(Note 1)
| | |
Transaction
Accounting
Adjustments
(Note 2)
| | | | |
Autonomous
Entity
Adjustments
(Note 3)
| | | | |
Pro Forma
| |||
| |
(In thousands, except share and share amounts)
| ||||||||||||||||
Assets: | | | | | | | | | | | | | ||||||
Current assets: | | | | | | | | | | | | |||||||
Cash and cash equivalents
| | |
$10,090
| | |
$188,972
| | |
(A)
| | |
$22,232
| | |
(K)
| | |
$221,294
|
Receivables, net
| | |
210,157
| | |
9,972
| | |
(D)
| | |
-
| | | | |
220,129
| |
Costs and estimated earnings in excess of billings on uncompleted contracts
| | |
31,145
| | |
-
| | | | |
-
| | | | |
31,145
| ||
Due from related-party
| | |
16,050
| | |
(9,972)
| | |
(D)
| | |
(6,078)
| | |
(K)
| | |
-
|
Inventories
| | |
323,277
| | |
-
| | | | |
-
| | | | |
323,277
| ||
Prepayments and other current assets
| | |
17,848
| | |
-
| | | | |
-
| | | | |
17,848
| ||
Total current assets
| | |
$608,567
| | |
$188,972
| | | | |
$16,154
| | | | |
$813,693
| ||
| | | | | | | | | | | | |||||||
Noncurrent assets | | | | | | | | | | | | | ||||||
Net property, plant, and equipment
| | |
$1,315,213
| | |
$-
| | | | |
$-
| | | | |
$1,315,213
| ||
Goodwill
| | |
274,540
| | |
-
| | | | |
-
| | | | |
274,540
| ||
Other intangible assets, net
| | |
13,430
| | |
-
| | | | |
-
| | | | |
13,430
| ||
Operating lease right-of-use assets
| | |
45,873
| | |
-
| | | | |
-
| | | | |
45,873
| ||
Investments and other
| | |
36,696
| | |
6,305
| | |
(A),(C)
| | |
-
| | | | |
43,001
| |
Total noncurrent assets
| | |
1,685,752
| | |
6,305
| | | | |
-
| | | | |
1,692,057
| ||
Total assets
| | |
$2,294,319
| | |
$195,277
| | | | |
$16,154
| | | | |
$ 2,505,750
| ||
| | | | | | | | | | | | |||||||
Liabilities and Stockholder's Equity: | | | | | | | | | | | | | ||||||
Current liabilities: | | | | | | | | | | | | | ||||||
Long-term debt - current portion
| | |
$211
| | |
$-
| | | | |
$-
| | | | |
$211
| ||
Related-party notes payable - current portion
| | |
238,000
| | |
(238,000)
| | |
(A)
| | |
-
| | | | |
-
| |
Accounts payable
| | |
87,370
| | |
16,209
| | |
(D)
| | |
-
| | | | |
103,579
| |
Billings in excess of costs and estimated earnings on uncompleted contracts
| | |
39,843
| | |
-
| | | | |
-
| | | | |
39,843
| ||
Accrued compensation
| | |
29,192
| | |
-
| | | | |
-
| | | | |
29,192
| ||
Due to related-party
| | |
20,286
| | |
(20,286)
| | |
(D)
| | |
-
| | | | |
-
| |
Current operating lease liabilities
| | |
13,210
| | |
-
| | | | |
-
| | | | |
13,210
| ||
Other accrued liabilities
| | |
88,778
| | |
4,983
| | |
(C), (D)
| | |
6,210
| | |
(K)
| | |
99,971
|
Total current liabilities
| | |
$516,890
| | |
$(237,094)
| | | | |
$6,210
| | | | |
$286,006
| ||
Noncurrent Liabilities | | | | | | | | | | | | | ||||||
Long-term debt
| | |
$427
| | |
$878,778
| | |
(A)
| | |
$-
| | | | |
$879,205
| |
Related-party notes payable
| | |
446,449
| | |
(446,449)
| | |
(A)
| | |
-
| | | | |
-
| |
Deferred income taxes
| | |
175,804
| | |
-
| | | | |
-
| | | | |
175,804
| ||
Noncurrent operating lease liabilities
| | |
32,663
| | |
-
| | | | |
-
| | | | |
32,663
| ||
Other
| | |
93,497
| | |
1,171
| | |
(C)
| | |
9,944
| | |
(K)
| | |
104,612
|
Total liabilities
| | |
$1,265,730
| | |
$196,406
| | | | |
$16,154
| | | | |
$ 1,478,290
| ||
Commitments and contingencies | | | | | | | | | | | | | ||||||
Stockholder's equity: | | | | | | | | | | | | | ||||||
Common stock, $10 par value; 80,000 shares authorized, issued and outstanding
| | |
$-
| | |
$-
| | | | |
$-
| | | | |
$-
| ||
Common stock, $0.01 par value; 300,000,000 shares authorized, 57,018,074 shares issued, and 56,566,215 shares outstanding on a pro forma basis
| | |
-
| | |
566
| | |
(F)
| | |
-
| | | | |
566
| |
Other paid-in capital
| | |
549,906
| | |
(1,695)
| | |
(C),(F),(G)
| | |
-
| | | | |
548,211
| |
Retained earnings
| | |
494,661
| | |
-
| | | | |
-
| | | | |
494,661
| ||
Parent stock held by subsidiary
| | |
(3,626)
| | |
3,626
| | |
(G)
| | |
-
| | | | |
-
| |
Treasury stock at cost - 451,859 shares
| | |
-
| | |
(3,626)
| | |
(G)
| | |
-
| | | | |
(3,626)
| |
Accumulated other comprehensive loss
| | |
(12,352)
| | |
-
| | | | |
-
| | | | |
(12,352)
| ||
Total stockholder's equity
| | |
$1,028,589
| | |
$(1,129)
| | | | |
$-
| | | | |
$1,027,460
| ||
Total liabilities and stockholder's equity
| | |
$2,294,319
| | |
$195,277
| | | | |
$16,154
| | | | |
$2,505,750
|
TABLE OF CONTENTS
A. |
Reflects the issuance by Knife River Holding Company of $425 million in aggregate principal amount of its 7.750% notes due 2031, and the expected incurrence of term loans by Knife River Holding Company in an aggregate principal amount of $275 million. The debt maturities are expected to range from five years to eight years with an estimated weighted average interest rate of approximately 7.3 percent. Total deferred debt issuance costs associated with such indebtedness are estimated to be $11,222 thousand, which will be amortized to Interest expense over the terms of the respective instruments and are reflected as a reduction to Long-term debt. It is expected that Knife River will use all or a portion of the net proceeds of such indebtedness to repay its outstanding indebtedness with Centennial of $238 million that is reflected as Related-party notes payable - current portion and $446,449 thousand reflected as Related-party notes payable on the historical audited consolidated balance sheet as of December 31, 2022. |
B. |
Reflects the addition of estimated interest expense and amortization of deferred debt issuance costs related to the debt issuances described in note (A) above and the estimated interest expense and deferred debt issuance cost impact of the settlement of indebtedness with Centennial. Interest expense associated with the term loans and other debt was calculated assuming constant debt levels throughout the period. Interest expense associated with the revolving credit facility was calculated using management's best estimate of seasonal utilization needs throughout the period. Interest expense associated with the settlement of indebtedness with Centennial was calculated based on historical interest expense incurred for the year ended December 31, 2022. A 0.125 percentage point change to the annual interest rate on the new indebtedness would change interest expense by approximately $446 thousand for the year ended December 31, 2022. Refer to the below table for further details on specific adjustments:
|
| |
Year ended December 31, 2022
| |
| |
(In thousands)
| |
Interest expense on new debt
| | |
$ 57,068
|
Amortization of deferred debt issuance costs on new debt
| | |
2,790
|
Expense on undrawn revolving credit facility balance
| | |
1,005
|
Less interest expense on Centennial debt
| | |
29,440
|
Less amortization of deferred debt costs on Centennial debt
| | |
483
|
Total interest expense
| | |
$ 30,940
|
TABLE OF CONTENTS
C. |
Reflects $948 thousand in Investments and other, $906 thousand in Other accrued liabilities and $1,171 thousand in Noncurrent liabilities - other with respect to additional employee-related obligations and associated assets of active employees expected to be transferred from MDU Resources to Knife River Holding Company prior to the separation. These assets and liabilities primarily relate to vacation accruals, the Supplemental Income Security Plan (SISP), Deferred Compensation Plan, Nonqualified Defined Contribution Plan and Retiree Reimbursement Account. The amounts in this adjustment are incremental to the assets and liabilities included in the historical audited consolidated balance sheet as they relate to employees who were not historically Knife River employees or the associated assets or liabilities were not attributed ratably to Knife River. Expenses associated with the active employees who will be transferred from MDU Resources to Knife River Holding Company were estimated to be $747 thousand, and are recorded in Selling, general and administrative expenses for the year ended December 31, 2022.
|
D. |
Reflects the reclassification of certain transactions historically included in related-party accounts to the appropriate third-party accounts based on the nature of the transaction, as of December 31, 2022.
|
| |
Year ended December 31, 2022
| |
| |
(In thousands)
| |
Related-party Accounts | | | |
Due from related-party
| | |
$(9,972)
|
Due to related-party
| | |
(20,286)
|
Total
| | |
$(30,258)
|
| | ||
Third-party Accounts | | | |
Receivables, net
| | |
$9,972
|
Accounts payable
| | |
16,209
|
Other accrued liabilities
| | |
4,077
|
Total
| | |
$30,258
|
E. |
Reflects the income tax impact of the transaction pro forma adjustments for the year ended December 31, 2022. This adjustment was calculated by applying the statutory federal income tax rate of 21.0% and state income tax rate of 6.1% to each of the pre-tax pro forma adjustments. The applicable tax rates could be impacted (either higher or lower) depending on certain factors subsequent to the separation including the legal entity structure implemented and may be materially different from the pro forma results. The estimated pro forma tax reduction is $8,587 thousand for the year ended December 31, 2022.
|
F. |
Reflects the issuance of 57,018,074 shares of Knife River Holding Company common stock with a par value of $0.01 per share on a pro forma basis pursuant to the separation and distribution agreement. Knife River Holding Company has assumed the number of issued and outstanding shares on a pro forma basis based on, among other things, (i) 203,638,373 shares of MDU Resources common stock outstanding as of April 30, 2023, (ii) the distribution ratio on the basis of one share of Knife River Holding Company common stock distributed for every four shares of MDU Resources common stock outstanding, (iii) a distribution of approximately 90% of the outstanding shares of Knife River Holding Company common stock to MDU Resources stockholders, on a pro rata basis and (iv) the hook stock exchange (as defined in the "Capitalization" section).The number of shares shown outstanding on a pro forma basis and the amount used to calculate pro forma earnings per share differs from the shares issued on a pro forma basis due to the 451,859 hook stock shares retained as Treasury stock, the details of which are outlined in adjustment G. The actual number of shares issued and outstanding will not be known until the record date for the distribution. Knife River Holding Company expects approximately 10% of Knife River Holding Company's common stock to be owned by MDU Resources at the time of separation.
|
TABLE OF CONTENTS
G. |
Knife River Corporation, presented here as a subsidiary of Knife River Holding Company, has historically held 538,921 shares of MDU Resources common stock, through a subsidiary. The historical shares are presented as Parent stock held by subsidiary. In connection with the separation, the subsidiary of Knife River Corporation will enter into an exchange agreement with MDU Resources to transfer, prior to the record date, the Parent stock held by subsidiary to MDU Resources in exchange for MDU Resources agreeing to transfer, on or before the distribution date, 451,859 shares of Knife River Holding Company common stock to the subsidiary of Knife River Corporation. Management assumed the historical Parent stock held by subsidiary of 538,921 shares of MDU Resources common stock at MDU's stock price as of April 30, 2023, to determine the estimated value of Knife River Holding Company common stock. Management assumed an estimated implied share price based on industry peer trading multiple data to determine the 451,859 shares of Knife River Holding Company that would be received in Treasury stock to the subsidiary of Knife River. The historical Parent stock held by subsidiary of $3,626 thousand reflects the value of the MDU Resources common stock at the time it was granted to Knife River Corporation subsidiary and will remain at the historical value since the exchange is between related parties.
|
H. |
The weighted-average number of shares used to compute pro forma basic earnings per share for the year ended December 31, 2022, is 56,566,215, on the basis of one share of Knife River Holding Company's common stock for every four shares of MDU Resources common stock outstanding as of April 30, 2023, and the approximately 10% interest in the outstanding shares of Knife River Holding Company's common stock that Knife River Holding Company expects will be owned by MDU Resources at the time of separation.
|
I. |
The weighted-average number of shares used to compute pro forma diluted earnings per share for year ended December 31, 2022, is 56,566,215, which represents the number of shares expected to be outstanding in connection with the separation. The actual dilutive effect following the completion of the separation will depend on various factors, including employees who may change employment between MDU Resources and Knife River Holding Company and the impact of MDU Resources and Knife River Holding Company equity-based compensation agreements. At this time, management cannot estimate the dilutive effects.
|
J. |
Reflects the effect of transition services agreements and associated reverse transition services agreements Knife River Holding Company intends to enter into with MDU Resources over a twelve month period following the separation. Knife River Holding Company will incur incremental expenses and income above the previous allocation of MDU Resources corporate costs related to financial reporting, tax, legal, risk management, human resources, information technology and other general and administrative functions. The adjustment related to services to be provided to Knife River Holding Company by MDU Resources of $6,082 thousand is recorded in Selling, general and administrative expenses and income related to services provided to MDU Resources by Knife River Holding Company of $1,284 thousand is recorded in Other (expense) income for the year ended December 31, 2022. However, actual incremental costs that will be incurred will depend on the results of contractual negotiations with MDU Resources, the ability to execute on proposed separation plans and the continuing assessment of resource needs for Knife River Holding Company to operate as a stand-alone company.
|
K. |
Reflects the establishment of new insurance coverage of certain liabilities, including but not limited to certain workers' compensation, auto liability, and general liability insurance through the creation of a new captive insurance entity as a stand-alone business that will become a subsidiary of Knife River Holding Company. The newly formed captive insurance entity will receive certain assets and liabilities to cover the actuarial estimated costs of known and unknown insured casualty claims of Knife River Holding Company. InterSource Insurance Company, a subsidiary of MDU Resources, will transfer $22,232 thousand of Cash and cash equivalents and liabilities of $6,210 thousand and $9,944 thousand recorded in Other accrued liabilities and Noncurrent liabilities - other, respectively. Knife River
|
TABLE OF CONTENTS
L. |
Reflects $4,335 thousand in Selling, general and administrative expenses for the year ended December 31, 2022 related to the net impact of new compensation agreements for the establishment of the Knife River Holding Company's executive management team. This adjustment primarily relates to costs for increases in salaries, bonuses and stock-based compensation.
|
M. |
Reflects the income tax impact of the autonomous entity pro forma adjustments for the year ended December 31, 2022. This adjustment was primarily calculated by applying the statutory federal income tax rate of 21.0% and state income tax rate of 6.1% to each of the pre-tax pro forma adjustments. The applicable tax rates could be impacted (either higher or lower) depending on certain factors subsequent to the separation including the legal entity structure implemented and may be materially different from the pro forma results. The estimated pro forma tax reduction is $7,511 thousand for the year ended December 31, 2022.
|
•
|
one-time and non-recurring expenses associated with separation and stand-up functions required to operate as a stand-alone public entity. These non-recurring costs primarily relate to credit rating agency fees, third-party consulting services for captive insurance structuring, new employee benefit plans, and new software; and
|
•
|
recurring and ongoing costs required to operate new functions as a public company such as governance and listing costs, continuing stock and rating agency fees, fees associated with proxy and other public company disclosures and information technology costs.
|
TABLE OF CONTENTS
| |
Net income (loss)
| | |
Basic earnings
per share
| | |
Diluted earnings
per share
| |
| |
(in thousands except share and per share amounts)
| |||||||
Unaudited pro forma consolidated net income* | | |
$72,916
| | |
$1.29
| | |
$1.29
|
Management adjustments
| | | | | | | |||
Dis-synergies
| | |
(11,314)
| | |
(0.20)
| | |
(0.20)
|
Synergies
| | |
4,236
| | |
0.07
| | |
0.07
|
Tax effect
| | |
1,918
| | |
0.03
| | |
0.03
|
Unaudited pro forma consolidated net income after management adjustments
| | |
$67,756
| | |
$1.19
| | |
$1.19
|
Weighted-average common shares outstanding - basic
| | |
56,566,215
| | | | | ||
Weighted-average common shares outstanding - diluted
| | |
56,566,215
| | | | |
* |
As shown in the Unaudited Pro Forma Consolidated Statement of Income
|
TABLE OF CONTENTS
TABLE OF CONTENTS
| |
Pacific
| | |
Northwest
| | |
Mountain
| | |
North Central
| | |
All Other
| | |
Consolidated
Knife River
| |
States of Operation | | |
Alaska,
California
and
Hawaii
| | |
Oregon
and
Washington
| | |
Idaho,
Montana
and
Wyoming
| | |
Iowa,
Minnesota,
North Dakota
and
South Dakota
| | |
Iowa,
Nebraska,
South Dakota,
Texas
and
Wyoming
| | | |
Aggregate Reserves (tons) | | |
165.2 million
| | |
506.9 million
| | |
222.0 million
| | |
133.4 million
| | |
78.5 million
| | |
1.1 billion
|
Properties: | | | | | | | | | | | | | ||||||
Aggregate Sites* | | |
17
| | |
51
| | |
36
| | |
81
| | |
6
| | |
191
|
Ready-Mix Plants | | |
18
| | |
24
| | |
17
| | |
36
| | |
6
| | |
101
|
Asphalt Plants | | |
4
| | |
13
| | |
19
| | |
18
| | |
2
| | |
56
|
Revenue | | |
$568.3 million
| | |
$704.4 million
| | |
$652.0 million
| | |
$809.9 million
| | |
$394.0 million
| | |
$3.1 billion
|
Revenue Composition: | | | | | | | | | | | | | ||||||
Construction Materials | | |
77%
| | |
63%
| | |
43%
| | |
56%
| | |
82%
| | |
62%
|
Contracting Services | | |
23%
| | |
37%
| | |
57%
| | |
44%
| | |
18%
| | |
38%
|
Public-Sector Services | | |
63%
| | |
66%
| | |
68%
| | |
96%
| | |
99%
| | |
77%
|
Private-Sector Services | | |
37%
| | |
34%
| | |
32%
| | |
4%
| | |
1%
| | |
23%
|
3 Year Revenue Compound Annual Growth Rate** | | |
0.79%
| | |
12.44%
| | |
7.14%
| | |
2.86%
| | |
0.52%
| | |
4.98%
|
* |
Includes 188 active sites and three that are classified as exploration stage properties.
|
** |
Includes the effects of recent acquisitions.
|
TABLE OF CONTENTS
(1) |
Leading vertically integrated, aggregates-based construction materials and contracting provider.
|
(2) |
Attractive geographic footprint across the western U.S. with exposure to areas demonstrating above-average growth.
|
TABLE OF CONTENTS
(3) |
Diverse public and private customer base.
|
(4) |
Large exposure to public-sector customers, providing recession resiliency amidst soft macro environment.
|
•
|
California. The Road Repair and Accountability Act (passed in 2017) invests $54 billion over 10 years in public infrastructure.
|
•
|
Oregon. The Keep Oregon Moving transportation funding package (passed in 2017) raises $5.3 billion over 10 years.
