Achieved all-time quarterly records for
revenue, net income and Adjusted EBITDA
Competitive EDGE initiatives drove strong
margin improvement
Raised guidance for revenue and Adjusted
EBITDA
Knife River Corporation (NYSE: KNF), an aggregates-led,
vertically integrated construction materials and contracting
services company, today announced financial results for the third
quarter ended September 30, 2023.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20231106228874/en/
Third Quarter Financial Highlights
(In millions, except per share)
2023
2022
%Change
Revenue
$1,090.4
$975.4
12%
Gross profit
$269.4
$184.5
46%
Net income
$146.7
$99.7
47%
EBITDA
$241.4
$172.1
40%
EBITDA margin
22.1%
17.6%
Adjusted EBITDA
$247.5
$173.1
43%
Adjusted EBITDA margin
22.7%
17.8%
Net income per diluted share
$2.58
$1.76
47%
Note: EBITDA, Adjusted EBITDA, EBITDA
margin and Adjusted EBITDA margin are non-GAAP financial measures.
For more information on all non-GAAP measures and a reconciliation
to the nearest GAAP measure, see the section entitled "Non-GAAP
Financial Measures."
“We have achieved record financial results in consecutive
quarters, driven in part by our 'Competitive EDGE' strategy and in
part by the strong markets where we operate,” said Brian Gray,
Knife River president and CEO. “Our third quarter 2023 revenue, net
income, EBITDA and Adjusted EBITDA were better than any quarter in
Knife River history.
“I would like to thank our entire Knife River team for their
continued discipline in executing our EDGE plan to increase
Adjusted EBITDA margins and deliver on our strategic goals,” Gray
said. “A key part of that plan is optimizing our pricing to fully
realize the value of our core products – aggregates, ready-mix
concrete and asphalt – as well as our contracting services. Price
increases outpaced costs for the quarter and positively contributed
to our margins, as we made further progress toward our previously
stated margin-expansion goals. On the contracting services side, we
continued to be more selective by targeting higher-margin projects.
This approach, combined with the timing of bid lettings in our
states, has contributed to a lower backlog than third quarter 2022.
However, the work in the backlog reflects improved margins and
higher total profit than the prior year's backlog.
“We remain optimistic about the long-term strength of our
markets, including the positive impact from local, state and
federal funding,” Gray said. “As of August, nearly $80 billion in
funding from the Infrastructure Investment and Jobs Act has been
allocated to projects in states where Knife River operates.
Additionally, states are also approving their own infrastructure
spending, with Texas and Minnesota each recently announcing
significant new funding for transportation infrastructure.
“Given our results for the first nine months of the year, we
have raised and narrowed our guidance for revenue and Adjusted
EBITDA,” Gray said. “We expect full year 2023 revenue in the range
of $2.7 billion to $2.8 billion and Adjusted EBITDA in the range of
$400 million to $430 million. We are committed to our EDGE plan, to
improving margins, to providing industry-leading return on invested
capital, and to upholding our ‘Life at Knife’ culture – being a
great place to work and putting people first.”
Third Quarter Consolidated Company
Results
Knife River reported third quarter consolidated revenue of
$1,090.4 million, a 12% increase from the prior-year period, led by
strong results in each region and double-digit price increases
across all core product lines. EDGE-related price optimization and
bidding strategies contributed to a 47% year-over-year increase in
net income, to $146.7 million, and a 43% year-over-year increase in
Adjusted EBITDA, to $247.5 million. Also contributing to the
year-over-year improvement in quarterly results were historically
high profits at our Energy Services business, as well as EDGE
initiatives focused on enhancing productivity and operational
excellence. Contracting services backlog was $732.2 million at
improved margins and higher total profit relative to the same time
last year. See the section entitled "Non-GAAP Financial Measures"
for more information on all non-GAAP measures and a reconciliation
to the nearest GAAP measure.
