Q - Knife River

Previous wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words "anticipates," "estimates," "expects," "intends," "plans," "predicts" and similar expressions, and include statements concerning plans, projections, objectives, goals, strategies, future events or performance, and underlying assumptions (many of which are based, in turn, upon further assumptions) and other statements that are other than statements of historical facts. From time to time, Knife River Corporation ("Knife River," the "Company," "we," "our," or "us") may publish or otherwise make available forward-looking statements of this nature, including statements related to its Competitive EDGE strategy (EDGE) implemented to improve margins and to execute on other strategic initiatives aimed at generating long-term profitable growth, shareholder value creation, expected long-term goals, backlog margin and acquisitions or financing plans.

Current wording

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended ("Exchange Act"). Forward-looking statements are all statements other than statements of historical fact, including without limitation those statements that are identified by the words "anticipates," "estimates," "expects," "intends," "plans," "predicts" and similar expressions, and include statements concerning plans, projections, objectives, goals, strategies, future events or performance, and underlying assumptions (many of which are based, in turn, upon further assumptions) and other statements that are other than statements of historical facts. From time to time, Knife River Corporation ("Knife River," the "Company," "we," "our," or "us") may publish or otherwise make available forward-looking statements of this nature, including statements related to its Competitive EDGE strategy (EDGE) implemented to improve margins and to execute on other strategic initiatives aimed at generating long-term profitable growth, shareholder value creation, expected long-term goals, expected backlog margin, acquisitions, financing plans, expected federal and state funding for infrastructure or other proposed strategies.

Previous wording

Our markets remain resilient and construction activity remains generally strong. Approximately 80 percent of our contracting services revenue each year comes from public-sector projects, enhancing stability through market cycles. For more information on factors that may negatively impact our business, see the section entitled "Item 1A. Risk Factors" in Part I of the Company's 2024 Annual Report.

Current wording

Federal and state funding remains strong for a majority of our markets with approximately 80 percent of our historical contracting services revenue each year coming from public-sector projects, enhancing stability through market cycles. For more information on factors that may negatively impact our business, see the section entitled "Item 1A. Risk Factors" in Part I of the Company's 2024 Annual Report.

Previous wording

Expected margins on backlog at March 31, 2025, were comparable to the expected margins on backlog at March 31, 2024. Of the $938.7 million of backlog at March 31, 2025, we expect to complete approximately $820.6 million in the 12 months following March 31, 2025. Approximately 87 percent of our backlog at March 31, 2025, relates to publicly funded projects, including street and highway construction projects, which are driven primarily by public works projects for state departments of transportation (DOT). Further, there continues to be infrastructure development, as discussed in the following section on Public Funding, which is expected to continue to provide bidding opportunities in our markets. We anticipate that full-year 2025 contracting service margins will be similar to 2024.

Current wording

Expected margins on backlog at June 30, 2025, were slightly lower compared to the expected margins on backlog at June 30, 2024. Of the $1.3 billion of backlog at June 30, 2025, we expect to complete approximately $998.5 million in the 12 months following June 30, 2025. Approximately 91 percent of our backlog at June 30, 2025, related to publicly funded projects, including street and highway construction projects, which are driven primarily by public works projects for state departments of transportation (DOT). Further, there continues to be infrastructure development, as discussed in the following section on Public Funding, which is expected to continue to provide bidding opportunities in our markets. Oregon, however, has seen challenges with both public and private projects contributing to lower backlog in the West segment. On the public side, challenges with the Oregon DOT budget, as discussed in the following section on Public funding, will continue to create a headwind for 2025, while high interest rates and macroeconomic uncertainty have delayed private projects.

Previous wording

Infrastructure, assigning the United States roads a "D+" grade and estimating that between 2024 and 2033, the country will require more funding than what is currently authorized. It is estimated that a total of $2.2 trillion in funding will be needed for our roadway systems to reach a state of good repair.