|
•
|
Texas. The Unified Transportation Program (passed in 2022) advances $85 billion in transportation funding over 10 years.
|
•
|
Washington. Move Ahead Washington (passed in 2022) provides $3 billion for public transportation over the next 16 years.
|
•
|
Idaho. The Leading Idaho funding bill (passed in 2022) directs $400 million to road and bridge maintenance.
|
(5) |
Strong backlog and robust pipeline of projects across public and private infrastructure end markets.
|
TABLE OF CONTENTS
•
|
Hill County FM Road 308. Knife River removed and replaced three bridge structures and widened the roadway at each structure near Malone, Texas, for the Texas Department of Transportation.
|
•
|
Heimann Cancer Center. Knife River provided ready-mix concrete for three-foot-thick walls and a three-foot- thick roof in Medford, Oregon, for ASANTE Rogue Regional Medical Center.
|
•
|
Confidential Data Centers. Knife River is providing precast design, drafting, fabrication and installation of precast concrete wall panels at multiple data and fulfillment centers throughout the Northwest.
|
•
|
Missoula International Airport. Knife River was the general contractor for a new airport terminal site, access road and apron expansion in Missoula, Montana.
|
•
|
Sanford Sports Complex. Knife River performed the site preparation and grading for 18 synthetic-turf sports fields in Sioux Falls, South Dakota. It also prepared and paved accompanying parking lots at the facility.
|
•
|
Butte County Skyway Rehabilitation. Knife River placed 100,000 tons of asphalt to rehabilitate roadway damaged during the Camp Fire near the town of Paradise, California.
|
(6) |
Resilient financial profile with robust free cash flows.
|
(7) |
Proven track record of growth through acquisition and highly effective integration playbook, driving both organic and inorganic growth.
|
TABLE OF CONTENTS
(8) |
Best-in-class management team with a long history of operating success and integration.
|
a. |
People. Knife River takes care of its team by providing them the tools, training and time to perform their work safely and successfully, by providing competitive wages and benefits, and by providing a safe and respectful work environment. The Company's "One Team: Stronger Together" initiative provides training and awareness for employees that Knife River embraces the diverse backgrounds and viewpoints of its team members, in an effort to keep learning from one another so the Company can keep improving.
|
b. |
Safety. Safety is a core value to Knife River on every task, every time, every day. Knife River strives to achieve world-class safety standards because it genuinely cares about the wellbeing of its employees and recognizes the bottom-line benefits of being a safe company. The Company focuses on the three Ts of safety: Tools, Training and Time. Knife River provides employees with the tools and training to safely and successfully perform their jobs, and asks that employees take the time to do their jobs safely.
|
c. |
Quality. Knife River delivers consistent, high-quality products and services to its customers and is committed to quality in all it does. Knife River stands behind its work and embraces innovation.
|
d. |
Environment. Knife River continuously manages its impact on the environment to minimize its footprint and keep its states beautiful for future generations.
|
TABLE OF CONTENTS
TABLE OF CONTENTS
•
|
Key economic factors. Many factors affect product demand, including public spending on roads and infrastructure projects, general economic conditions, including population growth and employment levels, and prevailing interest rates.
|
•
|
Location and transportation. Construction materials are expensive to transport due to low value-to-weight ratios, so they are generally produced and delivered locally or regionally. Access to well-positioned reserves is critical.
|
•
|
Vertical integration. Market participants that operate a vertically integrated business model can access certain efficiencies that lead to reduced product costs and other benefits for customers, including greater reliability of supply.
|
•
|
Industry fragmentation. There are thousands of construction materials producers of varying scope and size. Market participants may enter new geographies or expand existing positions through the acquisition of existing facilities.
|
•
|
Seasonality. Activity in certain areas are seasonal due to the effects of weather. Most of the production and sales of materials and related services in the northern U.S. occurs between May and October, in line with end market activity.
|
•
|
Cyclicality. The demand for construction materials products and contracting services is significantly influenced by the cyclical nature of the economy.
|
•
|
Regulations. Environmental and zoning approvals are often required for the development and expansion of facilities.
|
•
|
Production inputs. Cost and availability of energy, labor and other inputs can vary over time based on macroeconomic factors and impact profitability of operations.
|
TABLE OF CONTENTS
TABLE OF CONTENTS
Revenue
| | |
($ in millions)
| | |
(% of total)
| | |
Gross Profit
| | |
($ in millions)
| | |
(% of total)
|
Aggregates
| | |
$496.6
| | |
16%
| | |
Aggregates
| | |
$69.6
| | |
19%
|
Ready-mix concrete
| | |
609.5
| | |
19%
| | |
Ready-mix concrete
| | |
85.9
| | |
24%
|
Asphalt
| | |
427.5
| | |
14%
| | |
Asphalt
| | |
41.7
| | |
11%
|
Other
| | |
407.3
| | |
13%
| | |
Other
| | |
63.6
| | |
18%
|
Contracting services
| | |
1,187.7
| | |
38%
| | |
Contracting services
| | |
100.1
| | |
28%
|
Total gross revenue
| | |
$3,128.6
| | |
100%
| | | | | | | |||
Internal sales
| | |
(593.9)
| | |
-
| | | | | | | |||
Total revenue
| | |
$2,534.7
| | |
-
| | |
Total gross profit
| | |
$360.9
| | |
100%
|
Segment
| | |
Plants
| | |
Mixer Trucks
|
Pacific
| | |
18
| | |
177
|
Northwest
| | |
24
| | |
227
|
Mountain
| | |
17
| | |
213
|
North Central
| | |
36
| | |
277
|
All Other
| | |
6
| | |
54
|
Total
| | |
101
| | |
948
|
TABLE OF CONTENTS
Segment
| | |
Non-portable
Asphalt Plants
| | |
Portable
Asphalt Plants
| | |
Total
Asphalt Plants
|
Pacific
| | |
4
| | |
-
| | |
4
|
Northwest
| | |
11
| | |
2
| | |
13
|
Mountain
| | |
11
| | |
8
| | |
19
|
North Central
| | |
6
| | |
12
| | |
18
|
All Other
| | |
2
| | |
-
| | |
2
|
Total
| | |
34
| | |
22
| | |
56
|
TABLE OF CONTENTS
Public
| | | | |
Private
| | | ||
Streets & Highways
| | |
61%
| | |
Residential
| | |
8%
|
Airports
| | |
6%
| | |
Buildings/Sitework
| | |
5%
|
Marine
| | |
2%
| | |
Streets & Highways
| | |
3%
|
Bridges
| | |
4%
| | |
Other
| | |
7%
|
Other
| | |
4%
| | | | | ||
Total
| | |
77%
| | |
Total
| | |
23%
|
TABLE OF CONTENTS
TABLE OF CONTENTS
| |
Total Annual
Aggregate Production
| ||||
Production Area
| | |
Crushed Stone
| | |
Sand & Gravel
|
| |
(Tons in thousands)
| ||||
Pacific
| | |
1,847
| | |
2,706
|
Northwest
| | |
6,882
| | |
4,017
|
Mountain
| | |
1,171
| | |
6,425
|
North Central
| | |
2,253
| | |
5,534
|
All Other
| | |
1,181
| | |
166
|
Total
| | |
13,334
| | |
18,848
|
TABLE OF CONTENTS
| |
Aggregate Sites
| ||||||||||
Production Area
| | |
Crushed Stone
| | |
Sand & Gravel
| ||||||
| |
Owned
| | |
Leased
| | |
Owned
| | |
Leased
| |
Pacific
| | |
-
| | |
7
| | |
9
| | |
1
|
Northwest
| | |
11
| | |
12
| | |
19
| | |
9
|
Mountain
| | |
2
| | |
7
| | |
18
| | |
9
|
North Central
| | |
5
| | |
1
| | |
52
| | |
23
|
All Other
| | |
4
| | |
1
| | |
1
| | |
-
|
Total
| | |
22
| | |
28
| | |
99
| | |
42
|
| | | |
Crushed Stone
| | |
Sand & Gravel
| | | |||||||||||||||
Production Area
| | |
Aggregate
Sites
| | |
Proven
Mineral
Reserves
| | |
Probable
Mineral
Reserves
| | |
Total
Mineral
Reserves
| | |
Proven
Mineral
Reserves
| | |
Probable
Mineral
Reserves
| | |
Total
Mineral
Reserves
| | |
Total
Mineral
Reserves
|
| |
(Tons in thousands)
| ||||||||||||||||||||||
Pacific
| | |
16
| | |
132,877
| | |
662
| | |
133,539
| | |
31,612
| | |
-
| | |
31,612
| | |
165,151
|
Northwest
| | |
49
| | |
361,217
| | |
14,046
| | |
375,263
| | |
118,209
| | |
13,477
| | |
131,686
| | |
506,949
|
Mountain
| | |
36
| | |
77,125
| | |
11,582
| | |
88,707
| | |
98,182
| | |
35,061
| | |
133,243
| | |
221,950
|
North Central
| | |
81
| | |
45,559
| | |
3,000
| | |
48,559
| | |
69,546
| | |
15,300
| | |
84,846
| | |
133,405
|
All Other
| | |
6
| | |
65,451
| | |
4,691
| | |
70,142
| | |
8,368
| | |
-
| | |
8,368
| | |
78,510
|
Total
| | |
188
| | |
682,229
| | |
33,981
| | |
716,210
| | |
325,917
| | |
63,838
| | |
389,755
| | |
1,105,965
|
* |
The average selling price per ton for crushed stone and sand and gravel was $16.12 and $10.53, respectively, in 2022. The average selling price includes freight and delivery and other revenues.
|
** |
The aggregates mined are of suitable grade and quality to be used as construction materials and no further grade or quality disclosure is applicable.
|
| | | |
Sand & Gravel
| |||||||||||
Production Area
| | |
Aggregate
Sites
| | |
Measured
Mineral
Resources
| | |
Indicated
Mineral
Resources
| | |
Measured +
Indicated
Mineral
Resources
| | |
Inferred
Mineral
Resources
|
| |
(Tons in thousands)
| |||||||||||||
Pacific
| | |
1
| | |
14,673
| | |
-
| | |
14,673
| | |
-
|
Northwest
| | |
2
| | |
41,727
| | |
-
| | |
41,727
| | |
-
|
Mountain
| | |
-
| | |
11,500
| | |
-
| | |
11,500
| | |
-
|
North Central
| | |
-
| | |
-
| | |
-
| | |
-
| | |
373
|
Total
| | |
3
| | |
67,900
| | |
-
| | |
67,900
| | |
373
|
* |
Mountain and North Central each have a site that includes both reserves and resources, which are included in the aggregate sites for reserves.
|
TABLE OF CONTENTS
TABLE OF CONTENTS
•
|
Pacific: Alaska, California and Hawaii
|
•
|
Northwest: Oregon and Washington
|
•
|
Mountain: Idaho, Montana and Wyoming
|
•
|
North Central: Iowa, Minnesota, North Dakota and South Dakota
|
•
|
All Other: Iowa, Nebraska, South Dakota, Texas and Wyoming
|
TABLE OF CONTENTS
| |
Product and services
| | |
Modes of transportation
| ||||||||||||||||||||||||||||
| |
Aggregates
| | |
Asphalt
| | |
Ready-
mix
concrete
| | |
Contracting
services
| | |
Precast/
prestressed
concrete
| | |
Liquid
asphalt
| | |
Cement
| | |
Heavy
equipment
| | |
Trucking
| | |
Rail
| | |
Barge
| |
Pacific
| | |
X
| | |
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
| | | | | |||||
North Central
| | |
X
| | |
X
| | |
X
| | |
X
| | |
X
| | | | | | |
X
| | |
X
| | |
X
| | | |||
All Other
| | |
X
| | |
X
| | |
X
| | |
X
| | | | |
X
| | | | |
X
| | |
X
| | |
X
| | |
X
|
TABLE OF CONTENTS
December 31,
| | |
2022
| | |
2021
| | |
2020
|
| |
(In millions)
| |||||||
Pacific
| | |
$99.5
| | |
$89.3
| | |
$137.3
|
Northwest
| | |
210.7
| | |
108.0
| | |
85.8
|
Mountain
| | |
313.5
| | |
208.5
| | |
200.7
|
North Central
| | |
147.3
| | |
154.5
| | |
89.1
|
All Other
| | |
164.4
| | |
147.4
| | |
160.2
|
Total
| | |
$935.4
| | |
$707.7
| | |
$673.1
|
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
| | |
2022 vs 2021
% change
| | |
2021 vs 2020
% change
|
| |
(In millions)
| | | | | |||||||||
Revenue
| | |
$2,534.7
| | |
$2,228.9
| | |
$2,178.0
| | |
14%
| | |
2%
|
Cost of revenue
| | |
2,173.8
| | |
1,881.9
| | |
1,807.4
| | |
16%
| | |
4%
|
Gross profit
| | |
360.9
| | |
347.0
| | |
370.6
| | |
4%
| | |
(6)%
|
Selling, general and administrative expenses
| | |
166.6
| | |
155.9
| | |
156.1
| | |
7%
| | |
- %
|
Operating income
| | |
194.3
| | |
191.1
| | |
214.5
| | |
2%
| | |
(11)%
|
Interest expense
| | |
30.1
| | |
19.2
| | |
20.6
| | |
57%
| | |
(7)%
|
Other (expense) income
| | |
(5.4)
| | |
1.3
| | |
.8
| | |
(515)%
| | |
63%
|
Income before income taxes
| | |
158.8
| | |
173.2
| | |
194.7
| | |
(8)%
| | |
(11)%
|
Income taxes
| | |
42.6
| | |
43.4
| | |
47.4
| | |
(2)%
| | |
(8)%
|
Net income
| | |
$116.2
| | |
$129.8
| | |
$147.3
| | |
(10)%
| | |
(12)%
|
EBITDA
| | |
$306.7
| | |
$293.4
| | |
$305.0
| | |
5%
| | |
(4)%
|
Adjusted EBITDA
| | |
$313.4
| | |
$294.7
| | |
$304.3
| | |
6%
| | |
(3)%
|
TABLE OF CONTENTS
| |
Revenues
| | |
Gross profit
| | |
EBITDA
| |||||||||||||||||||
| |
2022
| | |
2021
| | |
2020
| | |
2022
| | |
2021
| | |
2020
| | |
2022
| | |
2021
| | |
2020
| |
| |
(In millions)
| |||||||||||||||||||||||||
Pacific
| | |
$468.6
| | |
$427.3
| | |
$454.4
| | |
$67.8
| | |
$74.1
| | |
$90.0
| | |
$55.8
| | |
$67.1
| | |
$79.1
|
Northwest
| | |
600.2
| | |
478.0
| | |
416.2
| | |
106.4
| | |
87.5
| | |
79.8
| | |
103.9
| | |
80.6
| | |
74.4
|
Mountain
| | |
542.0
| | |
479.6
| | |
450.9
| | |
77.5
| | |
71.2
| | |
62.9
| | |
72.6
| | |
65.0
| | |
52.4
|
North Central
| | |
608.0
| | |
561.8
| | |
570.8
| | |
71.8
| | |
79.7
| | |
81.0
| | |
65.0
| | |
72.3
| | |
71.7
|
All Other
| | |
353.1
| | |
317.4
| | |
325.9
| | |
37.4
| | |
34.5
| | |
56.9
| | |
9.4
| | |
8.4
| | |
27.4
|
Intersegment eliminations
| | |
(37.2)
| | |
(35.2)
| | |
(40.2)
| | |
-
| | |
-
| | |
-
| | |
-
| | |
-
| | |
-
|
Total
| | |
$2,534.7
| | |
$2,228.9
| | |
$2,178.0
| | |
$360.9
| | |
$347.0
| | |
$370.6
| | |
$306.7
| | |
$293.4
| | |
$305.0
|
| |
Revenues
| | |
Gross margin
| |||||||||||||
| |
2022
| | |
2021
| | |
2020
| | |
2022
| | |
2021
| | |
2020
| |
| | | | | |
(In millions)
| | | | | ||||||||
| | | | | | | | | | | | |||||||
Aggregates
| | |
$496.6
| | |
$444.0
| | |
$406.6
| | |
14.0%
| | |
13.6%
| | |
15.4%
|
Ready-mix concrete
| | |
609.5
| | |
584.4
| | |
547.0
| | |
14.1%
| | |
13.9%
| | |
13.6%
|
Asphalt
| | |
427.5
| | |
339.8
| | |
349.9
| | |
9.8%
| | |
11.9%
| | |
13.0%
|
Other*
| | |
407.3
| | |
344.3
| | |
356.3
| | |
15.6%
| | |
18.6%
| | |
23.2%
|
Contracting services
| | |
1,187.7
| | |
1,017.5
| | |
1,069.7
| | |
8.4%
| | |
9.9%
| | |
9.9%
|
Internal sales
| | |
(593.9)
| | |
(501.1)
| | |
(551.5)
| | |
- %
| | |
-%
| | |
-%
|
Total
| | |
$2,534.7
| | |
$2,228.9
| | |
$2,178.0
| | |
14.2%
| | |
15.6%
| | |
17.0%
|
* |
Other includes cement, liquid asphalt, merchandise, fabric, spreading and other products and services that individually are not considered to be a major line of business for the segment.
|
| |
2022
| | |
2021
| | |
2020
| |
Sales (thousands): | | | | | | | |||
Aggregates (tons)
| | |
33,994
| | |
33,518
| | |
30,949
|
Ready-mix concrete (cubic yards)
| | |
4,015
| | |
4,267
| | |
4,087
|
Asphalt (tons)
| | |
7,254
| | |
7,101
| | |
7,202
|
Average selling price: | | | | | | | |||
Aggregates (per ton)*
| | |
$14.61
| | |
$13.25
| | |
$13.14
|
Ready-mix concrete (per cubic yard)
| | |
$151.80
| | |
$136.94
| | |
$133.86
|
Asphalt (per ton)
| | |
$58.93
| | |
$47.86
| | |
$48.58
|
* |
The average selling price includes freight and delivery and other revenues.
|
TABLE OF CONTENTS
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
| | |
2022 vs 2021
% change
| | |
2021 vs 2020
% change
|
| |
(Dollars in millions)
| | | | | |||||||||
Revenue
| | |
$468.6
| | |
$427.3
| | |
$454.4
| | |
10%
| | |
(6)%
|
Gross profit
| | |
$67.8
| | |
$74.1
| | |
$90.0
| | |
(9)%
| | |
(18)%
|
Gross margin
| | |
14.5%
| | |
17.3%
| | |
19.8%
| | | | | ||
EBITDA
| | |
$55.8
| | |
$67.1
| | |
$79.1
| | |
(17)%
| | |
(15)%
|
EBITDA margin
| | |
11.9%
| | |
15.7%
| | |
17.4%
| | | | |
TABLE OF CONTENTS
| |
Revenues
| |||||||
| |
2022
| | |
2021
| | |
2020
| |
| |
(In millions)
| |||||||
Operating results | | | | | | | |||
Aggregates
| | |
$92.3
| | |
$89.9
| | |
$88.0
|
Ready-mix concrete
| | |
127.6
| | |
123.9
| | |
134.7
|
Asphalt
| | |
35.7
| | |
26.4
| | |
25.6
|
Other*
| | |
183.2
| | |
147.5
| | |
160.1
|
Contracting services
| | |
129.5
| | |
127.6
| | |
145.1
|
Internal sales
| | |
(99.7)
| | |
(88.0)
| | |
(99.1)
|
| |
$468.6
| | |
$427.3
| | |
$454.4
|
* |
Other includes cement, liquid asphalt, merchandise, fabric, spreading and other products that individually are not considered to be a major line of business for the segment.