Financial and Operating Results by
Reporting Segment
Pacific
Alaska, California, Hawaii
Three Months Ended
Nine Months Ended
Sept. 30,
Sept. 30,
2023
2022
% Change
2023
2022
% Change
(In millions)
Revenue
$
181.4
$
152.4
19
%
$
391.4
$
366.1
7
%
Net income
$
31.9
$
19.0
67
%
$
39.8
$
29.1
37
%
EBITDA
$
37.6
$
24.6
53
%
$
56.5
$
45.2
25
%
EBITDA margin
20.7
%
16.1
%
14.4
%
12.3
%
Third quarter revenue improved $29.0 million year-over-year to
$181.4 million, driven by increased volumes from previously delayed
work, and rebounding market activity driving all product lines. The
segment continues to benefit from higher realized prices across its
markets. Contracting services revenue increased 12%, again largely
related to the completion of work that had been delayed by weather
earlier in the year. EBITDA improved $13.0 million year-over-year
to $37.6 million, an all-time record, led by strong volumes at
improved margins.
Northwest
Oregon, Washington
Three Months Ended
Nine Months Ended
Sept. 30,
Sept. 30,
2023
2022
% Change
2023
2022
% Change
(In millions)
Revenue
$
209.4
$
204.7
2
%
$
504.2
$
461.2
9
%
Net income
$
39.1
$
34.6
13
%
$
74.3
$
53.4
39
%
EBITDA
$
48.9
$
43.8
12
%
$
102.7
$
79.8
29
%
EBITDA margin
23.3
%
21.4
%
20.4
%
17.3
%
Third quarter revenue improved $4.7 million year-over-year to
$209.4 million, with strong product pricing more than offsetting
lower volumes. EBITDA improved $5.1 million year-over-year and is
an all-time record at $48.9 million, resulting from EDGE-related
pricing initiatives across all product lines and increased sales of
higher priced products. Contracting services backlog increased 51%
year-over-year to a quarterly record of $227.4 million, notably
from an impact road project secured in fourth quarter of 2022. Also
in the quarter, the segment commissioned its new, state-of-the-art
prestress manufacturing facility in Washington, which it expects
will increase overall capacity and improve production
efficiencies.
Mountain
Idaho, Montana, Wyoming
Three Months Ended
Nine Months Ended
Sept. 30,
Sept. 30,
2023
2022
% Change
2023
2022
% Change
(In millions)
Revenue
$
255.1
$
204.1
25
%
$
491.5
$
433.0
14
%
Net income
$
54.1
$
33.8
60
%
$
67.9
$
43.0
58
%
EBITDA
$
60.4
$
39.6
53
%
$
86.5
$
60.2
44
%
EBITDA margin
23.7
%
19.4
%
17.6
%
13.9
%
Third quarter revenue improved $51.0 million year-over-year to
$255.1 million, led by strong commercial, residential and public
agency activity within the contracting services business. Volumes
increased across all product lines and the segment benefited from
improved product pricing. EBITDA improved $20.8 million
year-over-year to an all-time record of $60.4 million. Contracting
services revenue increased 29% and the segment realized higher
margins, benefiting from sustained market strength.
North Central
Iowa, Minnesota, North Dakota, South
Dakota
Three Months Ended
Nine Months Ended
Sept. 30,
Sept. 30,
2023
2022
% Change
2023
2022
% Change
(In millions)
Revenue
$
305.1
$
294.3
4
%
$
513.7
$
484.4
6
%
Net income
$
64.4
$
52.5
23
%
$
53.5
$
32.5
65
%
EBITDA
$
70.5
$
58.6
20
%
$
71.4
$
50.4
42
%
EBITDA margin
23.1
%
19.9
%
13.9
%
10.4
%
Third quarter revenue improved $10.8 million year-over-year to
$305.1 million. Strong price increases across all product lines
more than offset volume declines. EBITDA improved $11.9 million
year-over-year to an all-time record of $70.5 million. Strong
execution and the implementation of new bidding strategies to
target higher-margin work has begun to lift margins toward
EDGE-related goals. Contracting services revenues and gross margins
were also positively impacted by improved bid margins across the
region and job productivity gains.
