Knife River Corp

Note 10 -Acquisitions and Dispositions

Acquisitions

The following acquisitions were accounted for as business combinations in accordance with ASC 805 -Business Combinations. The results of the business combinations have been included in the Company's Consolidated Financial Statements beginning on the acquisition dates. Pro forma financial amounts reflecting the effects of the business combinations are not presented, as none of these business combinations, individually or in the aggregate, were material to our financial position or results of operations.

Acquisitions are also subject to customary adjustments based on, among other things, the amount of cash, debt and working capital in the business as of the closing date. The amounts included in the Consolidated Balance Sheets for these adjustments are considered provisional until final settlement has occurred.

Strata Corporation

On March 7, 2025, we completed the acquisition of Strata Corporation, a leading construction materials and contracting services provider in North Dakota and northwestern Minnesota. The purchase of Strata includes operations that expand our aggregates, ready-mix and asphalt operations, as well as our trucking fleet, locomotives and railcars, in our current geographic locations. The purchase price for Strata totaled $454.0 million and is subject to post-closing adjustments. The results of Strata are included in our Central segment.

The estimated fair value of the assets acquired and liabilities assumed are preliminary, as we continue to gather information to finalize the valuation of these assets and liabilities. The fair values are considered provisional until final fair values are determined, or the measurement period has passed. We expect to record adjustments as we accumulate the information needed to estimate the fair value of assets acquired and liabilities assumed, including working capital balances, estimated fair value of identifiable intangible assets, property, plant and equipment, total consideration and goodwill. We utilized market and cost approaches to estimate the fair value of the property, plant and equipment, excluding aggregate reserves. The fair value of aggregate reserves and intangible assets were determined using the income approach. All estimates, key assumptions, and forecasts were either provided by or reviewed by management. We engaged third-party valuation firms to assist in the analysis and valuation of the assets of Strata. While we chose to utilize third-party valuation firms, the fair value analysis and related valuations represent the conclusions of management and not the conclusions or statements of any third party.

The excess of the total purchase price over the fair value of assets acquired and liabilities assumed was allocated to goodwill. We believe that the goodwill relates to several factors, including potential synergies related to market opportunities for multiple product offerings and economies of scale expected from combining our operations with the business acquired.

The final fair value of the net assets acquired may result in adjustments to the assets and liabilities, including goodwill, and will be made as soon as practical, but no later than one year from the respective acquisition dates. However, any subsequent measurement period adjustments are not expected to have a material impact on our results of operations.

Index

The preliminary allocation of the purchase price for Strata is as follows:

Intangible assets for Strata include $9.5 million for customer backlog, which has an amortization period of 10 months, and $4.1 million for permits, which has an amortization period of 10 years upon commencement of operations.

Other

During the first quarter of 2025, we completed the acquisition of an aggregate quarry operation in Washington for $10.1 million, which will supply aggregates to Southern Washington and Northern Oregon. The acquisition resulted in the recognition of $15.1 million of assets in property, plant and equipment, $1.3 million deferred income tax liability and $202,000 in noncurrent liabilities - other. We have reviewed the fair values of the assets and liabilities and determined that the purchase would result in a gain being recognized at the time of the acquisition. We believe the bargain purchase gain was primarily the result of the sellers’ desire to exit quickly due to cash flow constraints which were limiting their ability to operate the business efficiently. The gain on the purchase was $3.5 million, net of deferred taxes of $1.3 million, and was recorded in other income on the Consolidated Statement of Operations. The results of this acquisition are included in our West segment.

During 2024, we completed four acquisitions with an aggregated purchase price of $120.7 million, subject to future post-closing adjustments. As of March 31, 2025, the purchase accounting for Albina Asphalt is considered preliminary and will be completed in the second quarter of 2025.

For the three months ended March 31, 2025, we incurred acquisition-related costs on completed and other potential acquisitions of $5.3 million. These costs are included in our Corporate Services in selling, general and administrative expenses on the Consolidated Statement of Operations.

Index

Dispositions

On March 7, 2025, we sold four ready-mix plant operations for total proceeds of $14.5 million. The ready-mix plant operations were acquired by us as part of the Strata acquisition and subsequently sold to a third-party. The ready-mix plants were included in assets held for sale on the opening balance sheet for Strata at the time of the acquisition.