|
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
| | |
2022 vs 2021
% change
| | |
2021 vs 2020
% change
|
| |
(Dollars in millions)
| | | | | |||||||||
Revenue
| | |
$600.2
| | |
$478.0
| | |
$416.2
| | |
26%
| | |
15%
|
Gross profit
| | |
$106.4
| | |
$87.5
| | |
$79.8
| | |
22%
| | |
10%
|
Gross margin
| | |
17.7%
| | |
18.3%
| | |
19.2%
| | | | | ||
EBITDA
| | |
$103.9
| | |
$80.6
| | |
$74.4
| | |
- 29%
| | |
8%
|
EBITDA margin
| | |
17.3%
| | |
16.9%
| | |
17.9%
| | | | |
| |
Revenues
| |||||||
| |
2022
| | |
2021
| | |
2020
| |
| |
(In millions)
| |||||||
Operating results | | | | | | | |||
Aggregates
| | |
$171.6
| | |
$135.2
| | |
$113.0
|
Ready-mix concrete
| | |
158.0
| | |
152.1
| | |
144.3
|
Asphalt
| | |
97.3
| | |
78.9
| | |
60.5
|
Other*
| | |
14.8
| | |
12.8
| | |
14.0
|
Contracting services
| | |
262.7
| | |
187.1
| | |
158.4
|
Internal sales
| | |
(104.2)
| | |
(88.1)
| | |
(74.0)
|
| |
$600.2
| | |
$478.0
| | |
$416.2
|
* |
Other includes merchandise, transportation services and other products that individually are not considered to be a major line of business for the segment.
|
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
| | |
2022 vs 2021
% change
| | |
2021 vs 2020
% change
|
| |
(Dollars in millions)
| | | | | |||||||||
Revenue
| | |
$542.0
| | |
$479.6
| | |
$450.9
| | |
13%
| | |
6%
|
Gross profit
| | |
$77.5
| | |
$71.2
| | |
$62.9
| | |
9%
| | |
13%
|
Gross margin
| | |
14.3%
| | |
14.8%
| | |
13.9%
| | | | | ||
EBITDA
| | |
$72.6
| | |
$65.0
| | |
$52.4
| | |
12%
| | |
24%
|
EBITDA margin
| | |
13.4%
| | |
13.6%
| | |
11.6%
| | | | |
TABLE OF CONTENTS
| |
Revenues
| |||||||
| |
2022
| | |
2021
| | |
2020
| |
| |
(In millions)
| |||||||
Operating results | | | | | | | |||
Aggregates
| | |
$83.3
| | |
$72.6
| | |
$60.0
|
Ready-mix concrete
| | |
106.7
| | |
100.4
| | |
83.1
|
Asphalt
| | |
93.3
| | |
69.3
| | |
72.2
|
Other*
| | |
-
| | |
.1
| | |
-
|
Contracting services
| | |
368.7
| | |
323.7
| | |
327.2
|
Internal sales
| | |
(110.0)
| | |
(86.5)
| | |
(91.6)
|
| |
$542.0
| | |
$479.6
| | |
$450.9
|
* |
Other includes products that individually are not considered to be a major line of business for the segment.
|
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
| | |
2022 vs 2021
% change
| | |
2021 vs 2020
% change
|
| |
(Dollars in millions)
| | | | | |||||||||
Revenue
| | |
$608.0
| | |
$561.8
| | |
$570.8
| | |
8%
| | |
(2)%
|
Gross profit
| | |
$71.8
| | |
$79.7
| | |
$81.0
| | |
(10)%
| | |
(2)%
|
Gross margin
| | |
11.8%
| | |
14.2%
| | |
14.2%
| | | | | ||
EBITDA
| | |
$65.0
| | |
$72.3
| | |
$71.7
| | |
(10)%
| | |
1%
|
EBITDA margin
| | |
10.7%
| | |
12.9%
| | |
12.6%
| | | | |
| |
Revenues
| |||||||
| |
2022
| | |
2021
| | |
2020
| |
| |
(In millions)
| |||||||
Operating results | | | | | | | |||
Aggregates
| | |
$96.5
| | |
$97.5
| | |
$94.8
|
Ready-mix concrete
| | |
158.6
| | |
157.2
| | |
142.4
|
Asphalt
| | |
174.2
| | |
140.0
| | |
156.4
|
Other*
| | |
24.9
| | |
22.8
| | |
24.8
|
Contracting services
| | |
355.7
| | |
306.9
| | |
344.9
|
Internal sales
| | |
(201.9)
| | |
(162.6)
| | |
(192.5)
|
| |
$608.0
| | |
$561.8
| | |
$570.8
|
* |
Other includes merchandise and other products that individually are not considered to be a major line of business for the segment.
|
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
| | |
2022 vs 2021
% change
| | |
2021 vs 2020
% change
|
| |
(Dollars in millions)
| |||||||||||||
Revenue
| | |
$353.1
| | |
$317.4
| | |
$325.9
| | |
11%
| | |
(3)%
|
Gross profit
| | |
$37.4
| | |
$34.5
| | |
$56.9
| | |
8%
| | |
(39)%
|
Gross margin
| | |
10.6%
| | |
10.9%
| | |
17.5%
| | | | | ||
EBITDA
| | |
$9.4
| | |
$8.4
| | |
$27.4
| | |
12%
| | |
(70)%
|
EBITDA margin
| | |
2.7%
| | |
2.6%
| | |
8.4%
| | | | |
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
|
| |
(In millions)
| |||||||
Intersegment transactions: | | | | | | | |||
Revenues
| | |
$37.2
| | |
$35.2
| | |
$40.2
|
Cost of revenue
| | |
$(37.2)
| | |
$(35.2)
| | |
$(40.2)
|
TABLE OF CONTENTS
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
|
| |
(In millions)
| |||||||
Net cash provided by (used in) | | | | | | | |||
Operating activities
| | |
$207.5
| | |
$181.2
| | |
$232.4
|
Investing activities
| | |
(155.9)
| | |
(398.3)
| | |
(185.9)
|
Financing activities
| | |
(55.3)
| | |
223.8
| | |
(47.9)
|
Increase (decrease) in cash and cash equivalents
| | |
(3.7)
| | |
6.7
| | |
(1.4)
|
Cash and cash equivalents - beginning of year
| | |
13.8
| | |
7.1
| | |
8.5
|
Cash and cash equivalents - end of year
| | |
$10.1
| | |
$13.8
| | |
$7.1
|
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
|
| |
(In millions)
| |||||||
Net income
| | |
$116.2
| | |
$129.8
| | |
$147.3
|
Adjustments to reconcile net income to net cash provided by operating
activities
| | |
112.4
| | |
128.6
| | |
87.3
|
Changes in current assets and current liabilities, net of acquisitions: | | | | | | | |||
Receivables
| | |
(32.5)
| | |
15.3
| | |
7.9
|
Due from related-party
| | |
(8.0)
| | |
2.9
| | |
(7.0)
|
Inventories
| | |
(31.0)
| | |
(42.4)
| | |
(11.3)
|
Other current assets
| | |
-
| | |
(4.6)
| | |
1.3
|
Accounts payable
| | |
17.5
| | |
(13.9)
| | |
(10.7)
|
Due to related-party
| | |
3.6
| | |
(1.0)
| | |
(0.8)
|
Other current liabilities
| | |
21.4
| | |
(21.0)
| | |
12.9
|
Pension and postretirement benefit plan contributions
| | |
(0.4)
| | |
(0.4)
| | |
(0.3)
|
Other noncurrent changes
| | |
8.3
| | |
(12.1)
| | |
5.8
|
Net cash provided by operating activities
| | |
$207.5
| | |
$181.2
| | |
$232.4
|
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
|
| |
(In millions)
| |||||||
Capital expenditures
| | |
$(178.2)
| | |
$(174.2)
| | |
$(135.9)
|
Acquisitions, net of cash acquired
| | |
1.7
| | |
(235.2)
| | |
(56.7)
|
Net proceeds from sale or disposition of property and other
| | |
22.9
| | |
12.0
| | |
8.2
|
Investments
| | |
(2.3)
| | |
(.9)
| | |
(1.5)
|
Net cash used in investing activities
| | |
$(155.9)
| | |
$(398.3)
| | |
$(185.9)
|
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
|
| |
(In millions)
| |||||||
Issuance of current related-party notes, net
| | |
$208.0
| | |
$-
| | |
$-
|
Repayment of long-term debt
| | |
(.3)
| | |
(.2)
| | |
(.2)
|
Debt issuance costs
| | |
(.8)
| | |
-
| | |
-
|
Issuance (repayment) of long-term related-party notes, net
| | |
(207.0)
| | |
282.0
| | |
(2.3)
|
Net transfers to Parent
| | |
(55.2)
| | |
(58.0)
| | |
(45.4)
|
Net cash provided by (used in) financing activities
| | |
$(55.3)
| | |
$223.8
| | |
$(47.9)
|
| |
Less than
1 year
| | |
1-3
years
| | |
3-5
years
| | |
More than
5 years
| | |
Total
| |
| |
(In millions)
| |||||||||||||
Related-party notes payable
| | |
$238.0
| | |
$76.4
| | |
$65.0
| | |
$305.0
| | |
$684.4
|
Interest on related-party notes*
| | |
20.8
| | |
36.1
| | |
31.9
| | |
48.7
| | |
137.5
|
Operating leases
| | |
15.1
| | |
18.8
| | |
7.5
| | |
11.9
| | |
53.3
|
Purchase commitments
| | |
80.8
| | |
6.2
| | |
3.9
| | |
9.8
| | |
100.7
|
| |
$354.7
| | |
$137.5
| | |
$108.3
| | |
$375.4
| | |
$975.9
|
* |
Represents the estimated interest payments associated with Knife River's related-party notes payable outstanding as of December 31, 2022, assuming interest rates as of December 31, 2022, and consistent amounts outstanding until their respective maturity dates over the periods indicated in the table above.
|
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
|
| |
(In millions)
| |||||||
Net income
| | |
$116.2
| | |
$129.8
| | |
$147.3
|
Adjustments: | | | | | | | |||
Income taxes
| | |
42.6
| | |
43.4
| | |
47.4
|
Depreciation, depletion and amortization
| | |
117.8
| | |
101.0
| | |
89.7
|
Interest
| | |
30.1
| | |
19.2
| | |
20.6
|
Consolidated EBITDA
| | |
$306.7
| | |
$293.4
| | |
$305.0
|
Unrealized gains (losses) on benefit plan investments
| | |
4.0
| | |
(2.3)
| | |
(4.0)
|
Stock-based compensation expense
| | |
2.7
| | |
3.6
| | |
3.3
|
One-time separation costs
| | |
-
| | |
-
| | |
-
|
Adjusted EBITDA
| | |
$313.4
| | |
$294.7
| | |
$304.3
|
Revenues
| | |
$2,534.7
| | |
$2,228.9
| | |
$2,178.0
|
Net income margin
| | |
4.6%
| | |
5.8%
| | |
6.8%
|
EBITDA margin
| | |
12.1 %
| | |
13.2%
| | |
14.0%
|
Adjusted EBITDA margin
| | |
12.4 %
| | |
13.2%
| | |
14.0%
|
TABLE OF CONTENTS
Name
| | |
Age
| | |
Position
|
| | | | |||
Brian R. Gray
| | |
53
| | |
President and Chief Executive Officer
|
Nathan W. Ring
| | |
47
| | |
Vice President and Chief Financial Officer
|
Karl A. Liepitz
| | |
44
| | |
Vice President, Chief Legal Officer and Secretary
|
Trevor J. Hastings
| | |
49
| | |
Vice President and Chief Operating Officer
|
Nancy K. Christenson
| | |
67
| | |
Vice President of Administration
|
Glenn R. Pladsen
| | |
56
| | |
Vice President of Support Services
|
John F. Quade
| | |
45
| | |
Vice President of Business Development
|
Marney L. Kadrmas
| | |
54
| | |
Chief Accounting Officer
|
TABLE OF CONTENTS
TABLE OF CONTENTS
Director
| | |
Class
|
Thomas Everist
| | |
Class I-Expiring 2024 Annual Meeting
|
German Carmona Alvarez
| | |
Class I-Expiring 2024 Annual Meeting
|
Patricia L. Moss
| | |
Class II-Expiring 2025 Annual Meeting
|
William Sandbrook
| | |
Class II-Expiring 2025 Annual Meeting
|
Karen B. Fagg
| | |
Class III-Expiring 2026 Annual Meeting
|
Brian R. Gray
| | |
Class III-Expiring 2026 Annual Meeting
|
TABLE OF CONTENTS
Name
| | |
Age
| | |
Principal Occupation and Other Information
|
Thomas Everist
| | |
73
| | |
Mr. Everist is a member of the board of directors at MDU Resources, where he sits on the Compensation and Nominating and Governance committees. As a director nominee for Knife River Holding Company, Mr. Everist is expected to chair the Nominating and Governance Committee and also serve on the Compensation Committee. Mr. Everist has had a 44-year career in the construction materials and mining industry and brings deep industry expertise. He was president and chair of L.G. Everist, Inc., an aggregate production company in Sioux Falls, South Dakota, from 1987-2002. From 2002 to present, he has been president and chair of The Everist Company, an investment and land development company; prior to 2017, The Everist Company also was engaged in aggregate, concrete and asphalt production.
|
German Carmona Alvarez
| | |
54
| | |
Mr. Alvarez is a member of the board of directors at MDU Resources, where he sits on the Compensation and Nominating and Governance committees. As a director nominee for Knife River Holding Company, Mr. Carmona Alvarez is expected to chair the Compensation Committee and be a member of the Audit Committee. Mr. Carmona Alvarez has 15 years of experience in the building materials industry and also brings expertise in human capital management, digital and information technology, and mergers and acquisitions. He is global president of applied intelligence at Wood PLC and formerly served as executive vice president of finance, information technology and shared services at CEMEX, Inc., a global building materials company.
|
Name
| | |
Age
| | |
Principal Occupation and Other Information
|
Patricia L. Moss
| | |
69
| | |
Ms. Moss is a member of the board of directors at MDU Resources, where she chairs the Environmental and Sustainability Committee and also is a member of the Compensation Committee. As a director nominee for Knife River Holding Company, Ms. Moss is expected to chair the Audit Committee and also serve on the Compensation Committee. Ms. Moss has substantial experience in the finance and banking industry, including service on the boards of public banking and investment companies. She contributes broad knowledge of finance, business development, human resources and compliance oversight, as well as public company governance. Ms. Moss was president and CEO of Cascade Bancorp, a financial holding company in Bend, Oregon, from 1998-2012. She was vice chairman of Cascade Bankcorp from 2012-2017, at which point she became a director at First Interstate BancSystem.
|
William Sandbrook
| | |
62
| | |
Mr. Sandbrook has extensive experience in the construction materials industry. He was president and CEO of U.S. Concrete, Inc., from 2011-2020, and also served as chairman of its board of directors from 2018-2020. Prior to that, Mr. Sandbrook served in various roles at Oldcastle Inc.'s Products and Distribution Group, Oldcastle Architectural Products Group, and Oldcastle Materials Inc. In 2019, he was elected chairman of the National Ready-Mixed Concrete Association. Mr. Sandbrook has served as a director of Comfort Systems USA since 2018, where he is a member of the Audit and Compensation committees.
|
TABLE OF CONTENTS
Name
| | |
Age
| | |
Principal Occupation and Other Information
|
Karen B. Fagg
| | |
69
| | |
Ms. Fagg is a member of the board of directors at MDU Resources, where she chairs the Compensation Committee and is a member of the Environmental and Sustainability Committee. As a director nominee for Knife River Holding Company, Ms. Fagg is expected to be non-executive chair of the board. She also is expected to serve on the Nominating and Governance Committee. Ms. Fagg contributes expertise in responsible natural resource development, with expertise in the construction and engineering industries. She was president, CEO and majority owner of HKM Engineering, a large regional civil and structural firm, from 2000-2008; when that business merged with DOWL LLC, Ms. Fagg was named vice president until her retirement in 2011. Prior to that, she was director of the Montana Department of Natural Resources and Conservation, the state agency charged with managing sustainable stewardship of the state's water, soil, energy and rangeland resources.
|
Brian R. Gray
| | |
53
| | |
Mr. Gray was named president of Knife River Corporation effective January 1, 2023, and was named its chief executive officer effective March 1, 2023. Prior to these promotions, he was president of Knife River Corporation's Northwest segment, a position he held from 2012 to 2022. While at the Northwest segment, Mr. Gray led the acquisition of eight companies and also was instrumental in the development of the Knife River Training Center and corporate-wide safety, training and sustainability programs. He has 29 years of experience at Knife River Corporation and has served on numerous industry boards, including the National Ready Mixed Concrete Association (current) and the Oregon-Columbia chapter of the Associated General Contractors.
|
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
• |
Brian R. Gray, President and Chief Executive Officer
|
• |
Nathan W. Ring, Vice President and Chief Financial Officer
|
• |
Trevor J. Hastings, Vice President and Chief Operating Officer
|
• |
Karl A. Liepitz, Vice President, Chief Legal Officer and Secretary
|
• |
Nancy K. Christenson, Vice President of Administration
|
• |
recruit, motivate, reward, and retain high performing executive talent required to create superior stockholder value;
|
• |
reward executives for short-term performance as well as for growth in enterprise value over the long-term;
|
• |
ensure effective utilization and development of talent by working in concert with other management processes - for example, performance appraisal, succession planning, and management development;
|
• |
help ensure that compensation programs do not encourage or reward excessive or imprudent risk taking; and
|
• |
provide a competitive package relative to industry-specific and general industry comparisons and internal equity, as appropriate.
|
TABLE OF CONTENTS
Executive
| | |
2022 Annual Base Salary
|
Brian R. Gray
| | |
$327,820
|
Nathan W. Ring
| | |
$302,952
|
Trevor J. Hastings
| | |
$400,000
|
Karl A. Liepitz
| | |
$440,000
|
Nancy K. Christenson
| | |
$280,000
|
Executive
| | |
Target Bonus
(% of Salary)
| | |
Measures and Weightings
| | |
Actual Payout
(% of Target)
|
Brian R. Gray
| | |
75%
| | |
Northwest segment EBITDA (50%), Construction Materials and Contracting EBITDA (45%); Safety (5%)
| | |
135.3%
|
Nathan W. Ring
| | |
40%
| | |
Construction Materials and Contracting EBITDA (100%)
| | |
78.5%
|
Trevor J. Hastings
| | |
60%
| | |
Pipeline Earnings (80%); MDU Resources adjusted EPS (20%); DEI Modifier
| | |
15.3%
|
Karl A. Liepitz
| | |
75%
| | |
MDU Resources adjusted EPS (100%); DEI Modifier
| | |
56.7%
|
Nancy K. Christenson
| | |
40%
| | |
Construction Materials and Contracting EBITDA (100%)
| | |
78.5%
|
TABLE OF CONTENTS
• |
Enhance the formal succession planning process to include the review of all Section 16 officer, key executive and business segment officers positions to ensure diverse representation in terms of gender, ethnicity, individuals with disabilities and veteran status and the development of candidates being prepared for these positions.
|
• |
Increase outreach activities and efforts aimed at attracting diverse candidates to positions within our businesses.
|
• |
Enhance new employee onboarding processes to include DEI training and formal mentoring programs.
|
• |
Implement a consistent human resources dashboard across all businesses to build baseline information and track key metrics to provide insight into the make-up and diversity of our employee population.
|
Performance Measure
| | |
Target
| | |
Result
| | |
Percent of
Performance | | |
Payout
Percentage
|
MDU Resources Earnings per Share1 | | |
$2.07
| | |
$1.87
| | |
90.3%
| | |
51.7%
|
Construction Materials and Contracting EBITDA2
| | |
$331.3 million
| | |
$307.5 million
| | |
92.8%
| | |
78.5%
|
Northwest segment EBITDA
| | |
$82.0 million
| | |
$103.9 million
| | |
126.6%
| | |
200.0%
|
Safety - Lost Time Rate
| | |
0.330
| | |
0.600
| | |
181.8%
| | |
0.0%
|
Pipeline earnings
| | |
$43.0 million
| | |
$35.3 million
| | |
82.1%
| | |
0.0%
|
1 |
Earnings used to calculate EPS from continuing operations was adjusted to remove the effect of transaction costs incurred for acquisitions and mergers as well as costs incurred associated with the company's intent to separate the construction materials and contracting segment pursuant to a tax-free spinoff and the strategic review to optimize the value of the construction services segment.
|
TABLE OF CONTENTS
2 |
Construction materials and contracting segment EBITDA from continuing operations was adjusted to remove the effect of transaction costs incurred for acquisitions and mergers.
|
Name
| | |
75% Performance Share
Opportunities (#)
| | |
25% Time-Vesting Restricted
Stock Unit Opportunities (#)
|
Brian R. Gray
| | |
-
| | |
-
|
Nathan W. Ring
| | |
4,101
| | |
1,367
|
Trevor J. Hastings
| | |
9,845
| | |
3,282
|
Karl A. Liepitz
| | |
17,328
| | |
5,776
|
Nancy K. Christenson
| | |
3,791
| | |
1,263
|
• |
Total stockholder return relative to that of a group of peer companies selected from the S&P 400 MidCap Index is the measure to align with MDU Resources' performance relative to its peers.
|
• |
Compound annual growth rate in earnings from continuing operations is the measure to encourage continued growth of MDU Resources.
|
• |
the effect on earnings from losses/impairments on asset sales/dispositions/retirements;
|
• |
the effect on earnings from withdrawal liabilities relating to multiemployer pension plans;
|
• |
the effect on earnings from costs incurred for acquisitions or mergers; and
|
• |
the effect on earnings from unanticipated tax law changes.
|
| |
MDU Resources' Relative TSR
Percentile Rank
| | |
MDU Resources' Earnings
Growth Rate as a Percentage
of Target
| | |
Vesting
Percentage of
Award Target
| |
Maximum
| | |
75th or higher
| | |
153.8% of target or higher
| | |
200%
|
Target
| | |
50th
| | |
Target
| | |
100%
|
Threshold
| | |
25th
| | |
46.2% of target
| | |
20%
|
Below threshold
| | |
Less than 25th
| | |
less than 46.2% of target
| | |
0%
|
TABLE OF CONTENTS
Plans
| | |
Brian R.