All Other and intersegment
eliminations
Iowa, Nebraska, South Dakota, Texas,
Wyoming, Corporate
Three Months Ended
Nine Months Ended
Sept. 30,
Sept. 30,
2023
2022
% Change
2023
2022
% Change
(In millions)
Revenue
$
139.4
$
119.9
16
%
$
282.7
$
252.5
12
%
Net loss
$
(42.8
)
$
(40.2
)
6
%
$
(73.3
)
$
(59.8
)
23
%
EBITDA
$
24.0
$
5.5
336
%
$
35.3
$
5.6
533
%
EBITDA margin
17.2
%
4.6
%
12.5
%
2.2
%
Third quarter revenue improved $19.5 million year-over-year to
$139.4 million, as a result of historically strong market
conditions at the Energy Services business as well as improved
materials market conditions in the South Region. With the Honey
Creek Quarry in Texas becoming fully operational in the second
quarter, this quarter the plant realized higher volumes and lower
production costs. EBITDA for All Other improved $18.5 million
year-over-year to $24.0 million. For the quarter, one-time costs
associated with the separation from MDU Resources Group, Inc.,
totaled $4.0 million; net recurring costs incurred by corporate
services were approximately $3.5 million.
Liquidity and Capital
Allocation
As of September 30, 2023, Knife River had $84.0 million of cash
and cash equivalents, and $698.7 million of gross debt. The company
had no borrowings outstanding under its $350.0 million revolving
credit facility as of September 30, 2023, having paid down the
balance during the third quarter. Net leverage was 1.4x. Knife
River remains committed to the stated long-term annualized goal of
approximately 2.5x net leverage.
Knife River has spent approximately $75.3 million of the planned
$125 million of capital projects for 2023, with the majority
allocated to maintenance projects. Future acquisitions are not
included in this amount and would be incremental to the capital
program. The company remains focused on its EDGE strategy,
including a disciplined capital allocation plan.
Guidance
For the full year 2023, Knife River is raising and narrowing its
guidance ranges on revenue, EBITDA and Adjusted EBITDA as a result
of pricing momentum, cost controls, and positive impacts from EDGE
initiatives.
- Revenues in the range of $2.7 billion to $2.8 billion.
- EBITDA in the range of $388 million to $418 million.
- Adjusted EBITDA in the range of $400 million to $430
million.
- Capital expenditures of approximately $125 million.*
* Future acquisitions are not included in this amount and would
be incremental to the capital program.
Conference Call
Knife River will host a conference call at 10 a.m. EDT on
November 6, 2023, to discuss third quarter results and answer
questions. The event will be webcast at
https://events.q4inc.com/attendee/986161993. To participate in the
live call:
- Domestic: 1-888-575-5163
- International: 1-416-764-8620
Conference ID: 45042298
About Knife River Corporation
Knife River Corporation, a member of the S&P MidCap 400
index, mines aggregates and markets crushed stone, sand, gravel and
related construction materials, including ready-mix concrete,
asphalt and other value-added products. Knife River also performs
vertically integrated contracting services, specializing in
publicly funded DOT projects and private projects across the
industrial, commercial and residential space. For more information
about the company, visit www.kniferiver.com.
Forward-Looking
Statements
The information in this news release highlights the key growth
strategies, projections and certain assumptions for the company and
its subsidiaries. Many of these highlighted statements and other
statements not historical in nature are “forward-looking
statements” within the meaning of Section 21E of the Securities
Exchange Act of 1934. Although the company believes that its
expectations are based on reasonable assumptions, there is no
assurance the company’s projections or estimates for growth,
shareholder value creation and financial guidance or other proposed
strategies will be achieved. Please refer to assumptions contained
in this news release, as well as the various important factors
listed in Part I, Item 1A - Risk Factors in the company's
registration statement on Form 10 and subsequent filings with the
Securities and Exchange Commission.
Changes in such assumptions and factors could cause actual
future results to differ materially from growth and financial
guidance. All forward-looking statements in this news release are
expressly qualified by such cautionary statements and by reference
to the underlying assumptions. Undue reliance should not be placed
on forward-looking statements, which speak only as of the date they
are made. Except as required by law, the company does not undertake
to update forward-looking statements, whether as a result of new
information, future events or otherwise.
Throughout this news release, the company presents financial
information prepared in accordance with GAAP, as well as EBITDA,
EBITDA margin, Adjusted EBITDA, Adjusted EBITDA margin and net
leverage, including those measures by segment, which are considered
non-GAAP financial measures. The use of these non-GAAP financial
measures should not be construed as alternatives to net income or
net income margin. The company believes the use of these non-GAAP
financial measures are beneficial in evaluating the company's
operating performance. Please refer to the "Non-GAAP Financial
Measures" section contained in this document for additional
information.