Gray
| | |
Nathan W.
Ring
| | |
Trevor J.
Hastings
| | |
Karl A.
Liepitz
| | |
Nancy K.
Christenson
|
Pension Plans
| | |
No
| | |
No
| | |
Yes
| | |
Yes
| | |
Yes
|
401(k) Retirement Plan
| | |
Yes
| | |
Yes
| | |
Yes
| | |
Yes
| | |
Yes
|
Supplemental Income Security Plan
| | |
No
| | |
No
| | |
Yes
| | |
No
| | |
Yes
|
Company Credit to Deferred Compensation Plan
| | |
Yes
| | |
Yes
| | |
Yes
| | |
Yes
| | |
Yes
|
Executive
| | |
Base Salary
| | |
Target Annual
Cash Incentive1 | | |
Long-Term Incentive
Opportunity1 | | |
Total Target
Compensation
|
Brian R. Gray
| | |
$800,000
| | |
$670,417
| | |
$2,676,389
| | |
$4,146,806
|
Nathan W. Ring
| | |
$450,000
| | |
$249,638
| | |
$675,000
| | |
$1,374,638
|
Trevor J. Hastings
| | |
$500,000
| | |
$323,750
| | |
$750,000
| | |
$1,573,750
|
Karl A. Liepitz
| | |
$470,000
| | |
$352,500
| | |
$799,000
| | |
$1,621,500
|
Nancy K. Christenson
| | |
$350,000
| | |
$171,267
| | |
$350,000
| | |
$871,267
|
1 |
Target annual cash incentive and long-term incentive opportunity reflect a blended rate consistent with offer letters effective with the separation and distribution.
|
Vulcan Materials Company
| | |
Summit Materials, Inc.
| | |
The AZEK Company Inc.
|
Martin Marietta Materials, Inc.
| | |
Arcosa, Inc.
| | |
Gibraltar Industries, Inc.
|
Dycom Industries, Inc.
| | |
Minerals Technologies Inc.
| | |
Construction Partners, Inc.
|
Granite Construction Incorporated
| | |
Eagle Materials Inc.
| | |
Armstrong World Industries, Inc.
|
Allegion plc
| | |
Simpson Manufacturing Co., Inc.
| | | |
Masonite International Corporation
| | |
Sterling Infrastructure, Inc.
| | |
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
Name and Principal Position (a)
| | |
Year (b)
| | |
Salary ($)
(c)
| | |
Stock
Awards ($)
(e)1 | | |
Non-Equity
Incentive Plan
Compensation
($) (g)
| | |
Change in
Pension Value
and Nonqualified
Deferred
Compensation
Earnings
($) (h)2 | | |
All Other
Compensation
($) (i)3 | | |
Total
($) (j)
|
Brian R. Gray
| | |
2022
| | |
359,3414 | | |
-
| | |
332,717
| | |
-
| | |
72,308
| | |
764,366
|
President and CEO
| | | | | | | | | | | | | | | |||||||
Nathan W. Ring
| | |
2022
| | |
302,952
| | |
169,102
| | |
95,127
| | |
-
| | |
63,077
| | |
630,258
|
Vice President and Chief Financial Officer
| | | | | | | | | | | | | | | |||||||
Trevor J. Hastings
| | |
2022
| | |
400,000
| | |
405,956
| | |
36,720
| | |
-
| | |
97,478
| | |
940,154
|
Vice President and Chief Operating Officer
| | | | | | | | | | | | | | | |||||||
Karl A. Liepitz
| | |
2022
| | |
440,000
| | |
714,491
| | |
187,110
| | |
-
| | |
100,604
| | |
1,442,205
|
Vice President, Chief Legal Officer and Secretary
| | | | | | | | | | | | | | | |||||||
Nancy K. Christenson
| | |
2022
| | |
280,000
| | |
156,301
| | |
87,920
| | |
17,630
| | |
80,378
| | |
622,229
|
Vice President of Administration
| | | | | | | | | | | | | | |
1 |
Amounts in this column represent the aggregate grant date fair value of MDU Resources performance share award opportunities at target calculated in accordance with generally accepted accounting principles for stock-based compensation in Accounting Standards Codification Topic 718. This column was prepared assuming none of the awards were or will be forfeited. The amounts were calculated as described in Note 12 of our audited financial statements in our Form 10 for the year ended December 31, 2022. For 2022, the aggregate grant date fair value of outstanding MDU Resources performance share award opportunities assuming the highest level of payout would be as follows:
|
Name
| | |
Aggregate Grant Date
Fair Value at Highest
Payout ($)
|
Brian R. Gray
| | |
-
|
Nathan W. Ring
| | |
300,297
|
Trevor J. Hastings
| | |
720,901
|
Karl A. Liepitz
| | |
1,268,814
|
Nancy K. Christenson
| | |
277,580
|
2 |
Amounts shown for 2022 represent the change in the actuarial present value for the named executive officers' accumulated benefits under the pension plan, and SISP, collectively referred to as the "accumulated pension change," plus above-market earnings on deferred annual incentives as of December 31, 2022.
|
Name
| | |
Accumulated Pension
Change ($)
| | |
Above Market
Earnings ($)
|
Brian R. Gray
| | |
-
| | |
-
|
Nathan W. Ring
| | |
-
| | |
-
|
Trevor J. Hastings
| | |
(392,740)
| | |
-
|
Karl A. Liepitz
| | |
(26,285)
| | |
-
|
Nancy K. Christenson
| | |
(455,047)
| | |
17,630
|
3 |
All Other Compensation for 2022 is comprised of:
|
Name
| | |
401(k) Plan
($)a | | |
Nonqualified
Deferred
Compensation
Plan ($)b | | |
Life
Insurance
Premium ($)
| | |
Matching
Charitable
Contributions
($)
| | |
Vehicle
Allowance
| | |
Dividend
Equivalents
($)c | | |
Total ($)
|
Brian R. Gray
| | |
24,400
| | |
32,782
| | |
507
| | |
-
| | |
14,619
| | |
-
| | |
72,308
|
Nathan W. Ring
| | |
24,218
| | |
30,295
| | |
469
| | |
120
| | |
-
| | |
7,975
| | |
63,077
|
Trevor J. Hastings
| | |
36,600
| | |
40,000
| | |
619
| | |
1,300
| | |
-
| | |
18,959
| | |
97,478
|
Karl A. Liepitz
| | |
30,500
| | |
44,000
| | |
681
| | |
975
| | |
-
| | |
24,448
| | |
100,604
|
Nancy K. Christenson
| | |
40,500
| | |
28,000
| | |
433
| | |
4,200
| | |
-
| | |
7,245
| | |
80,378
|
a |
Represents company contributions to the MDU Resources 401(k) plan, which includes matching contributions, profit sharing and retirement contributions associated with certain frozen pension plans.
|
TABLE OF CONTENTS
b |
Represents company contribution amounts to the MDU Resources Group, Inc. Deferred Compensation Plan (MDU Resources DCP) which are approved by the compensation committee and the board of directors. The purpose of the plan is to recognize outstanding performance coupled with enhanced retention as the MDU Resources DCP requires a vesting period. For further information, see the section entitled "Nonqualified Deferred Compensation for 2022."
|
c |
Represents accrued dividend equivalents for 2022 on the 2022-2024, 2021-2023, and 2020-2022 MDU Resources performance share awards associated with financial performance measures and MDU Resources restricted stock units. The 2022-2024 and 2021-2023 awards are presented at target, and the 2020-2022 MDU Resources performance share awards are presented based on the actual achievement of the performance measures.
|
4 |
Mr. Gray's salary amount includes the payout of accrued vacation of $31,521 upon his transfer from the Northwest segment to Knife River Corporation.
|
| | | |
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards
| | |
Estimated Future Payouts Under
Equity Incentive Plan Awards
| | |
All Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#) (i)
| | |
Grant
Date Fair
Value of
Stock
and
Option
Awards
($) (l)
| ||||||||||||||
Name (a)
| | |
Grant Date
(b)
| | |
Threshold
($) (c)
| | |
Target ($)
(d)
| | |
Maximum
($) (e)
| | |
Threshold
(#) (f)
| | |
Target (#)
(g)
| | |
Maximum
(#) (h)
| | |||||
Brian R. Gray
| | |
2/17/20221 | | |
61,466
| | |
245,865
| | |
491,730
| | | | | | | | | | | |||||
| |
2/17/20222
| | | | | | | | |
-
| | |
-
| | |
-
| | | | |
-
| |||||
| |
2/17/20223 | | | | | | | | | | | | | | |
-
| | |
-
| |||||||
Nathan W. Ring
| | |
2/17/20221 | | |
30,295
| | |
121,181
| | |
302,953
| | | | | | | | | | | |||||
| |
2/17/20222 | | | | | | | | |
820
| | |
4,101
| | |
8,202
| | | | |
131,195
| |||||
| |
2/17/20223 | | | | | | | | | | | | | | |
1,367
| | |
37,907
| |||||||
Trevor J. Hastings
| | |
2/17/20221 | | |
60,000
| | |
240,000
| | |
480,000
| | | | | | | | | | | |||||
| |
2/17/20222 | | | | | | | | |
1,969
| | |
9,845
| | |
19,690
| | | | |
314,946
| |||||
| |
2/17/20223 | | | | | | | | | | | | | | |
3,282
| | |
91,010
| |||||||
Karl A. Liepitz
| | |
2/17/20221 | | |
82,500
| | |
330,000
| | |
660,000
| | | | | | | | | | | |||||
| |
2/17/20222 | | | | | | | | |
3,465
| | |
17,328
| | |
34,656
| | | | |
554,323
| |||||
| |
2/17/20223 | | | | | | | | | | | | |
5,776
| | |
5,776
| | |
160,168
| ||||||
Nancy K. Christenson
| | |
2/17/20221 | | |
28,000
| | |
112,000
| | |
280,000
| | | | | | | | | | | |||||
| |
2/17/20222 | | | | | | | | |
758
| | |
3,791
| | |
7,582
| | | | |
121,278
| |||||
| |
2/17/20223 | | | | | | | | | | | | | | |
1,263
| | |
35,023
|
1 |
Annual incentive for 2022 granted pursuant to the MDU Resources Group, Inc. Executive Incentive Compensation Plan (the "MDU Resources EICP").
|
2 |
MDU Resources Performance shares for the 2022-2024 performance period granted pursuant to the MDU Resources Group, Inc. Long-Term Performance-Based Incentive Plan (the "MDU Resources LTIP").
|
3 |
MDU Resources Restricted Stock Units for the 2022-2024 period granted pursuant to the MDU Resources LTIP.
|
TABLE OF CONTENTS
| |
Stock Awards
| ||||||||||
Name (a)
| | |
Number of Unearned
Shares, Units or
Other Rights That
Have Not Vested (#)
(g)1 | | |
Market or Payout
Value of Unearned
Shares, Units or
Other Rights That
Have Not Vested ($)
(h)2 | | |
Equity Incentive Plan
Awards: Number of
Unearned Shares,
Units or Other Rights
That Have Not Vested
(#) (i)3 | | |
Equity Incentive Plan
Awards: Market or
Payout Value of
Unearned Shares,
Units or Other Rights
That Have Not Vested
($) (j)2 |
Brian R. Gray
| | |
-
| | |
-
| | |
-
| | |
-
|
Nathan W. Ring
| | |
2,838
| | |
86,105
| | |
13,357
| | |
405,251
|
Trevor J. Hastings
| | |
6,640
| | |
201,458
| | |
32,077
| | |
973,216
|
Karl A. Liepitz
| | |
11,176
| | |
339,080
| | |
33,529
| | |
1,017,270
|
Nancy K. Christenson
| | |
2,590
| | |
78,581
| | |
12,101
| | |
367,144
|
1 |
Below is the breakdown by year of the outstanding restricted stock unit awards:
|
Name
| | |
2020-2022
Award
(#)
| | |
2021-2023
Award
(#)
| | |
2022-2024
Award
(#)
| | |
Total
(#)
|
Brian R. Gray
| | |
n/a
| | |
-
| | |
-
| | |
-
|
Nathan W. Ring
| | |
n/a
| | |
1,471
| | |
1,367
| | |
2,838
|
Trevor J. Hastings
| | |
n/a
| | |
3,358
| | |
3,282
| | |
6,640
|
Karl A. Liepitz
| | |
n/a
| | |
5,400
| | |
5,776
| | |
11,176
|
Nancy K. Christenson
| | |
n/a
| | |
1,327
| | |
1,263
| | |
2,590
|
2 |
Value based on the number of MDU Resources performance shares and MDU Resources restricted stock units reflected in columns (g) and (i) multiplied by $30.34, the year-end per share closing stock price for 2022.
|
3 |
Below is a breakdown by year of the outstanding MDU Resources performance share awards:
|
Name
| | |
2020-2022
Award
(#)
| | |
2021-2023
Award
(#)
| | |
2022-2024
Award
(#)
| | |
Total
(#)
|
Brian R. Gray
| | |
-
| | |
-
| | |
-
| | |
-
|
Nathan W. Ring
| | |
4,842
| | |
4,414
| | |
4,101
| | |
13,357
|
Trevor J. Hastings
| | |
12,157
| | |
10,075
| | |
9,845
| | |
32,077
|
Karl A. Liepitz
| | |
-
| | |
16,201
| | |
17,328
| | |
33,529
|
Nancy K. Christenson
| | |
4,327
| | |
3,983
| | |
3,791
| | |
12,101
|
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| |
Stock Awards
| ||||
Name (a)
| | |
Number of Shares
Acquired on Vesting
(#) (d)1 | | |
Value Realized on
Vesting ($) (e)2 |
Brian R. Gray
| | |
-
| | |
-
|
Nathan W. Ring
| | |
7,592
| | |
253,155
|
Trevor J. Hastings
| | |
18,421
| | |
614,248
|
Karl A. Liepitz
| | |
-
| | |
-
|
Nancy K. Christenson
| | |
6,782
| | |
261,446
|
1 |
Reflects MDU Resources performance shares for the 2019-2021 performance period ended December 31, 2021, which were settled February 17, 2022.
|
2 |
Reflects the value of vested MDU Resources performance shares based on the closing stock price of $30.84 per share upon the vesting of stock on December 31, 2021, and the dividend equivalents paid on the vested MDU Resources performance shares.
|
Name (a)
| | |
Plan Name (b)
| | |
Number of Years
Credited Service
(#) (c)1 | | |
Present Value of
Accumulated Benefit
($) (d)
|
Brian R. Gray
| | |
Pension
| | |
n/a
| | |
-
|
| |
SISP
| | |
n/a
| | |
-
| |
Nathan W. Ring
| | |
Pension
| | |
n/a
| | |
-
|
| |
SISP
| | |
n/a
| | |
-
| |
Trevor J. Hastings
| | |
Pension
| | |
13
| | |
262,850
|
| |
SISP
| | |
10
| | |
331,806
| |
Karl A. Liepitz
| | |
Pension
| | |
6
| | |
28,624
|
| |
SISP
| | |
n/a
| | |
-
| |
Nancy K. Christenson
| | |
Pension
| | |
32
| | |
1,048,635
|
| |
SISP
| | |
10
| | |
800,899
|
1 |
Years of credited service related to the pension plans reflects the years of participation in the plan as of December 31, 2009, when the pension plan was frozen. Years of credited service related to the MDU Resources Group, Inc. Supplemental Income Security Plan (SISP) reflects the years toward full vesting of the benefit which is 10 years.
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2 |
Messrs. Gray and Ring do not participate in the pension plans. Mr. Hastings and Ms. Christenson participate in the Knife River Corporation Salaried Employees' Pension Plan (the "KRC pension plan") and the SISP. Mr. Liepitz participates in the MDU Resources Group, Inc. Pension Plan for Non-Bargaining Unit Employees (the "MDU Resources pension plan").
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•
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a 4.97% discount rate for the SISP
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•
|
a 5.05% discount rate for the KRC pension plan;
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•
|
a 5.04% discount rate for the MDU Resources pension plan
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•
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the Society of Actuaries Pri-2012 Total Dataset Mortality with Scale MP-2021 (post commencement only); and
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•
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no recognition of pre-retirement mortality.
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monthly retirement benefits only;
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•
|
monthly death benefits paid to a beneficiary only; or
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•
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a combination of retirement and death benefits, where each benefit is reduced proportionately.
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Name (a)
| | |
Executive
Contributions
in Last FY
($) (b)
| | |
Registrant
Contributions
in Last FY ($)
(c)
| | |
Aggregate
Earnings in
Last FY ($)
(d)
| | |
Aggregate
Withdrawals/
Distributions
($) (e)
| | |
Aggregate
Balance at Last
FYE ($) (f)
|
Brian R. Gray
| | |
30,285
| | |
32,782
| | |
(65,479)
| | |
-
| | |
321,8761 |
Nathan W. Ring
| | |
-
| | |
30,295
| | |
(34,117)
| | |
-
| | |
154,2312 |
Trevor J. Hastings
| | |
-
| | |
40,000
| | |
(40,830)
| | |
-
| | |
190,5483 |
Karl A. Liepitz
| | |
-
| | |
44,000
| | |
(25,874)
| | |
-
| | |
120,1274 |
Nancy K. Christenson
| | |
22,837
| | |
28,000
| | |
41,135
| | |
-
| | |
2,232,1285 |
1 |
Mr. Gray deferred 10% of his 2021 annual incentive which was contributed to the MDU Resources Group, Inc. Deferred Compensation Plan in 2022. Amounts shown in column (c) are included in the "All Other Compensation" column of the Summary Compensation Table.
|
2 |
Amounts shown in column (c) are included in the "All Other Compensation" column of the Summary Compensation Table.
|
3 |
Amounts shown in column (c) are included in the "All Other Compensation" column of the Summary Compensation Table.
|
4 |
Amounts shown in column (c) are included in the "All Other Compensation" column of the Summary Compensation Table.
|
5 |
Ms. Christenson deferred 25% of her 2021 annual incentive which was contributed to the MDU Resources Group Inc. Deferred Compensation Plan in 2022. Amounts shown in column (c) is included in the "All Other Compensation" column of the Summary Compensation Table.
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•
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Voluntary or Not for Cause Termination;
|
•
|
Death;
|
•
|
Disability;
|
•
|
Change of Control with Termination; and
|
•
|
Change of Control without Termination.
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termination of employment during the first year of the vesting period = equity shares awards are forfeited;
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•
|
termination of employment during the second year of the vesting period = equity shares awards earned are prorated based on the number of months employed during the vesting period; and
|
•
|
termination of employment during the third year of the vesting period = full amount of any equity shares awards earned are received.
|
•
|
2020-2022 MDU Resources performance shares would vest based on the achievement of the performance measure for the period ended December 31, 2022, which was 91.7%;
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•
|
2021-2023 MDU Resources performance shares would be prorated at 24 out of 36 months (2/3) of the vesting period and vest based on the actual achievement of the performance measure for the period ended December 31, 2023. For purposes of the Potential Payments upon Termination or Change of Control Table, the performance achievement for the performance period is shown at target; and
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•
|
2022-2024 MDU Resources performance shares would be forfeited.
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•
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termination of employment during the first year of the vesting period = MDU Resources restricted stock unit awards are forfeited;
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•
|
termination of employment during the second year of the vesting period = MDU Resources restricted stock unit awards earned are prorated based on the number of months employed during the vesting period; and
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•
|
termination of employment during the third year of the vesting period = full amount of any MDU Resources restricted stock unit awards earned are received.
|
| |
Monthly SISP
Retirement Payment
($)
| | |
Monthly SISP
Death Payment
($)
| |
Trevor J. Hastings
| | |
5,360
| | |
10,720
|
Nancy K. Christenson
| | |
6,250
| | |
12,500
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Age When Disabled | | |
Benefits Payable
|
Prior to age 60
| | |
To age 65
|
Ages 60 to 64
| | |
60 months
|
Ages 65-67
| | |
To age 70
|
Age 68 and over
| | |
24 months
|
Executive Benefits and Payments upon Termination or Change of Control
| | |
Voluntary or
Not for Cause
Termination
($)
| | |
Death
($)
| | |
Disability
($)
| | |
Change of
Control
(With
Termination)
($)
| | |
Change of
Control
(Without
Termination)
($)
|
Brian R. Gray | | | | | | | | | | | |||||
Benefits and Perquisites: | | | | | | | | | | | |||||
Disability Benefits
| | |
-
| | |
-
| | |
554,689
| | |
-
| | |
-
|
Total
| | |
-
| | |
-
| | |
554,689
| | |
-
| | |
-
|
Nathan W. Ring | | | | | | | | | | | |||||
Compensation: | | | | | | | | | | | |||||
MDU Resources Performance Shares
| | |
-
| | |
-
| | |
-
| | |
429,096
| | |
429,096
|
MDU Resources Restricted Stock Units
| | |
-
| | |
45,716
| | |
45,716
| | |
89,888
| | |
89,888
|
Benefits and Perquisites: | | | | | | | | | | | |||||
Disability Benefits
| | |
-
| | |
-
| | |
701,224
| | |
-
| | |
-
|
Total
| | |
-
| | |
45,716
| | |
746,940
| | |
518,984
| | |
518,984
|
Trevor J. Hastings | | | | | | | | | | | |||||
Compensation: | | | | | | | | | | | |||||
MDU Resources Performance Shares
| | |
-
| | |
-
| | |
-
| | |
1,030,924
| | |
1,030,924
|
MDU Resources Restricted Stock Units
| | |
-
| | |
106,004
| | |
106,004
| | |
210,238
| | |
210,238
|
Benefits and Perquisites: | | | | | | | | | | | |||||
SISP
| | |
320,090
| | | | |
320,090
| | |
320,090
| | | ||
SISP Death Benefits
| | | | |
640,180
| | | | | | | ||||
Disability Benefits
| | |
-
| | |
-
| | |
487,577
| | |
-
| | |
-
|
Total
| | |
320,090
| | |
746,184
| | |
913,671
| | |
1,561,252
| | |
1,241,162
|
Karl A. Liepitz | | | | | | | | | | | |||||
Compensation: | | | | | | | | | | | |||||
MDU Resources Performance Shares
| | |
-
| | |
-
| | |
-
| | |
1,060,963
| | |
1,060,963
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Executive Benefits and Payments upon Termination or Change of Control
| | |
Voluntary or
Not for Cause
Termination
($)
| | |
Death
($)
| | |
Disability
($)
| | |
Change of
Control
(With
Termination)
($)
| | |
Change of
Control
(Without
Termination)
($)
|
MDU Resources Restricted Stock Units
| | |
-
| | |
175,624
| | |
175,624
| | |
353,643
| | |
353,643
|
Benefits and Perquisites: | | | | | | | | | | | |||||
Disability Benefits
| | |
-
| | |
-
| | |
749,323
| | |
-
| | |
-
|
Total
| | |
-
| | |
175,624
| | |
924,947
| | |
1,414,606
| | |
1,414,606
|
Nancy K. Christenson | | | | | | | | | | | |||||
Compensation: | | | | | | | | | | | |||||
MDU Resources Performance Shares
| | |
215,779
| | |
215,779
| | |
215,779
| | |
388,632
| | |
388,632
|
MDU Resources Restricted Stock Units
| | |
28,395
| | |
41,543
| | |
41,543
| | |
82,020
| | |
82,020
|
Benefits and Perquisites: | | | | | | | | | | | |||||
SISP
| | |
795,189
| | |
-
| | |
795,189
| | |
795,189
| | |
-
|
SISP Death Benefits
| | |
-
| | |
1,590,378
| | |
-
| | |
-
| | |
-
|
Disability Benefits
| | |
-
| | |
-
| | |
-
| | |
-
| | |
-
|
Total
| | |
1,039,363
| | |
1,847,700
| | |
1,052,511
| | |
1,265,841
| | |
470,652
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Element
| | |
Amount
|
Base Cash Retainer
| | |
$110,000
|
Additional Cash Retainers | | | |
Non-Executive Chair
| | |
$125,000
|
Audit Committee Chair
| | |
$20,000
|
Compensation Committee Chair
| | |
$15,000
|
Nominating and Governance Committee Chair
| | |
$15,000
|
Annual Stock Grant - Directors (other than Non-Executive Chair)
| | |
$150,000
|
Annual Stock Grant - Non-Executive Chair
| | |
$175,000
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any restriction periods and restrictions imposed on awards that are not subject to performance-based vesting conditions will lapse and such awards will become immediately vested in full; and
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•
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the target payout opportunity attainable under all outstanding performance-based awards will be deemed to have been fully earned for the entire performance period(s) as of the effective date of the change in control and will be paid out promptly in shares or cash pursuant to the terms of the award agreement, or in the absence of such designation, as the Knife River compensation committee shall determine.
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•
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the acquisition by an individual, entity, or group of 20% or more of the outstanding common stock of Knife River Holding Company;
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•
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a change in a majority of the board of directors of Knife River Holding Company since the effective date of the Plan without the approval of a majority of the board members as of the effective date of the Plan, or whose election was approved by such board members;
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•
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consummation of a merger or similar transaction or sale of all or substantially all of the assets of Knife River Holding Company, unless (a) the stockholders of Knife River Holding Company immediately prior to the transaction beneficially own more than 60% of the outstanding common stock and voting power of the resulting corporation in substantially the same proportions as before the merger, (b) no person owns 20% or more of the resulting corporation's outstanding common stock or voting power except for any such ownership that existed before the merger, and (c) at least a majority of the board of the resulting corporation is comprised of directors of Knife River Holding Company as of immediately prior to the transaction; or
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stockholder approval of a complete liquidation or dissolution of Knife River Holding Company.
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Assets (whether tangible or intangible) primarily related to, or included on the balance sheet of, Knife River Holding Company, which are referred to as the "Knife River Holding Company Assets," will be transferred to Knife River Holding Company, as applicable, generally including:
|
•
|
Equity interests in certain MDU Resources subsidiaries that hold assets primarily related to Knife River.
|
•
|
Customer, distribution, supply and vendor contracts (or portions thereof) to the extent they relate to Knife River.
|
•
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Certain third-party vendor contracts for services primarily related to Knife River.
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•
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Rights to technology, software and intellectual property primarily related to Knife River.
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•
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Exclusive rights to information exclusively related to Knife River and nonexclusive rights to information related to Knife River.
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•
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Rights and assets expressly allocated to Knife River Holding Company pursuant to the terms of the separation agreement or certain other agreements entered into in connection with the separation.
|
•
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Permits used by Knife River.
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•
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Other assets that are included in Knife River Holding Company's pro forma balance sheet.
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Liabilities primarily related to, or included on the balance sheet of, Knife River, which are referred to as the "Knife River Holding Company Liabilities," will be retained by or transferred to Knife River Holding Company, as applicable.
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•
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All of the assets and liabilities (including whether accrued, contingent, or otherwise) other than the Knife River Holding Company Assets and Knife River Holding Company Liabilities (such assets and liabilities, other than the Knife River Holding Company Assets and the Knife River Holding Company Liabilities, referred to as the "MDU Resources Assets" and "MDU Resources Liabilities," respectively) will be retained by or transferred to MDU Resources, as applicable.
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The Knife River Holding Company Liabilities.
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•
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The failure of Knife River Holding Company or any other person to pay, perform or otherwise promptly discharge any of the Knife River Holding Company Liabilities, in accordance with their respective terms, whether prior to, at or after the distribution.
|
•
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Except to the extent relating to a MDU Resources Liability, any guarantee, indemnification or contribution obligation for Knife River Holding Company's benefit by MDU Resources that survives the distribution.
|
•
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Any breach by Knife River Holding Company of the separation agreement or any of the ancillary agreements.
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•
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Any untrue statement or alleged untrue statement or omission or alleged omission of material fact in the registration statement of which this information statement forms a part, or in this information statement (as amended or supplemented), other than any such statements or omissions directly relating to information regarding MDU Resources, provided to Knife River Holding Company by MDU Resources, for inclusion therein.
|
•
|
The MDU Resources Liabilities.
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•
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The failure of MDU Resources or any other person to pay, perform, or otherwise promptly discharge any of the MDU Resources Liabilities, in accordance with their respective terms whether prior to, at, or after the distribution.
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Except to the extent relating to a Knife River Holding Company Liability, any guarantee, indemnification or contribution obligation for the benefit of MDU Resources by Knife River Holding Company that survives the distribution.
|
•
|
Any breach by MDU Resources of the separation agreement or any of the ancillary agreements.
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•
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Any untrue statement or alleged untrue statement or omission or alleged omission of a material fact directly relating to information regarding MDU Resources, provided to Knife River Holding Company by MDU Resources, for inclusion in the registration statement of which this information statement forms a part, or in this information statement (as amended or supplemented).
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An individual who is a citizen or a resident of the United States.
|
•
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A corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States, any state thereof or the District of Columbia.
|
•
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An estate, the income of which is subject to U.S. federal income taxation regardless of its source.
|
•
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A trust, if (i) a court within the United States is able to exercise primary supervision over its administration and one or more United States persons have the authority to control all of its substantial decisions; or (ii) it has a valid election in place under applicable United States Treasury Regulations to be treated as a U.S. person.
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•
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Subject to the discussion below regarding Section 355(e) of the Code, neither Knife River Holding Company nor MDU Resources will recognize any gain or loss upon the separation and the distribution of Knife River Holding Company common stock, and no amount will be includable in the income of MDU Resources or Knife River Holding Company as a result of the separation and the distribution other than taxable income or gain possibly arising with respect to the retained shares of Knife River Holding Company, from internal reorganizations undertaken in connection with the separation and distribution or with respect to any items required to be taken into account under U.S. Treasury Regulations relating to consolidated federal income tax returns.
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•
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No gain or loss will be recognized by (and no amount will be included in the income of) U.S. holders of MDU Resources common stock upon the receipt of Knife River Holding Company common stock in the distribution, except with respect to any cash received in lieu of fractional shares of Knife River Holding Company common stock (as described below).
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•
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The aggregate tax basis of the MDU Resources common stock and Knife River Holding Company common stock received in the distribution (including any fractional share interest in Knife River Holding Company common stock for which cash is received) in the hands of each U.S. holder of MDU Resources common stock immediately after the distribution will equal the aggregate tax basis of MDU Resources common stock held by the U.S. holder immediately before the distribution, allocated
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•
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The holding period of Knife River Holding Company common stock received by each U.S. holder of MDU Resources common stock in the distribution (including any fractional share interest in Knife River Holding Company common stock for which cash is received) will generally include the holding period at the time of the distribution for the MDU Resources common stock with respect to which the distribution is made.
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each person who will beneficially own more than five percent of Knife River Holding Company common stock;
|
•
|
each director of Knife River Holding Company;
|
•
|
each executive officer of Knife River Holding Company; and
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•
|
all expected directors and executive officers of Knife River Holding Company as a group.
|
Name and Address of Beneficial Owner
| | |
Amount and Nature
of Beneficial
Ownership1 | | |
Percent
of Class1 |
MDU Resources Group, Inc.(2) | | |
5,656,621
| | |
10.0%
|
The Vanguard Group, Inc.(3) | | |
5,505,325
| | |
9.7%
|
BlackRock, Inc.(4) | | |
4,706,913
| | |
8.3%
|
State Street Corporation(5) | | |
4,054,060
| | |
7.2%
|
Thomas Everist(6) | | |
166,788
| | |
*
|
German Carmona Alvarez(6) | | |
204
| | |
*
|
Patricia L. Moss(6) | | |
23,053
| | |
*
|
William Sandbrook(6) | | |
-
| | |
*
|
Karen B. Fagg(6) | | |
23,206
| | |
*
|
Brian R. Gray(6) | | |
8,015
| | |
*
|
Nathan W. Ring(6) | | |
5,531
| | |
*
|
Karl A. Liepitz(6) | | |
1,834
| | |
*
|
Trevor J. Hastings(6) | | |
11,502
| | |
*
|
Nancy K. Christenson(6) | | |
31,255
| | |
*
|
Glenn R Pladsen(6) | | |
8,703
| | |
*
|
John F. Quade(6) | | |
1,284
| | |
*
|
Marney L. Kadrmas(6) | | |
655
| | |
*
|
All directors and executive officers as a group
| | |
282,030
| | |
*
|
* |
Less than one percent.
|
1. |
The figures in this table exclude shares of Knife River Holding Company to be issued in settlement of the hook stock exchange. For more information on the hook stock exchange, see the section entitled "Capitalization".
|
2. |
The address of MDU Resources is 1200 West Century Avenue, P.O. Box 5650, Bismarck, North Dakota 58506. Pursuant to the stockholder and registration rights agreement, MDU Resources will (i) agree to vote any shares of Knife River Holding Company common stock that it retains in proportion to the votes cast by Knife River Holding Company's other stockholders and (ii) grant Knife
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3. |
Based on the Schedule 13G/A filed with the SEC on February 9, 2023 by The Vanguard Group, Inc. ("Vanguard") with respect to MDU resources common stock. Vanguard reported sole dispositive power with respect to 21,738,805 shares of MDU Resources common stock, shared dispositive power with respect to 282,495 shares of MDU Resources common stock, and shared voting power with respect to 104,218 shares of MDU Resources common stock. The address of The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355.
|
4. |
Based on the Schedule 13G/A filed with the SEC on January 24, 2023 by BlackRock, Inc. and certain subsidiaries ("BlackRock") with respect to MDU Resources common stock. BlackRock reported sole voting power with respect to 18,214,136 shares of MDU Resources common stock and sole dispositive power with respect to 18,827,655 shares of MDU Resources common stock as the parent holding company or control person of BlackRock Life Limited; BlackRock Advisors, LLC; Aperio Group, LLC; BlackRock (Netherlands) B.V.; BlackRock Fund Advisors; BlackRock Institutional Trust Company, National Association; BlackRock Asset Management Ireland Limited; BlackRock Financial Management, Inc.; BlackRock Asset Management Schweiz AG; BlackRock Investment Management, LLC; BlackRock Investment Management (UK) Limited; BlackRock Asset Management Canada Limited; BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited; BlackRock Advisors (UK) Limited; and BlackRock Fund Managers Ltd. The address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10022.
|
5. |
Based on the Schedule 13G/A filed with the SEC on February 10, 2023 by State Street Corporation and certain subsidiaries ("State Street") with respect to MDU Resources common stock. State Street reported shared voting power with respect to 15,823,579 shares of MDU Resources common stock and shared dispositive power with respect to 16,216,240 shares of MDU Resources common stock as the parent holding company or control person of SSGA Funds Management, Inc.; State Street Global Advisors, Limited; State Street Global Advisors, LTD; State Street Global Advisors Europe Limited; State Street Global Advisors Asia, Limited; and State Street Global Advisors Trust Company. The address of State Street Corporation is State Street Financial Center, One Lincoln Street, Boston, MA 02111.
|
6. |
The business address for these persons is c/o Knife River Holding Company, 1150 West Century Avenue, Bismarck, North Dakota 58503, Attention: Secretary.
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Page
| |
Audited Annual Consolidated Financial Statements: | | | |
Report of Independent Registered Public Accounting Firm | | |
F-2 |
Consolidated Statements of Income | | |
F-5 |
Consolidated Statements of Comprehensive Income | | |
F-6 |
Consolidated Balance Sheets | | |
F-7 |
Consolidated Statement of Equity | | |
F-8 |
Consolidated Statements of Cash Flows | | |
F-9 |
Notes to Consolidated Financial Statements | | |
F-10 |
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We tested the operating effectiveness of management's controls over contracting services revenue, including controls over management's estimation of total costs and profit for the performance obligations.
|
•
|
We developed an expectation of the amount of contracting services revenue for certain performance obligations based on prior year markups, and taking into account current year events, applied to the contracting services contract costs in the current year and compared our expectation to the amount of contracting services revenue recorded by management.
|
•
|
We selected a sample of contracting services contracts and performed the following:
|
•
|
Evaluated whether the contracts were properly included in management's calculation of contracting services revenue based on the terms and conditions of each contract, including whether continuous transfer of control to the customer occurred as progress was made toward fulfilling the performance obligation.
|
•
|
Observed the work sites and inspected the progress to completion for certain construction contracts.
|
•
|
Compared the transaction prices to the consideration expected to be received based on current rights and obligations under the contracts and any modifications that were agreed upon with the customers.
|
•
|
Tested management's identification of distinct performance obligations by evaluating whether the underlying goods and services were highly interdependent and interrelated.
|
•
|
Tested the accuracy and completeness of the costs incurred to date for the performance obligation.
|
•
|
Evaluated the estimates of total cost and profit for the performance obligation by:
|
•
|
Comparing total costs incurred to date to the costs management estimated to be incurred to date and selecting specific cost types to compare costs incurred to date to management's estimated costs at completion.
|
•
|
Evaluating management's ability to achieve the estimates of total cost and profit by performing corroborating inquiries with the Company's project managers and engineers, and comparing the estimates to management's work plans, engineering specifications, and supplier contracts.
|
•
|
Comparing management's estimates for the selected contracts to costs and profits of similar performance obligations, when applicable.