Knife River
Corporation
Consolidated Statements of
Operations
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
(In millions, except per share
amounts)
Revenue:
Construction materials
$
553.1
$
483.2
$
1,177.7
$
1,060.0
Contracting services
537.3
492.2
1,005.8
937.2
Total revenue
1,090.4
975.4
2,183.5
1,997.2
Cost of revenue:
Construction materials
346.3
340.6
856.6
847.0
Contracting services
474.7
450.3
900.4
861.3
Total cost of revenue
821.0
790.9
1,757.0
1,708.3
Gross profit
269.4
184.5
426.5
288.9
Selling, general and administrative
expenses
59.2
41.6
167.3
130.2
Operating income
210.2
142.9
259.2
158.7
Interest expense
15.3
8.8
44.0
21.5
Other income (expense)
—
(1.3
)
3.3
(6.1
)
Income before income taxes
194.9
132.8
218.5
131.1
Income tax expense
48.2
33.1
56.3
32.9
Net income
$
146.7
$
99.7
$
162.2
$
98.2
Earnings per share:
Basic
$
2.59
$
1.76
$
2.87
$
1.74
Diluted
$
2.58
$
1.76
$
2.86
$
1.74
Weighted average common shares
outstanding:
Basic
56.6
56.6
56.6
56.6
Diluted
56.7
56.6
56.6
56.6
Knife River
Corporation
Consolidated Balance
Sheets
(Unaudited)
September 30, 2023
December 31, 2022
Assets
(In millions, except shares and per share
amounts)
Current assets:
Cash, cash equivalents and restricted
cash
$
116.2
$
10.1
Receivables, net
491.9
210.2
Costs and estimated earnings in excess of
billings on uncompleted contracts
50.5
31.1
Due from related-party
—
16.1
Inventories
314.7
323.3
Prepayments and other current assets
38.1
17.8
Total current assets
1,011.4
608.6
Noncurrent assets:
Property, plant and equipment
2,547.6
2,489.4
Less accumulated depreciation, depletion
and amortization
1,248.1
1,174.2
Net property, plant and equipment
1,299.5
1,315.2
Goodwill
274.5
274.5
Other intangible assets, net
11.5
13.4
Operating lease right-of-use assets
44.3
45.9
Investments and other
39.7
36.7
Total noncurrent assets
1,669.5
1,685.7
Total assets
$
2,680.9
$
2,294.3
Liabilities and Stockholders' Equity
Current liabilities:
Long-term debt - current portion
$
7.1
$
.2
Related-party notes payable - current
portion
—
238.0
Accounts payable
149.0
87.4
Billings in excess of costs and estimated
earnings on uncompleted contracts
58.8
39.8
Taxes payable
53.3
8.5
Accrued compensation
37.9
29.2
Due to related-party
—
20.3
Current operating lease liabilities
13.7
13.2
Other accrued liabilities
105.2
80.3
Total current liabilities
425.0
516.9
Noncurrent liabilities:
Long-term debt
675.6
.4
Related-party notes payable
—
446.4
Deferred income taxes
174.0
175.8
Noncurrent operating lease liabilities
30.6
32.7
Other
132.7
93.5
Total liabilities
1,437.9
1,265.7
Commitments and contingencies
Stockholders' equity:
Common stock, 300,000,000 shares
authorized, $0.01 par value, 56,997,350 shares
issued and 56,566,214 shares outstanding
at September 30, 2023; 80,000 shares authorized, issued and
outstanding, $10 par value at December 31, 2022
.6
.8
Other paid-in capital
613.0
549.1
Retained earnings
645.2
494.7
MDU Resources common stock held by
subsidiary at cost - 538,921 shares at
December 31, 2022
—
(3.6
)
Treasury stock held at cost - 431,136
shares
(3.6
)
—
Accumulated other comprehensive loss
(12.2
)
(12.4
)
Total stockholders' equity
1,243.0
1,028.6
Total liabilities and stockholders'
equity
$
2,680.9
$
2,294.3
Knife River
Corporation
Consolidated Statements of
Cash Flows
(Unaudited)
Nine Months Ended
September 30,
2023
2022
(In millions)
Operating activities:
Net income
$
162.2
$
98.2
Adjustments to reconcile net income to net
cash provided by operating activities:
93.0
95.0
Changes in current assets and liabilities,
net of acquisitions:
Receivables
(302.5
)
(239.6
)
Due from related-party
16.1
1.3
Inventories
8.6
(18.6
)
Other current assets
(20.2
)
.8
Accounts payable
91.6
69.6
Due to related-party
(7.3
)
9.8
Other current liabilities
78.0
21.8
Pension and postretirement benefit plan
contributions
(1.6
)
(.3
)
Other noncurrent changes
35.0
1.4
Net cash provided by operating
activities
$
152.9
$
39.4
Investing activities:
Capital expenditures
(86.4
)
(121.8
)
Acquisitions, net of cash acquired
—
.4
Net proceeds from sale or disposition of
property and other
5.2
5.7
Investments
(1.7
)
(2.2
)
Net cash used in investing activities
$
(82.9
)
$
(117.9
)
Financing activities:
Issuance of current related-party notes,
net
—
100.0
Issuance of long-term related-party notes,
net
205.3
26.9
Issuance of long-term debt
700.0
—
Repayment of long-term debt
(1.9
)
(.2
)
Debt issuance costs
(16.7
)
(.7
)
Net transfers to Centennial Energy
Holdings Inc.
(850.6
)
(42.3
)
Net cash provided by financing
activities
$
36.1
$
83.7
Increase in cash, cash equivalents and
restricted cash
106.1
5.2
Cash, cash equivalents and restricted cash
-- beginning of year
10.1
13.8
Cash, cash equivalents and restricted cash
-- end of period
$
116.2
$
19.0
Segment Financial Data and Highlights
(Unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Amount
% of Revenues
Amount
% of Revenues
Amount
% of Revenues
Amount
% of Revenues
(Dollars in millions)
Revenues by operating segment:
Pacific
$
181.4
$
152.4
$
391.4
$
366.1
Northwest
209.4
204.7
504.2
461.2
Mountain
255.1
204.1
491.5
433.0
North Central
305.1
294.3
513.7
484.4
All Other and internal sales
139.4
119.9
282.7
252.5
Total revenues
$
1,090.4
$
975.4
$
2,183.5
$
1,997.2
Gross profit by operating segment:
Pacific
$
42.8
23.6
%
$
27.4
18.0
%
$
71.7
18.3
%
$
54.0
14.7
%
Northwest
50.6
24.1
%
44.1
21.5
%
109.3
21.7
%
82.4
17.9
%
Mountain
60.7
23.8
%
40.9
20.0
%
89.3
18.2
%
64.6
14.9
%
North Central
74.5
24.4
%
58.9
20.0
%
82.8
16.1
%
55.7
11.5
%
All Other
40.8
29.3
%
13.2
11.0
%
73.4
25.9
%
32.2
12.7
%
Total gross profit
$
269.4
24.7
%
$
184.5
18.9
%
$
426.5
19.5
%
$
288.9
14.5
%
EBITDA*:
Pacific
$
37.6
20.7
%
$
24.6
16.1
%
$
56.5
14.4
%
$
45.2
12.3
%
Northwest
48.9
23.3
%
43.8
21.4
%
102.7
20.4
%
79.8
17.3
%
Mountain
60.4
23.7
%
39.6
19.4
%
86.5
17.6
%
60.2
13.9
%
North Central
70.5
23.1
%
58.6
19.9
%
71.4
13.9
%
50.4
10.4
%
All Other
24.0
17.2
%
5.5
4.6
%
35.3
12.5
%
5.6
2.2
%
Total EBITDA*
$
241.4
22.1
%
$
172.1
17.6
%
$
352.4
16.1
%
$
241.2
12.1
%
* EBITDA, Segment EBITDA, and EBITDA
margin are non-GAAP financial measures. For more information and a
reconciliation to the nearest GAAP measure, see the section
entitled "Non-GAAP Financial Measures."
The following table summarizes backlog for the company.
September 30, 2023
September 30, 2022
(In millions)
Pacific
$
69.8
$
79.1
Northwest
227.4
150.6
Mountain
251.1
310.9
North Central
109.3
181.1
All Other
74.6
82.0
$
732.2
$
803.7
Margins on backlog at September 30, 2023, are expected to be
higher than the margins on backlog at September 30, 2022.