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|
Tested the mathematical accuracy of management's calculation of contracting services revenue for the performance obligation.
|
•
|
We evaluated management's ability to estimate total costs and profits accurately by comparing actual costs and profits to management's historical estimates for performance obligations that have been fulfilled.
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Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
|
| |
(In thousands, except per share amounts)
| |||||||
Revenue: | | | | | | | |||
Construction materials
| | |
$1,347,008
| | |
$1,211,459
| | |
$1,108,337
|
Contracting services
| | |
1,187,721
| | |
1,017,471
| | |
1,069,665
|
Total revenue
| | |
2,534,729
| | |
2,228,930
| | |
2,178,002
|
Cost of revenue: | | | | | | | |||
Construction materials
| | |
1,086,193
| | |
965,028
| | |
843,127
|
Contracting services
| | |
1,087,642
| | |
916,953
| | |
964,297
|
Total cost of revenue
| | |
2,173,835
| | |
1,881,981
| | |
1,807,424
|
Gross profit
| | |
360,894
| | |
346,949
| | |
370,578
|
Selling, general and administrative expenses
| | |
166,599
| | |
155,872
| | |
156,080
|
Operating income
| | |
194,295
| | |
191,077
| | |
214,498
|
Interest expense
| | |
30,121
| | |
19,218
| | |
20,577
|
Other (expense) income
| | |
(5,353)
| | |
1,355
| | |
835
|
Income before income taxes
| | |
158,821
| | |
173,214
| | |
194,756
|
Income taxes
| | |
42,601
| | |
43,459
| | |
47,431
|
Net income
| | |
$116,220
| | |
$129,755
| | |
$147,325
|
Earnings per share - basic
| | |
$1,452.74
| | |
$1,621.93
| | |
$1,841.56
|
Weighted average common shares outstanding - basic
| | |
80
| | |
80
| | |
80
|
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
|
| |
(In thousands)
| |||||||
Net income
| | |
$116,220
| | |
$129,755
| | |
$147,325
|
Other comprehensive income (loss): | | | | | | | |||
Reclassification adjustment for loss on derivative instruments included in net income, net of tax of $107, $107 and $107 in 2022, 2021 and 2020, respectively
| | |
328
| | |
332
| | |
328
|
Postretirement liability adjustment: | | | | | | | |||
Postretirement liability gains (losses) arising during the period, net of tax of $3,586, $1,011 and $(683) in 2022, 2021 and 2020, respectively
| | |
10,935
| | |
3,041
| | |
(1,898)
|
Amortization of postretirement liability losses included in net periodic benefit cost, net of tax of $292, $363 and $351 in 2022, 2021 and 2020, respectively
| | |
875
| | |
1,090
| | |
1,071
|
Postretirement liability adjustment
| | |
11,810
| | |
4,131
| | |
(827)
|
Other comprehensive income (loss)
| | |
12,138
| | |
4,463
| | |
(499)
|
Comprehensive income attributable to common stockholders
| | |
$128,358
| | |
$134,218
| | |
$146,826
|
TABLE OF CONTENTS
December 31,
| | |
2022
| | |
2021
|
| |
(In thousands, except shares and per share amounts)
| ||||
Assets | | | | | ||
Current assets: | | | | | ||
Cash and cash equivalents
| | |
$10,090
| | |
$13,848
|
Receivables, net
| | |
210,157
| | |
188,649
|
Costs and estimated earnings in excess of billings on uncompleted contracts
| | |
31,145
| | |
22,005
|
Due from related-party
| | |
16,050
| | |
8,046
|
Inventories
| | |
323,277
| | |
291,445
|
Prepayments and other current assets
| | |
17,848
| | |
18,637
|
Total current assets
| | |
608,567
| | |
542,630
|
Noncurrent assets: | | | | | ||
Net property, plant and equipment
| | |
1,315,213
| | |
1,250,310
|
Goodwill
| | |
274,540
| | |
276,426
|
Other intangible assets, net
| | |
13,430
| | |
16,228
|
Operating lease right-of-use assets
| | |
45,873
| | |
50,128
|
Investments and other
| | |
36,696
| | |
38,476
|
Due from related-party - noncurrent
| | |
-
| | |
7,626
|
Total noncurrent assets
| | |
1,685,752
| | |
1,639,194
|
Total assets
| | |
$2,294,319
| | |
$2,181,824
|
Liabilities and Stockholder's Equity | | | | | ||
Current liabilities: | | | | | ||
Long-term debt - current portion
| | |
$211
| | |
$233
|
Related-party notes payable - current portion
| | |
238,000
| | |
108,000
|
Accounts payable
| | |
87,370
| | |
82,598
|
Billings in excess of costs and estimated earnings on uncompleted contracts
| | |
39,843
| | |
32,348
|
Accrued compensation
| | |
29,192
| | |
25,731
|
Due to related-party
| | |
20,286
| | |
18,465
|
Current operating lease liabilities
| | |
13,210
| | |
14,999
|
Other accrued liabilities
| | |
88,778
| | |
74,827
|
Total current liabilities
| | |
516,890
| | |
357,201
|
Noncurrent liabilities: | | | | | ||
Long-term debt
| | |
427
| | |
703
|
Related-party notes payable
| | |
446,449
| | |
575,457
|
Deferred income taxes
| | |
175,804
| | |
168,526
|
Noncurrent operating lease liabilities
| | |
32,663
| | |
35,129
|
Other
| | |
93,497
| | |
91,964
|
Total liabilities
| | |
1,265,730
| | |
1,228,980
|
Commitments and contingencies
| | | | | ||
Stockholder's equity: | | | | | ||
Common stock, $10 par value; 80,000 shares authorized, issued and outstanding
| | |
800
| | |
800
|
Other paid-in capital
| | |
549,106
| | |
549,714
|
Retained earnings
| | |
494,661
| | |
430,446
|
Parent stock held by subsidiary
| | |
(3,626)
| | |
(3,626)
|
Accumulated other comprehensive loss
| | |
(12,352)
| | |
(24,490)
|
Total stockholder's equity
| | |
1,028,589
| | |
952,844
|
Total liabilities and stockholder's equity
| | |
$2,294,319
| | |
$2,181,824
|
TABLE OF CONTENTS
Years ended December 31, 2022,
2021 and 2020
| | |
Common Stock
| | |
Other Paid-in
Capital
| | |
Retained
Earnings
| | |
Parent Stock
Held by
Subsidiary
| | |
Accumulated
Other
Comprehensive
Loss
| | |
Total
| |||
|
Shares
| | |
Amount
| | ||||||||||||||||
| |
(In thousands, except shares)
| |||||||||||||||||||
Balance at December 31, 2019
| | |
80,000
| | |
$800
| | |
$548,631
| | |
$260,729
| | |
$(3,626)
| | |
$(28,454)
| | |
$778,080
|
Net income
| | |
-
| | |
-
| | |
-
| | |
147,325
| | |
-
| | |
-
| | |
147,325
|
Other comprehensive loss
| | |
-
| | |
-
| | |
-
| | |
-
| | |
-
| | |
(499)
| | |
(499)
|
Net transfers to Parent
| | |
-
| | |
-
| | |
1,631
| | |
(48,293)
| | |
-
| | |
-
| | |
(46,662)
|
Balance at December 31, 2020
| | |
80,000
| | |
$800
| | |
$550,262
| | |
$359,761
| | |
$(3,626)
| | |
$(28,953)
| | |
$878,244
|
Net income
| | |
-
| | |
-
| | |
-
| | |
129,755
| | |
-
| | |
-
| | |
129,755
|
Other comprehensive income
| | |
-
| | |
-
| | |
-
| | |
-
| | |
-
| | |
4,463
| | |
4,463
|
Net transfers to Parent
| | |
-
| | |
-
| | |
(548)
| | |
(59,070)
| | |
-
| | |
-
| | |
(59,618)
|
Balance at December 31, 2021
| | |
80,000
| | |
$800
| | |
$549,714
| | |
$430,446
| | |
$(3,626)
| | |
$(24,490)
| | |
$952,844
|
Net income
| | |
-
| | |
-
| | |
-
| | |
116,220
| | |
-
| | |
-
| | |
116,220
|
Other comprehensive income
| | |
-
| | |
-
| | |
-
| | |
-
| | |
-
| | |
12,138
| | |
12,138
|
Net transfers to Parent
| | |
-
| | |
-
| | |
(608)
| | |
(52,005)
| | |
-
| | |
-
| | |
(52,613)
|
Balance at December 31, 2022
| | |
80,000
| | |
$800
| | |
$549,106
| | |
$494,661
| | |
$(3,626)
| | |
$(12,352)
| | |
$1,028,589
|
TABLE OF CONTENTS
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
|
| |
(In thousands)
| |||||||
Operating activities: | | | | | | | |||
Net income
| | |
$116,220
| | |
$129,755
| | |
$147,325
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | | | | | |||
Depreciation, depletion and amortization
| | |
117,798
| | |
100,974
| | |
89,626
|
Deferred income taxes
| | |
2,078
| | |
32,858
| | |
1,753
|
Provision for credit losses
| | |
538
| | |
48
| | |
1,158
|
Amortization of debt issuance costs
| | |
483
| | |
402
| | |
403
|
Employee stock-based compensation costs
| | |
1,272
| | |
1,852
| | |
1,781
|
Pension and postretirement benefit plan net periodic benefit cost
| | |
1,306
| | |
1,092
| | |
1,502
|
Unrealized (gains) losses on investments
| | |
2,525
| | |
(1,632)
| | |
(2,844)
|
Gains on sale of assets
| | |
(14,092)
| | |
(6,638)
| | |
(6,116)
|
Equity in (loss) earnings of unconsolidated affiliates
| | |
438
| | |
(373)
| | |
75
|
Changes in current assets and liabilities, net of acquisitions: | | | | | | | |||
Receivables
| | |
(32,506)
| | |
15,357
| | |
7,902
|
Due from related-party
| | |
(8,004)
| | |
2,889
| | |
(7,021)
|
Inventories
| | |
(31,033)
| | |
(42,441)
| | |
(11,288)
|
Other current assets
| | |
44
| | |
(4,574)
| | |
1,252
|
Accounts payable
| | |
17,489
| | |
(13,899)
| | |
(10,662)
|
Due to related-party
| | |
3,578
| | |
(957)
| | |
(799)
|
Other current liabilities
| | |
21,417
| | |
(21,011)
| | |
12,855
|
Pension and postretirement benefit plan contributions
| | |
(426)
| | |
(392)
| | |
(348)
|
Other noncurrent changes
| | |
8,319
| | |
(12,070)
| | |
5,850
|
Net cash provided by operating activities
| | |
207,444
| | |
181,240
| | |
232,404
|
Investing activities: | | | | | | | |||
Capital expenditures
| | |
(178,162)
| | |
(174,229)
| | |
(135,870)
|
Acquisitions, net of cash acquired
| | |
1,745
| | |
(235,218)
| | |
(56,681)
|
Net proceeds from sale or disposition of property and other
| | |
22,878
| | |
12,017
| | |
8,205
|
Investments
| | |
(2,339)
| | |
(837)
| | |
(1,509)
|
Net cash used in investing activities
| | |
(155,878)
| | |
(398,267)
| | |
(185,855)
|
Financing activities: | | | | | | | |||
Issuance of current related-party notes
| | |
208,000
| | |
-
| | |
-
|
Repayment of long-term debt
| | |
(298)
| | |
(221)
| | |
(227)
|
Debt issuance costs
| | |
(807)
| | |
-
| | |
(28)
|
Issuance (repayment) of long-term related-party notes, net
| | |
(207,007)
| | |
281,983
| | |
(2,262)
|
Net transfers to Parent
| | |
(55,212)
| | |
(57,959)
| | |
(45,430)
|
Net cash provided by (used in) financing activities
| | |
(55,324)
| | |
223,803
| | |
(47,947)
|
Increase (decrease) in cash and cash equivalents
| | |
(3,758)
| | |
6,776
| | |
(1,398)
|
Cash and cash equivalents - beginning of year
| | |
13,848
| | |
7,072
| | |
8,470
|
Cash and cash equivalents - end of year
| | |
$10,090
| | |
$13,848
| | |
$7,072
|
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
Standard
| | |
Description
| | |
Effective Date
| | |
Impact on financial
statements/disclosures
|
Recently adopted accounting standards updates (ASU's)
| |||||||||
ASU 2021-10 - Government Assistance
| | |
In November 2021, the FASB issued guidance on modifying the disclosure requirements to increase the transparency of government assistance including disclosure of the types of assistance, an entity's accounting for the assistance and the effect of the assistance on an entity's financial statements.
| | |
January 1, 2022
| | |
The Company determined the guidance did not have a material impact on its disclosures for the year ended December 31, 2022.
|
TABLE OF CONTENTS
TABLE OF CONTENTS
| |
2022
| | |
2021
| |
| |
(In thousands)
| ||||
Trade receivables
| | |
$104,347
| | |
$98,114
|
Contracting services contract receivables
| | |
82,428
| | |
70,768
|
Retention receivables
| | |
28,859
| | |
25,173
|
Receivables, gross
| | |
215,634
| | |
194,055
|
Less expected credit loss
| | |
5,477
| | |
5,406
|
Receivables, net
| | |
$210,157
| | |
$188,649
|
| |
Pacific
| | |
Northwest
| | |
Mountain
| | |
North Central
| | |
Other
| | |
Total
| |
| |
(In thousands)
| ||||||||||||||||
At December 31, 2020
| | |
$2,696
| | |
$824
| | |
$1,258
| | |
$1,179
| | |
$207
| | |
$6,164
|
Current expected credit loss provision*
| | |
(543)
| | |
(112)
| | |
577
| | |
106
| | |
40
| | |
68
|
Less write-offs charged against the allowance
| | |
101
| | |
200
| | |
225
| | |
133
| | |
167
| | |
826
|
At December 31, 2021
| | |
$2,052
| | |
$512
| | |
$1,610
| | |
$1,152
| | |
$80
| | |
$5,406
|
Current expected credit loss provision
| | |
27
| | |
946
| | |
(206)
| | |
(253)
| | |
24
| | |
538
|
Less write-offs charged against the allowance
| | |
34
| | |
205
| | |
126
| | |
60
| | |
42
| | |
467
|
At December 31, 2022
| | |
$2,045
| | |
$1,253
| | |
$1,278
| | |
$839
| | |
$62
| | |
$5,477
|
* |
Includes impacts from businesses acquired.
|
| |
2022
| | |
2021
| |
| |
(In thousands)
| ||||
Finished products
| | |
$211,496
| | |
$195,616
|
Raw materials
| | |
78,571
| | |
68,504
|
Supplies and parts
| | |
33,210
| | |
27,325
|
Total
| | |
$323,277
| | |
$291,445
|
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
TABLE OF CONTENTS
Year ended December 31, 2022
| | |
Pacific
| | |
Northwest
| | |
Mountain
| | |
North Central
| | |
All Other
| | |
Total
|
| |
(In thousands)
| ||||||||||||||||
Aggregates
| | |
$92,266
| | |
$171,633
| | |
$83,343
| | |
$96,528
| | |
$52,891
| | |
$496,661
|
Asphalt
| | |
35,735
| | |
97,299
| | |
93,263
| | |
174,207
| | |
26,964
| | |
427,468
|
Ready-mix concrete
| | |
127,569
| | |
157,951
| | |
106,654
| | |
158,552
| | |
58,783
| | |
609,509
|
Contracting services public-sector
| | |
81,989
| | |
173,981
| | |
249,573
| | |
342,370
| | |
70,117
| | |
918,030
|
Contracting services private-sector
| | |
47,497
| | |
88,713
| | |
119,136
| | |
13,342
| | |
1,003
| | |
269,691
|
Other
| | |
183,229
| | |
14,844
| | |
36
| | |
24,948
| | |
184,195
| | |
407,252
|
Internal sales
| | |
(99,696)
| | |
(105,647)
| | |
(110,095)
| | |
(202,636)
| | |
(75,808)
| | |
(593,882)
|
Revenues from contracts with customers
| | |
$468,589
| | |
$598,774
| | |
$541,910
| | |
$607,311
| | |
$318,145
| | |
$2,534,729
|
Year ended December 31, 2021
| | |
Pacific
| | |
Northwest
| | |
Mountain
| | |
North Central
| | |
All Other
| | |
Total
|
| |
(In thousands)
| ||||||||||||||||
Aggregates
| | |
$89,913
| | |
$135,182
| | |
$72,567
| | |
$97,515
| | |
$48,833
| | |
$444,010
|
Asphalt
| | |
26,348
| | |
78,937
| | |
69,310
| | |
139,934
| | |
25,317
| | |
339,846
|
Ready-mix concrete
| | |
123,905
| | |
152,079
| | |
100,412
| | |
157,237
| | |
50,756
| | |
584,389
|
Contracting services public-sector
| | |
83,014
| | |
118,970
| | |
211,603
| | |
292,015
| | |
71,156
| | |
776,758
|
Contracting services private-sector
| | |
44,602
| | |
68,171
| | |
112,058
| | |
14,891
| | |
991
| | |
240,713
|
Other
| | |
147,484
| | |
12,786
| | |
91
| | |
22,803
| | |
161,094
| | |
344,258
|
Internal sales
| | |
(88,037)
| | |
(91,184)
| | |
(86,498)
| | |
(162,734)
| | |
(72,591)
| | |
(501,044)
|
Revenues from contracts with customers
| | |
$427,229
| | |
$474,941
| | |
$479,543
| | |
$561,661
| | |
$285,556
| | |
$2,228,930
|
Year ended December 31, 2020
| | |
Pacific
| | |
Northwest
| | |
Mountain
| | |
North Central
| | |
All Other
| | |
Total
|
| |
(In thousands)
| ||||||||||||||||
Aggregates
| | |
$88,020
| | |
$112,983
| | |
$59,980
| | |
$94,785
| | |
$50,789
| | |
$406,557
|
Asphalt
| | |
25,649
| | |
60,507
| | |
72,222
| | |
156,376
| | |
35,146
| | |
349,900
|
Ready-mix concrete
| | |
134,692
| | |
144,256
| | |
83,104
| | |
142,398
| | |
42,566
| | |
547,016
|
Contracting services public-sector
| | |
95,730
| | |
107,698
| | |
227,866
| | |
330,268
| | |
92,434
| | |
853,996
|
Contracting services private-sector
| | |
49,384
| | |
50,635
| | |
99,300
| | |
14,632
| | |
1,718
| | |
215,669
|
Other
| | |
160,063
| | |
14,076
| | |
34
| | |
24,857
| | |
157,364
| | |
356,394
|
Internal sales
| | |
(99,220)
| | |
(76,432)
| | |
(91,654)
| | |
(195,843)
| | |
(88,381)
| | |
(551,530)
|
Revenues from contracts with customers
| | |
$454,318
| | |
$413,723
| | |
$450,852
| | |
$567,473
| | |
$291,636
| | |
$2,178,002
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| |
| |
(In thousands)
| ||||
Costs incurred on uncompleted contracts
| | |
$1,217,480
| | |
$1,190,922
|
Estimated earnings
| | |
153,317
| | |
158,836
|
| |
1,370,797
| | |
1,349,758
| |
Less billings to date
| | |
(1,379,495)
| | |
(1,360,101)
|
Net contract liability
| | |
$(8,698)
| | |
$(10,343)
|
| |
2022
| | |
2021
| | |
Change
| | |
Location on Consolidated Balance Sheet
| |
| |
(In thousands)
| | | ||||||||
Contract assets
| | |
$31,145
| | |
$22,005
| | |
$9,140
| | |
Costs and estimated earnings in excess of billings on uncompleted contracts
|
Contract liabilities
| | |
(39,843)
| | |
(32,348)
| | |
(7,495)
| | |
Billings in excess of costs and estimated earnings on uncompleted contracts
|
Net contract liabilities
| | |
$(8,698)
| | |
$(10,343)
| | |
$1,645
| | |
| |
2021
| | |
2020
| | |
Change
| | |
Location on Consolidated Balance Sheet
| |
| |
(In thousands)
| | | ||||||||
Contract assets
| | |
$22,005
| | |
$20,659
| | |
$1,346
| | |
Costs and estimated earnings in excess of billings on uncompleted contracts
|
Contract liabilities
| | |
(32,348)
| | |
(34,115)
| | |
1,767
| | |
Billings in excess of costs and estimated earnings on uncompleted contracts
|
Net contract liabilities
| | |
$(10,343)
| | |
$(13,456)
| | |
$3,113
| | |
TABLE OF CONTENTS
•
|
Allied Concrete and Supply Co., a producer of ready-mixed concrete in California, acquired by the Pacific segment in December 2022. At December 31, 2022, the purchase price allocation was preliminary and will be finalized within 12 months of the acquisition date.
|
•
|
Baker Rock Resources and Oregon Mainline Paving, two construction materials companies located around the Portland, Oregon metro area, acquired by the Northwest segment in November 2021. At September 30, 2022, the purchase price allocation was settled with no material adjustments made to the provisional accounting.
|
•
|
Mt. Hood Rock, a construction aggregates business in Oregon, acquired by the Northwest segment in April 2021. At March 31, 2022, the purchase price allocation was settled with no material adjustments made to the provisional accounting.