Approximately 83% of the company's contracting services backlog
relates to publicly funded projects, including street and highway
construction projects. Period over period increases or decreases
cannot be used as an indicator of future revenues or earnings.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Sales (thousands):
Aggregates (tons)
12,022
12,399
26,071
26,891
Ready-mix concrete (cubic yards)
1,271
1,306
2,944
3,179
Asphalt (tons)
3,349
3,550
5,441
5,968
Average selling price:*
Aggregates (per ton)
$
16.10
$
13.86
$
16.24
$
14.35
Ready-mix concrete (per cubic yard)
$
169.98
$
152.34
$
169.02
$
149.59
Asphalt (per ton)
$
66.51
$
57.91
$
66.41
$
57.85
* The average selling price includes
freight and delivery and other revenues.
Three Months Ended
Nine Months Ended
September 30,
September 30,
2023
2022
2023
2022
Amount
% of Revenues
Amount
% of Revenues
Amount
% of Revenues
Amount
% of Revenues
(Dollars in millions)
Revenues by product line:
Aggregates
$
193.6
$
171.8
$
423.5
$
385.8
Ready-mix concrete
216.0
198.9
497.7
475.5
Asphalt
222.8
205.6
361.3
345.2
Other*
214.1
166.7
395.9
328.5
Contracting services
537.3
492.2
1,005.8
937.2
Internal sales
(293.4
)
(259.8
)
(500.7
)
(475.0
)
Total revenues
$
1,090.4
$
975.4
$
2,183.5
$
1,997.2
Gross profit by product line:
Aggregates
$
51.8
26.7
%
$
32.7
19.1
%
$
90.6
21.4
%
$
62.8
16.3
%
Ready-mix concrete
37.7
17.4
%
34.4
17.3
%
74.5
15.0
%
67.0
14.1
%
Asphalt
39.4
17.7
%
29.2
14.2
%
49.7
13.8
%
35.4
10.3
%
Other*
77.9
36.4
%
46.3
27.8
%
106.3
26.9
%
47.8
14.6
%
Contracting services
62.6
11.7
%
41.9
8.5
%
105.4
10.5
%
75.9
8.1
%
Total gross profit
$
269.4
24.7
%
$
184.5
18.9
%
$
426.5
19.5
%
$
288.9
14.5
%
* Other includes cement, liquid asphalt,
merchandise, fabric and spreading, and other products and services
that individually are not considered to be a core line of
business.
Non-GAAP Financial
Measures
EBITDA, EBITDA margin, Adjusted EBITDA, Adjusted EBITDA Margin
and net leverage, including those measures by segment, are
considered non-GAAP financial measures and are most directly
comparable to the corresponding GAAP measures of net income, net
income margin, gross profit and gross margin. Knife River believes
these non-GAAP financial measures, in addition to corresponding
GAAP measures, are useful to investors by providing meaningful
information about operational efficiency compared to its peers by
excluding the impacts of differences in tax jurisdictions and
structures, debt levels and capital investment. Management believes
Adjusted EBITDA is a useful performance measure because it allows
for an effective evaluation of the company's operating performance
by excluding stock-based compensation and unrealized gains and
losses on benefit plan investments as they are considered non-cash
and not part of the company's core operations. The company also
excludes the one-time, non-recurring costs associated with the
separation of Knife River from MDU Resources as those are not
expected to continue. Rating agencies and investors also use EBITDA
and Adjusted EBITDA to calculate Knife River’s leverage as a
multiple of EBITDA and Adjusted EBITDA. Additionally, EBITDA and
Adjusted EBITDA are important financial metrics for debt investors
who utilize debt to EBITDA and debt to Adjusted EBITDA ratios.
Management believes EBITDA and EBITDA margin, including those
measures by segment, are useful performance measures because they
provide clarity as to the operational results of the company.
Management believes net leverage is a useful performance measure
because it provides a measure of how long it would take the company
to pay back its debt if net debt and Adjusted EBITDA were constant.
It also allows management to assess the borrowing capacity and
optimal leverage ratio of the company. Knife River’s management
uses these non-GAAP financial measures in conjunction with GAAP
results when evaluating its operating results internally and
calculating employee incentive compensation, and leverage as a
multiple of EBITDA and Adjusted EBITDA to determine the appropriate
method of funding operations of the company.
EBITDA is calculated by adding back income taxes, interest
expense (net of interest income) and depreciation, depletion and
amortization expense to net income. EBITDA margin is calculated by
dividing EBITDA by revenues. Adjusted EBITDA is calculated by
adding back unrealized gains and losses on benefit plan
investments, stock-based compensation and one-time separation
costs, to EBITDA. Adjusted EBITDA Margin is calculated by dividing
Adjusted EBITDA by revenues. Net debt is calculated by adding
unamortized debt issuance costs to the net debt balance presented
on the balance sheet, less any unrestricted cash. Net leverage is
calculated by dividing the net debt by the trailing-twelve-month
Adjusted EBITDA. These non-GAAP financial measures are calculated
the same for both the segment and consolidated metrics and should
not be considered as alternatives to, or more meaningful than, GAAP
financial measures such as net income or net income margin and are
intended to be helpful supplemental financial measures for
investors’ understanding of Knife River’s operating performance.
Knife River’s non-GAAP financial measures are not standardized;
therefore, it may not be possible to compare these financial
measures with other companies’ EBITDA, EBITDA margin, Adjusted
EBITDA and Adjusted EBITDA Margin measures having the same or
similar names.
The following information reconciles segment and consolidated
net income to EBITDA and EBITDA to Adjusted EBITDA and provides the
calculation of EBITDA margin and Adjusted EBITDA margin.
Three Months Ended September 30, 2023
Pacific
Northwest
Mountain
North Central
All Other and Intersegment
Eliminations
Consolidated
(In millions)
Net income (loss)
$
31.9
$
39.1
$
54.1
$
64.4
$
(42.8
)
$
146.7
Depreciation, depletion and
amortization
5.7
9.8
6.3
6.1
3.9
31.8
Interest expense, net
—
—
—
—
14.7
14.7
Income taxes
—
—
—
—
48.2
48.2
EBITDA
$
37.6
$
48.9
$
60.4
$
70.5
$
24.0
$
241.4
Unrealized (gains) losses on benefit plan
investments
.6
.6
Stock-based compensation expense
1.5
1.5
One-time separation costs
4.0
4.0
Adjusted EBITDA
$
30.1
$
247.5
Revenue
$
181.4
$
209.4
$
255.1
$
305.1
$
139.4
$
1,090.4
Net Income Margin
17.6
%
18.7
%
21.2
%
21.1
%
(30.7
)%
13.4
%
EBITDA Margin
20.7
%
23.3
%
23.7
%
23.1
%
17.2
%
22.1
%
Adjusted EBITDA Margin
21.6
%
22.7
%
Three Months Ended September 30, 2022
Pacific
Northwest
Mountain
North Central
All Other and Intersegment
Eliminations
Consolidated
(In millions)
Net income (loss)
$
19.0
$
34.6
$
33.8
$
52.5
$
(40.2
)
$
99.7
Depreciation, depletion and
amortization
5.6
9.2
5.8
6.1
3.8
30.5
Interest expense, net
—
—
—
—
8.8
8.8
Income taxes
—
—
—
—
33.1
33.1
EBITDA
$
24.6
$
43.8
$
39.6
$
58.6
$
5.5
$
172.1
Unrealized (gains) losses on benefit plan
investments
.8
.8
Stock-based compensation expense
.2
.2
Adjusted EBITDA
$
6.5
$
173.1
Revenue
$
152.4
$
204.7
$
204.1
$
294.3
$
119.9
$
975.4
Net Income Margin
12.5
%
16.9
%
16.6
%
17.8
%
(33.5
)%
10.2
%
EBITDA Margin
16.1
%
21.4
%
19.4
%
19.9
%
4.6
%
17.6
%
Adjusted EBITDA Margin
5.5
%
17.8
%
Nine Months Ended September 30, 2023
Pacific
Northwest
Mountain
North Central
All Other and Intersegment
Eliminations
Consolidated
(In millions)
Net income (loss)
$
39.8
$
74.3
$
67.9
$
53.5
$
(73.3
)
$
162.2
Depreciation, depletion and