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| | |
Weighted Average
Depreciable Life in
Years
| |
| |
(In thousands)
| | | |||||
Land
| | |
$150,809
| | |
$149,066
| | |
-
|
Aggregate reserves
| | |
592,097
| | |
584,683
| | |
*
|
Buildings and improvements
| | |
165,833
| | |
149,262
| | |
21
|
Machinery, vehicles and equipment
| | |
1,492,506
| | |
1,414,260
| | |
12
|
Construction in progress
| | |
88,163
| | |
50,426
| | |
-
|
Less: accumulated depreciation and depletion
| | |
1,174,195
| | |
1,097,387
| | | |
Net property, plant and equipment
| | |
$1,315,213
| | |
$1,250,310
| | |
* |
Depleted on the units-of-production method based on proven and probable aggregate reserves.
|
| |
Balance at
January 1, 2022
| | |
Goodwill Acquired
During the Year
| | |
Measurement Period
Adjustments
| | |
Balance at
December 31, 2022
| |
| |
(In thousands)
| ||||||||||
Pacific
| | |
$38,101
| | |
$238
| | |
$-
| | |
$38,339
|
Northwest
| | |
93,102
| | |
-
| | |
(2,124)
| | |
90,978
|
Mountain
| | |
26,816
| | |
-
| | |
-
| | |
26,816
|
North Central
| | |
75,879
| | |
-
| | |
-
| | |
75,879
|
All other
| | |
42,528
| | |
-
| | |
-
| | |
42,528
|
Total
| | |
$276,426
| | |
$238
| | |
$(2,124)
| | |
$274,540
|
| |
Balance at
January 1, 2021
| | |
Goodwill Acquired
During the Year
| | |
Measurement Period
Adjustments
| | |
Balance at
December 31, 2021
| |
| |
(In thousands)
| ||||||||||
Pacific
| | |
$38,101
| | |
$-
| | |
$-
| | |
$38,101
|
Northwest
| | |
42,462
| | |
50,640
| | |
-
| | |
93,102
|
Mountain
| | |
27,033
| | |
-
| | |
(217)
| | |
26,816
|
North Central
| | |
75,879
| | |
-
| | |
-
| | |
75,879
|
All other
| | |
42,528
| | |
-
| | |
-
| | |
42,528
|
Total
| | |
$226,003
| | |
$50,640
| | |
$(217)
| | |
$276,426
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| |
| |
(In thousands)
| ||||
Customer relationships
| | |
$18,540
| | |
$18,540
|
Less accumulated amortization
| | |
7,367
| | |
5,633
|
| |
11,173
| | |
12,907
| |
Noncompete agreements
| | |
4,039
| | |
4,039
|
Less accumulated amortization
| | |
2,985
| | |
2,471
|
| |
1,054
| | |
1,568
| |
Other
| | |
5,279
| | |
9,579
|
Less accumulated amortization
| | |
4,076
| | |
7,826
|
| |
1,203
| | |
1,753
| |
Total
| | |
$13,430
| | |
$16,228
|
TABLE OF CONTENTS
| |
Fair Value Measurements
at December 31, 2022, Using
| | | ||||||||
| |
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
| | |
Significant Other
Observable Inputs
(Level 2)
| | |
Significant
Unobservable
Inputs (Level 3)
| | |
Balance at
December 31, 2022
| |
| |
(In thousands)
| ||||||||||
Assets: | | | | | | | | | ||||
Money market funds
| | |
$-
| | |
$2,448
| | |
$-
| | |
$2,448
|
Insurance contracts*
| | |
-
| | |
20,083
| | |
-
| | |
20,083
|
Total assets measured at fair value
| | |
$-
| | |
$22,531
| | |
$-
| | |
$22,531
|
* |
The insurance contracts invest approximately 63 percent in fixed-income investments, 15 percent in common stock of large-cap companies, 8 percent in common stock of mid-cap companies, 6 percent in common stock of small-cap companies, 6 percent in target date investments and 2 percent in cash equivalents.
|
| |
Fair Value Measurements
at December 31, 2021, Using
| | | ||||||||
| |
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
| | |
Significant Other
Observable Inputs
(Level 2)
| | |
Significant
Unobservable
Inputs (Level 3)
| | |
Balance at
December 31, 2021
| |
| |
(In thousands)
| ||||||||||
Assets: | | | | | | | | | ||||
Money market funds
| | |
$-
| | |
$3,044
| | |
$-
| | |
$3,044
|
Insurance contracts*
| | |
-
| | |
21,629
| | |
-
| | |
21,629
|
Total assets measured at fair value
| | |
$-
| | |
$24,673
| | |
$-
| | |
$24,673
|
* |
The insurance contracts invest approximately 61 percent in fixed-income investments, 17 percent in common stock of large-cap companies, 8 percent in common stock of mid-cap companies, 7 percent in common stock of small-cap companies, 5 percent in target date investments and 2 percent in cash equivalents.
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| |||||||
Lease costs: | | | | | | | |||
Operating lease cost
| | |
$17,941
| | |
$21,914
| | |
$25,303
|
Variable lease cost
| | |
98
| | |
84
| | |
150
|
Short-term lease cost
| | |
55,871
| | |
53,016
| | |
59,233
|
Total lease costs
| | |
$73,910
| | |
$75,014
| | |
$84,686
|
| |
2022
| | |
2021
| |
| |
(Dollars in thousands)
| ||||
Weighted average remaining lease term
| | |
2.03 years
| | |
1.63 years
|
Weighted average discount rate
| | |
4.05%
| | |
3.63%
|
Cash paid for amounts included in the measurement of lease liabilities
| | |
$17,941
| | |
$21,914
|
| |
(In thousands)
| |
2023
| | |
$15,129
|
2024
| | |
10,902
|
2025
| | |
7,928
|
2026
| | |
4,528
|
2027
| | |
2,983
|
Thereafter
| | |
11,913
|
Total
| | |
53,383
|
Less discount
| | |
7,510
|
Total operating lease liabilities
| | |
$45,873
|
| |
2022
| | |
2021
| |
| |
(In thousands)
| ||||
Balance at beginning of year
| | |
$33,406
| | |
$30,932
|
Liabilities incurred
| | |
4,657
| | |
1,655
|
Liabilities acquired
| | |
-
| | |
1,805
|
Liabilities settled
| | |
(2,117)
| | |
(2,613)
|
Accretion expense
| | |
1,415
| | |
1,627
|
Balance at end of year
| | |
$37,361
| | |
$33,406
|
TABLE OF CONTENTS
Grant Date
| | |
Performance Period
| | |
Target Grant of Shares
|
February 2021
| | |
2021-2023
| | |
34,655
|
February 2022
| | |
2022-2024
| | |
34,946
|
| |
2022
| | |
2021
| | |
2020
| |
Weighted average grant-date fair value
| | |
$36.25
| | |
$37.96
| | |
$40.75
|
Blended volatility range
| | |
24.07% - 31.41%
| | |
35.37% - 46.35%
| | |
15.30% - 15.97%
|
Risk-free interest rate range
| | |
.71% - 1.68%
| | |
.02% - .20%
| | |
1.45% - 1.62%
|
Weighted average discounted dividends per share
| | |
$2.93
| | |
$3.16
| | |
$2.91
|
TABLE OF CONTENTS
| |
Number of Shares
| | |
Weighted Average
Grant-Date
Fair Value
| |
Nonvested at beginning of period
| | |
69,250
| | |
$34.42
|
Granted
| | |
34,946
| | |
31.99
|
Additional performance shares earned (unearned)
| | |
(2,874)
| | |
31.63
|
Less: | | | | | ||
Vested
| | |
31,721
| | |
36.60
|
Nonvested at end of period
| | |
69,601
| | |
$32.32
|
| |
Net Unrealized Loss on
Derivative Instruments
Qualifying as Hedges
| | |
Post- retirement
Liability
Adjustment
| | |
Total Accumulated
Other Comprehensive
Loss
| |
| |
(In thousands)
| |||||||
At December 31, 2020
| | |
$(750)
| | |
$(28,203)
| | |
$(28,953)
|
Other comprehensive income before reclassifications
| | |
-
| | |
3,041
| | |
3,041
|
Amounts reclassified from accumulated other comprehensive loss
| | |
332
| | |
1,090
| | |
1,422
|
Net current-period other comprehensive income
| | |
332
| | |
4,131
| | |
4,463
|
At December 31, 2021
| | |
(418)
| | |
(24,072)
| | |
(24,490)
|
Other comprehensive income before reclassifications
| | |
-
| | |
10,935
| | |
10,935
|
Amounts reclassified from accumulated other comprehensive loss
| | |
328
| | |
875
| | |
1,203
|
Net current-period other comprehensive income
| | |
328
| | |
11,810
| | |
12,138
|
At December 31, 2022
| | |
$(90)
| | |
$(12,262)
| | |
$(12,352)
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| | |
2020
| | |
Location on
Consolidated
Statements of
Income
| |
| |
(In thousands)
| ||||||||||
Reclassification adjustment for loss on derivative instruments included in net income
| | |
$435
| | |
$439
| | |
$435
| | |
Interest expense
|
| |
(107)
| | |
(107)
| | |
(107)
| | |
Income taxes
| |
| |
328
| | |
332
| | |
328
| | | ||
Amortization of postretirement liability losses included in net periodic benefit credit
| | |
1,167
| | |
1,453
| | |
1,422
| | |
Other income
|
| |
(292)
| | |
(363)
| | |
(351)
| | |
Income taxes
| |
| |
875
| | |
1,090
| | |
1,071
| | | ||
Total reclassifications
| | |
$1,203
| | |
$1,422
| | |
$1,399
| | |
| |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| |||||||
Current: | | | | | | | |||
Federal
| | |
$27,293
| | |
$4,270
| | |
$32,682
|
State
| | |
13,230
| | |
6,331
| | |
12,996
|
| |
40,523
| | |
10,601
| | |
45,678
| |
Deferred: | | | | | | | |||
Income taxes: | | | | | | | |||
Federal
| | |
1,715
| | |
26,793
| | |
2,972
|
State
| | |
363
| | |
6,065
| | |
(1,219)
|
| |
2,078
| | |
32,858
| | |
1,753
| |
Total income tax expense
| | |
$42,601
| | |
$43,459
| | |
$47,431
|
| |
2022
| | |
2021
| |
| |
(In thousands)
| ||||
Deferred tax assets: | | | | | ||
Accrued pension costs
| | |
$11,070
| | |
$15,011
|
Operating lease liabilities
| | |
11,804
| | |
12,966
|
Asset retirement obligations
| | |
9,687
| | |
8,696
|
Deferred compensation/compensation related
| | |
15,329
| | |
14,654
|
Net operating loss/credit carryforward
| | |
12,039
| | |
11,329
|
Capitalized inventory overheads
| | |
7,260
| | |
4,683
|
Payroll tax deferral
| | |
-
| | |
2,329
|
Other
| | |
8,412
| | |
8,032
|
Total deferred tax assets
| | |
75,601
| | |
77,700
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| |
| |
(In thousands)
| ||||
Deferred tax liabilities: | | | | | ||
Basis differences on property, plant and equipment
| | |
203,099
| | |
199,928
|
Operating lease right-of-use-assets
| | |
11,804
| | |
12,966
|
Intangible assets
| | |
10,975
| | |
9,760
|
Other
| | |
13,488
| | |
12,243
|
Total deferred tax liabilities
| | |
239,366
| | |
234,897
|
Valuation allowance
| | |
12,039
| | |
11,329
|
Net deferred income tax liability
| | |
$(175,804)
| | |
$(168,526)
|
| |
2022
| | |
2021
| |
| |
(In thousands)
| ||||
Change in net deferred income tax liability from the preceding table
| | |
$7,278
| | |
$37,516
|
Deferred income taxes established due to an acquisition
| | |
(1,215)
| | |
(3,177)
|
Deferred taxes associated with other comprehensive loss
| | |
(3,985)
| | |
(1,481)
|
Deferred income tax expense for the period
| | |
$2,078
| | |
$32,858
|
Years ended December 31,
| | |
2022
| | |
2021
| | |
2020
| |||||||||
| |
Amount
| | |
%
| | |
Amount
| | |
%
| | |
Amount
| | |
%
| |
| |
(Dollars in thousands)
| ||||||||||||||||
Computed tax at federal statutory rate
| | |
$33,353
| | |
21.0
| | |
$36,375
| | |
21.0
| | |
$40,899
| | |
21.0
|
Increases (reductions) resulting from: | | | | | | | | | | | | | ||||||
State income taxes, net of federal income tax
| | |
9,702
| | |
6.1
| | |
9,429
| | |
5.4
| | |
10,450
| | |
5.4
|
Depletion allowance
| | |
(2,123)
| | |
(1.3)
| | |
(1,893)
| | |
(1.1)
| | |
(1,756)
| | |
(.9)
|
Nonqualified benefit plans
| | |
1,129
| | |
.7
| | |
(535)
| | |
(.3)
| | |
(922)
| | |
(.5)
|
Deductible K-Plan dividends
| | |
(394)
| | |
(.3)
| | |
(392)
| | |
(.2)
| | |
(372)
| | |
(.2)
|
Resolution of tax matters and uncertain tax positions
| | |
592
| | |
.4
| | |
(64)
| | |
-
| | |
(1,375)
| | |
(.7)
|
Other
| | |
342
| | |
.2
| | |
539
| | |
.3
| | |
507
| | |
.3
|
Total income tax expense
| | |
$42,601
| | |
26.8
| | |
$43,459
| | |
25.1
| | |
$47,431
| | |
24.4
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| |||||||
Interest
| | |
$28,148
| | |
$19,121
| | |
$14,805
|
Income taxes paid, net
| | |
$21,186
| | |
$34,784
| | |
$41,050
|
| |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| |||||||
Property, plant and equipment additions in accounts payable
| | |
$13,965
| | |
$15,840
| | |
$7,762
|
Right-of-use assets obtained in exchange for new operating lease liabilities
| | |
$11,763
| | |
$11,497
| | |
$22,428
|
Capital contribution from Parent in the form of common stock
| | |
$1,272
| | |
$1,852
| | |
$1,781
|
Debt assumed in connection with a business combination
| | |
$-
| | |
$10
| | |
$-
|
Accrual for holdback payment related to a business combination
| | |
$70
| | |
$-
| | |
$-
|
Stock issued in connection with a business combination
| | |
$7,304
| | |
$-
| | |
$-
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| |||||||
External operating revenues: | | | | | | | |||
Pacific
| | |
$468,589
| | |
$427,229
| | |
$454,318
|
Northwest
| | |
598,774
| | |
474,941
| | |
413,723
|
Mountain
| | |
541,910
| | |
479,543
| | |
450,852
|
North Central
| | |
607,311
| | |
561,661
| | |
567,473
|
All Other
| | |
318,145
| | |
285,556
| | |
291,636
|
Total external operating revenues
| | |
$2,534,729
| | |
$2,228,930
| | |
$2,178,002
|
Intersegment operating revenues: | | | | | | | |||
Pacific
| | |
$-
| | |
$55
| | |
$148
|
Northwest
| | |
1,444
| | |
3,102
| | |
2,414
|
Mountain
| | |
120
| | |
26
| | |
18
|
North Central
| | |
747
| | |
122
| | |
3,358
|
All Other
| | |
34,894
| | |
31,827
| | |
34,236
|
Total intersegment operating revenues
| | |
$37,205
| | |
$35,132
| | |
$40,174
|
EBITDA: | | | | | | | |||
Pacific
| | |
$55,839
| | |
$67,124
| | |
$79,136
|
Northwest
| | |
103,885
| | |
80,624
| | |
74,360
|
Mountain
| | |
72,604
| | |
65,017
| | |
52,407
|
North Central
| | |
64,988
| | |
72,301
| | |
71,723
|
All Other
| | |
9,424
| | |
8,340
| | |
27,333
|
Total segment EBITDA
| | |
$306,740
| | |
$293,406
| | |
$304,959
|
Capital expenditures: | | | | | | | |||
Pacific
| | |
$33,046
| | |
$26,675
| | |
$22,108
|
Northwest
| | |
60,697
| | |
278,946
| | |
45,963
|
Mountain
| | |
35,098
| | |
47,648
| | |
59,156
|
North Central
| | |
33,151
| | |
28,838
| | |
17,307
|
All Other
| | |
19,855
| | |
35,417
| | |
47,101
|
Total capital expenditures* | | |
$181,847
| | |
$417,524
| | |
$191,635
|
Assets: | | | | | | | |||
Pacific
| | |
$441,606
| | |
$414,103
| | |
$403,023
|
Northwest
| | |
772,159
| | |
714,098
| | |
452,126
|
Mountain
| | |
293,121
| | |
278,608
| | |
248,216
|
North Central
| | |
420,877
| | |
414,619
| | |
408,571
|
All Other
| | |
366,556
| | |
360,396
| | |
311,571
|
Total assets
| | |
$2,294,319
| | |
$2,181,824
| | |
$1,823,507
|
Property, plant and equipment: | | | | | | | |||
Pacific
| | |
$533,985
| | |
$505,103
| | |
$486,401
|
Northwest
| | |
813,513
| | |
759,482
| | |
553,632
|
Mountain
| | |
400,907
| | |
369,732
| | |
328,037
|
North Central
| | |
441,731
| | |
419,075
| | |
396,427
|
All Other
| | |
299,272
| | |
294,305
| | |
263,978
|
Less accumulated depreciation and depletion
| | |
1,174,195
| | |
1,097,387
| | |
1,038,730
|
Net property, plant and equipment
| | |
$1,315,213
| | |
$1,250,310
| | |
$989,745
|
* |
Capital expenditures for 2022, 2021 and 2020 include noncash transactions for capital expenditure-related accounts payable, the issuance of equity securities in connection with an acquisition and accrual of a holdback payment in connection with an acquisition totaling $(5,430) thousand, $(8,077) thousand and $916,000, respectively.