amortization
16.7
28.4
18.5
17.9
11.0
92.5
Interest expense, net
—
—
.1
—
41.3
41.4
Income taxes
—
—
—
—
56.3
56.3
EBITDA
$
56.5
$
102.7
$
86.5
$
71.4
$
35.3
$
352.4
Unrealized (gains) losses on benefit plan
investments
(1.1
)
(1.1
)
Stock-based compensation expense
2.3
2.3
One-time separation costs
6.4
6.4
Adjusted EBITDA
$
42.9
$
360.0
Revenue
$
391.4
$
504.2
$
491.5
$
513.7
$
282.7
$
2,183.5
Net Income Margin
10.2
%
14.7
%
13.8
%
10.4
%
(25.9
)%
7.4
%
EBITDA Margin
14.4
%
20.4
%
17.6
%
13.9
%
12.5
%
16.1
%
Adjusted EBITDA Margin
15.2
%
16.5
%
Nine Months Ended September 30, 2022
Pacific
Northwest
Mountain
North Central
All Other and Intersegment
Eliminations
Consolidated
(In millions)
Net income (loss)
$
29.1
$
53.4
$
43.0
$
32.5
$
(59.8
)
$
98.2
Depreciation, depletion and
amortization
16.1
26.4
17.1
17.9
11.1
88.6
Interest expense, net
—
—
.1
—
21.4
21.5
Income taxes
—
—
—
—
32.9
32.9
EBITDA
$
45.2
$
79.8
$
60.2
$
50.4
$
5.6
$
241.2
Unrealized (gains) losses on benefit plan
investments
4.8
4.8
Stock-based compensation expense
1.6
1.6
Adjusted EBITDA
$
12.0
$
247.6
Revenue
$
366.1
$
461.2
$
433.0
$
484.4
$
252.5
$
1,997.2
Net Income Margin
8.0
%
11.6
%
9.9
%
6.7
%
(23.7
)%
4.9
%
EBITDA Margin
12.3
%
17.3
%
13.9
%
10.4
%
2.2
%
12.1
%
Adjusted EBITDA Margin
4.7
%
12.4
%
The following tables provide the reconciliation to
trailing-twelve-month EBITDA and Adjusted EBITDA as of September
30, 2023, as well as the net leverage calculation of net debt to
trailing-twelve-month Adjusted EBITDA.
Twelve Months Ended September 30,
2023
Nine Months Ended September 30,
2023
Twelve Months Ended December 31,
2022
Nine Months Ended September 30,
2022
(In millions)
Net income
$
180.2
$
162.2
$
116.2
$
98.2
Depreciation, depletion and
amortization
121.7
92.5
117.8
88.6
Interest expense, net
50.0
41.4
30.1
21.5
Income taxes
66.0
56.3
42.6
32.9
EBITDA
$
417.9
$
352.4
$
306.7
$
241.2
Unrealized (gains) losses on benefit plan
investments
(1.9
)
(1.1
)
4.0
4.8
Stock-based compensation expense
3.4
2.3
2.7
1.6
One-time separation costs
6.4
6.4
—
—
Adjusted EBITDA
$
425.8
$
360.0
$
313.4
$
247.6
Twelve Months Ended September 30,
2023
(In millions)
Long-term debt
$
675.6
Long-term debt - current portion
7.1
Total debt
682.7
Add: Unamortized debt issuance costs
16.0
Total debt, gross
698.7
Less: Cash and cash equivalents, excluding
restricted cash
84.0
Total debt, net
$
614.7
Trailing twelve months ended September 30,
2023, Adjusted EBITDA
$
425.8
Net leverage
1.4
x
The following table provides a reconciliation of consolidated
GAAP net income to EBITDA and Adjusted EBITDA for forecasted
results.
2023
Low
High
(In millions)
Net income
$
160.0
$
180.0
Adjustments:
Interest expense
55.0
55.0
Income taxes
53.0
63.0
Depreciation, depletion and
amortization
120.0
120.0
EBITDA
$
388.0
$
418.0
Unrealized (gains) losses on benefit plan
investments
(1.1
)
(1.1
)
Stock-based compensation expense
3.5
3.5
One-time separation costs
9.6
9.6
Adjusted EBITDA
$
400.0
$
430.0
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231106228874/en/
Media Contact: Tony Spilde, Senior Director of
Communications, 541-693-5949 Financial Contact: Zane Karimi,
Director of Investor Relations, 503-944-3508
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