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| |||||||
Total reportable segment operating revenues
| | |
$2,218,896
| | |
$1,946,679
| | |
$1,892,304
|
Other revenue
| | |
353,038
| | |
317,383
| | |
325,872
|
Elimination of intersegment operating revenues
| | |
(37,205)
| | |
(35,132)
| | |
(40,174)
|
Total consolidated operating revenues
| | |
$2,534,729
| | |
$2,228,930
| | |
$2,178,002
|
| |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| |||||||
Total assets for reportable segments
| | |
$1,927,763
| | |
$1,821,428
| | |
$1,511,936
|
Other assets
| | |
3,731,031
| | |
3,529,536
| | |
2,854,648
|
Elimination of intercompany receivables
| | |
(3,364,475)
| | |
(3,169,140)
| | |
(2,543,077)
|
Total consolidated assets
| | |
$2,294,319
| | |
$2,181,824
| | |
$1,823,507
|
| |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| |||||||
Total EBITDA for reportable segments
| | |
$297,316
| | |
$285,066
| | |
$277,626
|
Other EBITDA
| | |
9,424
| | |
8,340
| | |
27,333
|
Depreciation, depletion and amortization
| | |
117,798
| | |
100,974
| | |
89,626
|
Interest
| | |
30,121
| | |
19,218
| | |
20,577
|
Total consolidated income before income taxes
| | |
$158,821
| | |
$173,214
| | |
$194,756
|
TABLE OF CONTENTS
| |
Pension Benefits
| | |
Other Postretirement Benefits
| |||||||
| |
2022
| | |
2021
| | |
2022
| | |
2021
| |
| | | |
(In thousands)
| | | ||||||
Change in benefit obligation: | | | | | | | | | ||||
Benefit obligation at beginning of year
| | |
$44,363
| | |
$46,783
| | |
$19,480
| | |
$21,790
|
Service cost
| | |
-
| | |
-
| | |
522
| | |
567
|
Interest cost
| | |
1,127
| | |
1,053
| | |
514
| | |
492
|
Plan participants' contributions
| | |
-
| | |
-
| | |
3
| | |
3
|
Actuarial gain
| | |
(9,174)
| | |
(832)
| | |
(5,319)
| | |
(2,769)
|
Benefits paid
| | |
(2,558)
| | |
(2,641)
| | |
(584)
| | |
(603)
|
Benefit obligation at end of year
| | |
33,758
| | |
44,363
| | |
14,616
| | |
19,480
|
Change in net plan assets: | | | | | | | | | ||||
Fair value of plan assets at beginning of year
| | |
39,345
| | |
40,710
| | |
314
| | |
505
|
Actual return on plan assets
| | |
(8,356)
| | |
1,276
| | |
(473)
| | |
17
|
Employer contribution
| | |
-
| | |
-
| | |
426
| | |
392
|
Plan participants' contributions
| | |
-
| | |
-
| | |
3
| | |
3
|
Benefits paid
| | |
(2,558)
| | |
(2,641)
| | |
(584)
| | |
(603)
|
Fair value of net plan assets at end of year
| | |
28,431
| | |
39,345
| | |
(314)
| | |
314
|
Funded status - under
| | |
$(5,327)
| | |
$(5,018)
| | |
$(14,930)
| | |
$(19,166)
|
Amounts recognized in the Consolidated Balance Sheets at December 31: | | | | | | | | | ||||
Other accrued liabilities
| | |
$-
| | |
$-
| | |
$1,044
| | |
$544
|
Noncurrent liabilities - other
| | |
5,327
| | |
5,018
| | |
13,886
| | |
18,622
|
Benefit obligation liabilities - net amount recognized
| | |
$(5,327)
| | |
$(5,018)
| | |
$(14,930)
| | |
$(19,166)
|
Amounts recognized in accumulated other comprehensive loss consist of: | | | | | | | | | ||||
Actuarial (gain) loss
| | |
$19,087
| | |
$18,788
| | |
$(2,057)
| | |
$3,128
|
Prior service credit
| | |
-
| | |
-
| | |
(109)
| | |
(189)
|
Total
| | |
$19,087
| | |
$18,788
| | |
$(2,166)
| | |
$2,939
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| |
| |
(In thousands)
| ||||
Projected benefit obligation
| | |
$33,758
| | |
$44,363
|
Accumulated benefit obligation
| | |
$33,758
| | |
$44,363
|
Fair value of plan assets
| | |
$28,431
| | |
$39,345
|
| |
Pension Benefits
| | |
Other Postretirement Benefits
| |||||||||||||
| |
2022
| | |
2021
| | |
2020
| | |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| ||||||||||||||||
Components of net periodic benefit cost (credit): | | | | | | | | | | | | | ||||||
Service cost
| | |
$-
| | |
$-
| | |
$-
| | |
$522
| | |
$567
| | |
$554
|
Interest cost
| | |
1,127
| | |
1,053
| | |
1,291
| | |
514
| | |
492
| | |
650
|
Expected return on assets
| | |
(1,973)
| | |
(2,028)
| | |
(2,065)
| | |
(12)
| | |
(19)
| | |
(17)
|
Amortization of prior service credit
| | |
-
| | |
-
| | |
-
| | |
(79)
| | |
(79)
| | |
(79)
|
Recognized net actuarial loss
| | |
856
| | |
971
| | |
862
| | |
351
| | |
135
| | |
306
|
Net periodic benefit cost (credit)
| | |
10
| | |
(4)
| | |
88
| | |
1,296
| | |
1,096
| | |
1,414
|
Other changes in plan assets and benefit obligations recognized in accumulated other comprehensive loss: | | | | | | | | | | | | | ||||||
Net (gain) loss
| | |
1,155
| | |
(162)
| | |
794
| | |
(4,833)
| | |
(2,763)
| | |
(181)
|
Amortization of actuarial loss
| | |
(856)
| | |
(1,108)
| | |
(985)
| | |
(351)
| | |
(135)
| | |
(306)
|
Amortization of prior service credit
| | |
-
| | |
-
| | |
-
| | |
79
| | |
90
| | |
90
|
Total recognized in accumulated other comprehensive loss
| | |
299
| | |
(1,270)
| | |
(191)
| | |
(5,105)
| | |
(2,808)
| | |
(397)
|
Total recognized in net periodic benefit cost (credit) and accumulated other comprehensive loss
| | |
$309
| | |
$(1,274)
| | |
$(103)
| | |
$(3,809)
| | |
$(1,712)
| | |
$1,017
|
| |
Pension Benefits
| | |
Other Postretirement Benefits
| |||||||
| |
2022
| | |
2021
| | |
2022
| | |
2021
| |
Discount rate
| | |
5.06%
| | |
2.62%
| | |
5.07%
| | |
2.69%
|
Expected return on plan assets
| | |
6.50%
| | |
6.00%
| | |
6.00%
| | |
5.50%
|
Rate of compensation increase
| | |
N/A
| | |
N/A
| | |
3.00%
| | |
3.00%
|
| |
Pension Benefits
| | |
Other Postretirement Benefits
| |||||||
| |
2022
| | |
2021
| | |
2022
| | |
2021
| |
Discount rate
| | |
2.62%
| | |
2.29%
| | |
2.69%
| | |
2.38%
|
Expected return on plan assets
| | |
6.00%
| | |
6.00%
| | |
5.50%
| | |
5.50%
|
Rate of compensation increase
| | |
N/A
| | |
N/A
| | |
3.00%
| | |
3.00%
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| |
Health care trend rate assumed for next year
| | |
7.5%
| | |
7.0%
|
Health care cost trend rate - ultimate
| | |
4.5%
| | |
4.5%
|
Year in which ultimate trend rate achieved
| | |
2033
| | |
2031
|
Years
| | |
Pension Benefits
| | |
Other
Postretirement Benefits
| | |
Expected Medicare
Part D Subsidy
|
| |
(In thousands)
| |||||||
2023
| | |
$2,876
| | |
$738
| | |
$8
|
2024
| | |
2,782
| | |
902
| | |
7
|
2025
| | |
2,759
| | |
1,023
| | |
6
|
2026
| | |
2,725
| | |
1,169
| | |
5
|
2027
| | |
2,667
| | |
1,240
| | |
5
|
2028-2032
| | |
12,410
| | |
1,685
| | |
16
|
TABLE OF CONTENTS
| |
Fair Value Measurements at December 31, 2022, Using
| | | ||||||||
| |
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
| | |
Significant Other
Observable Inputs
(Level 2)
| | |
Significant
Unobservable
Inputs
(Level 3)
| | |
Balance at
December 31, 2022
| |
| |
(In thousands)
| ||||||||||
Assets: | | | | | | | | | ||||
Cash equivalents
| | |
$-
| | |
$859
| | |
$-
| | |
$859
|
Equity securities: | | | | | | | | | ||||
U.S. companies
| | |
777
| | |
-
| | |
-
| | |
777
|
International companies
| | |
-
| | |
49
| | |
-
| | |
49
|
Collective and mutual funds(a) | | |
12,729
| | |
3,508
| | |
-
| | |
16,237
|
Corporate bonds
| | |
-
| | |
8,554
| | |
-
| | |
8,554
|
Municipal bonds
| | |
-
| | |
621
| | |
-
| | |
621
|
U.S. Government securities
| | |
320
| | |
92
| | |
-
| | |
412
|
Pooled separate accounts(b) | | |
-
| | |
337
| | |
-
| | |
337
|
Investments measured at net asset value(c) | | |
-
| | |
-
| | |
-
| | |
585
|
Total assets measured at fair value
| | |
$13,826
| | |
$14,020
| | |
$-
| | |
$28,431
|
(a) |
Collective and mutual funds invest approximately 29 percent in corporate bonds, 24 percent in common stock of large-cap U.S. companies, 16 percent in common stock of international companies, 7 percent in cash and cash equivalents, 7 percent in U.S. Government securities and 17 percent in other investments.
|
(b) |
Pooled separate accounts are invested 100 percent in cash and cash equivalents.
|
TABLE OF CONTENTS
(c) |
In accordance with ASC 820 - Fair Value, Measurements certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the Consolidated Balance Sheets.
|
| |
Fair Value Measurements
at December 31, 2021, Using
| | | ||||||||
| |
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
| | |
Significant Other
Observable Inputs
(Level 2)
| | |
Significant
Unobservable
Inputs
(Level 3)
| | |
Balance at
December 31,
2021
| |
| |
(In thousands)
| ||||||||||
Assets: | | | | | | | | | ||||
Cash equivalents
| | |
$-
| | |
$489
| | |
$-
| | |
$489
|
Equity securities: | | | | | | | | | ||||
U.S. companies
| | |
789
| | |
-
| | |
-
| | |
789
|
International companies
| | |
-
| | |
135
| | |
-
| | |
135
|
Collective and mutual funds(a) | | |
17,620
| | |
4,364
| | |
-
| | |
21,984
|
Corporate bonds
| | |
-
| | |
13,199
| | |
-
| | |
13,199
|
Municipal bonds
| | |
-
| | |
791
| | |
-
| | |
791
|
U.S. Government securities
| | |
750
| | |
201
| | |
-
| | |
951
|
Pooled separate accounts(b) | | |
-
| | |
326
| | |
-
| | |
326
|
Investments measured at net asset value(c) | | |
-
| | |
-
| | |
-
| | |
681
|
Total assets measured at fair value
| | |
$19,159
| | |
$19,505
| | |
$-
| | |
$39,345
|
(a) |
Collective and mutual funds invest approximately 37 percent in corporate bonds, 19 percent in common stock of international companies, 16 percent in common stock of large-cap U.S. companies, 9 percent in U.S. Government securities and 19 percent in other investments.
|
(b) |
Pooled separate accounts are invested 100 percent in cash and cash equivalents.
|
(c) |
In accordance with ASC 820 - Fair Value, Measurements certain investments that were measured at net asset value per share (or its equivalent) have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the Consolidated Balance Sheets.
|
TABLE OF CONTENTS
| |
Fair Value Measurements at
December 31, 2022, Using
| | | ||||||||
| |
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
| | |
Significant Other
Observable Inputs
(Level 2)
| | |
Significant
Unobservable
Inputs
(Level 3)
| | |
Balance at
December 31,
2022
| |
| |
(In thousands)
| ||||||||||
Assets: | | | | | | | | | ||||
Cash equivalents
| | |
$-
| | |
$(17)
| | |
$-
| | |
$(17)
|
Equity securities: | | | | | | | | | ||||
U.S. companies
| | |
(11)
| | |
-
| | |
-
| | |
(11)
|
Insurance contract(a) | | |
-
| | |
(286)
| | |
-
| | |
(286)
|
Total assets measured at fair value
| | |
$(11)
| | |
$(303)
| | |
$-
| | |
$(314)
|
(a) |
The insurance contract invests approximately 69 percent in corporate bonds, 14 percent in common stock of large-cap U.S. companies, 13 percent in U.S. Government securities and 4 percent in common stock of small-cap U.S. companies
|
| |
Fair Value Measurements
at December 31, 2021, Using
| | | ||||||||
| |
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
| | |
Significant Other
Observable Inputs
(Level 2)
| | |
Significant
Unobservable
Inputs
(Level 3)
| | |
Balance at
December 31,
2021
| |
| |
(In thousands)
| ||||||||||
Assets: | | | | | | | | | ||||
Cash equivalents
| | |
$-
| | |
$14
| | |
$-
| | |
$14
|
Equity securities: | | | | | | | | | ||||
U.S. companies
| | |
7
| | |
-
| | |
-
| | |
7
|
Insurance contract(a) | | |
-
| | |
293
| | |
-
| | |
293
|
Total assets measured at fair value
| | |
$7
| | |
$307
| | |
$-
| | |
$314
|
(a) |
The insurance contract invests approximately 58 percent in corporate bonds, 13 percent in U.S. Government securities, 13 percent in common stock of large-cap U.S. companies, 5percent in common stock of small-cap U.S. companies and11percent in other investments.
|
| |
2022
| | |
2021
| |
| |
(In thousands)
| ||||
Projected benefit obligation
| | |
$16,047
| | |
$20,086
|
Accumulated benefit obligation
| | |
$16,047
| | |
$20,086
|
TABLE OF CONTENTS
| |
2022
| | |
2021
| | |
2020
| |
| |
(In thousands)
| |||||||
Components of net periodic benefit cost: | | | | | | | |||
Interest cost
| | |
$460
| | |
$407
| | |
$556
|
Recognized net actuarial loss
| | |
39
| | |
223
| | |
160
|
Net periodic benefit cost
| | |
$499
| | |
$630
| | |
$716
|
| |
2022
| | |
2021
| |
Benefit obligation discount rate
| | |
4.97%
| | |
2.38%
|
Benefit obligation rate of compensation increase
| | |
N/A
| | |
N/A
|
Net periodic benefit cost discount rate
| | |
2.38%
| | |
1.95%
|
Net periodic benefit cost rate of compensation increase
| | |
N/A
| | |
N/A
|
| |
2023
| | |
2024
| | |
2025
| | |
2026
| | |
2027
| | |
2028-2032
| |
| |
(In thousands)
| ||||||||||||||||
Nonqualified benefits
| | |
$1,573
| | |
$1,621
| | |
$1,727
| | |
$1,763
| | |
$1,653
| | |
$6,343
|
| |
2022
| | |
2021
| |
| |
(In thousands)
| ||||
Investments | | | | | ||
Insurance contract*
| | |
$20,083
| | |
$21,629
|
Life insurance**
| | |
7,234
| | |
7,567
|
Other
| | |
2,448
| | |
3,044
|
Total investments
| | |
$29,765
| | |
$32,240
|
* |
For more information on the insurance contract, see Note 9.
|
** |
Investments of life insurance are carried on plan participants (payable upon the employee's death).
|
TABLE OF CONTENTS
•
|
Assets contributed to the MEPP by one employer may be used to provide benefits to employees of other participating employers
|
•
|
If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers
|
•
|
If the Company chooses to stop participating in some of its MEPPs, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability
|
| |
EIN/Pension
Plan Number
| | |
Pension Protection Act
Zone Status
| | |
FIP/RP Status
Pending/
Implemented
| | |
Contributions
| | |
Surcharge
Imposed
| | |
Expiration Date
of Collective
Bargaining
Agreement
| ||||||||||
Pension Fund
| | |
2022
| | |
2021
| | |
2022
| | |
2021
| | |
2020
| | |||||||||||
| | | | | | | | | |
(In thousands)
| | | | | |||||||||||||
Pension Trust Fund for Operating Engineers
| | |
946090764-001
| | |
Yellow
| | |
Yellow
| | |
Implemented
| | |
$2,484
| | |
$2,495
| | |
$2,680
| | |
No
| | |
3/31/2023-
6/15/2026
|
Western Conference of Teamsters Pension Plan
| | |
916145047-001
| | |
Green
| | |
Green
| | |
No
| | |
3,127
| | |
3,006
| | |
3,025
| | |
No
| | |
12/31/2023-
12/31/2025
|
Other funds
| | | | | | | | | | |
-
| | |
6,969
| | |
7,065
| | | | | ||||||
Total contributions
| | | | | | | | | | |
$5,611
| | |
$12,470
| | |
$12,770
| | | | |
Pension Fund
| | |
Year Contributions to Plan Exceeded More Than 5 Percent of Total Contributions (as of December 31 of the Plan's Year-End)
|
Minnesota Teamsters Construction Division Pension Fund
| | |
2021 and 2020
|
Southwest Marine Pension Trust
| | |
2021 and 2020
|
TABLE OF CONTENTS
TABLE OF CONTENTS
| |
2023
| | |
2024
| | |
2025
| | |
2026
| | |
2027
| | |
Thereafter
| |
| |
(In thousands)
| ||||||||||||||||
Purchase commitments
| | |
$80,766
| | |
$3,582
| | |
$2,582
| | |
$2,046
| | |
$1,854
| | |
$9,821
|
TABLE OF CONTENTS
TABLE OF CONTENTS
| |
Weighted average
interest rate at
December 31, 2022
| | |
2022
| | |
2021
| |
| | | |
(In thousands)
| |||||
Centennial term loan agreements with maturities ranging from March 17, 2023 to December 18, 2023
| | |
5.44%
| | |
$208,000
| | |
$-
|
Centennial senior notes with maturities ranging from June 27, 2023 to April 4, 2034
| | |
4.34%
| | |
410,000
| | |
368,000
|
Borrowing arrangements under Centennial commercial paper program, supported by Centennial's credit agreements
| | |
5.27%
| | |
66,449
| | |
315,457
|
Total long-term related-party notes payable
| | | | |
684,449
| | |
683,457
| |
Less: current maturities
| | | | |
238,000
| | |
108,000
| |
Net long-term related-party notes payable
| | | | |
$446,449
| | |
$575,457
|
TABLE OF CONTENTS
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MDU Resources Group Inc. published this content on 12 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 12 May 2023 13:06:40 UTC.