Current wording

Public Funding. Funding for public projects is dependent on federal and state funding, such as appropriations to the Federal Highway Administration. Earlier this year, the American Society of Civil Engineers published its 2025 Report Card for America's Infrastructure, assigning the United States roads a "D+" grade and estimating that between 2024 and 2033, the country will require more funding than what is currently authorized. It is estimated that a total of $2.2 trillion in funding will be needed for our roadway systems to reach a state of good repair.

Previous wording

Currently, states have continued moving forward with allocating funds from federal programs, such as the Infrastructure Investment and Jobs Act (IIJA), which is authorized to provide $1.2 trillion in funding from 2022 through 2026. As of January 2025, over 60 percent of IIJA formula funding had yet to be spent in our 14 state operating market. Additionally, DOT budgets in most of the states where we operate remain strong, which favorably affects bidding through the remainder of the year. During the early part of second quarter 2025, Washington, Idaho and North Dakota have all passed bills that support their transportation funding. We continue to monitor the implementation and impact of these legislative items.

Current wording

Currently, states have continued moving forward with allocating funds from federal programs, such as the Infrastructure Investment and Jobs Act (IIJA), which is authorized to provide $1.2 trillion in funding from 2022 through 2026. As of April 2025, approximately 58 percent percent of IIJA formula funding had yet to be spent in our 14 state operating market. Additionally, DOT budgets in most of the states where we operate remain strong, which favorably affects bidding through the remainder of the year. During the early part of second quarter 2025, Washington, Idaho and North Dakota all passed bills that support their transportation funding. We continue to monitor the implementation and impact of these legislative items. Throughout the first half of 2025, we saw projects in Oregon get delayed and funding diverted from asphalt paving to megaprojects as a result of the state's DOT budget shortfall and general uncertainty for funding. In August 2025, Oregon intends to hold a special legislative session to address transportation funding needs.

Previous wording

Profitability. Our management team continually monitors our margins and has been proactive in applying strategies to increase margins to support our long-term profitability goals and to create shareholder value. In 2023, we began implementing EDGE initiatives and established teams to deliver training, assist with targeting higher-margin bidding opportunities across the regions and pursue growth opportunities, as well as identifying ways to increase efficiencies and reduce costs. Since inception, the Materials Process Improvement Team (Materials PIT Crew) has traveled to 22 locations throughout our operational footprint, visiting 135 individual aggregate, asphalt and ready-mix concrete plants. In 2024, we created the position of Chief Excellence Officer. This newly formed position became effective January 1, 2025, and focuses on expanding our PIT Crews and leading our standardization efforts. Under the leadership of the Chief Excellence Officer, a broader process improvement framework was established, creating more teams focused on standardization, commercial excellence and operational excellence.

Current wording

Profitability. Our management team continually monitors our margins and has been proactive in applying strategies to increase margins to support our long-term profitability goals and to create shareholder value. In 2023, we began implementing EDGE initiatives and established teams to deliver training, assist with targeting higher-margin bidding opportunities across the regions and pursue growth opportunities, as well as identifying ways to increase efficiencies and reduce costs. Since inception, the Materials Process Improvement Team (Materials PIT Crew) has traveled to 25 locations throughout our operational footprint, visiting 152 individual aggregate, asphalt and ready-mix concrete plants. In the effort to drive continuous improvements, these teams have been deploying new technologies and training to enhance productivity.

Previous wording

Under the current tariff environment, we did not experience a material direct impact to the results of our financial operations in the first three months of 2025. We continue to closely monitor the effects and changes to these announcements, but currently do not have enough information to fully quantify the direct or indirect impact these tariffs will have once fully enacted.

Current wording

Under the current tariff environment, we did not experience a material direct impact to the results of our financial operations in the first six months of 2025. We continue to closely monitor the effects and changes to these announcements, but currently do not have enough information to fully quantify the direct or indirect impact of these tariffs.

Previous wording

Growth. Our management team continues to evaluate growth opportunities, both through organic growth and acquisitions they believe will generate shareholder value. Our business development team is focused on our growth with materials-led businesses in mid-size, high growth markets, and has several targets at various stages of completion in our acquisition pipeline. In March 2025, we completed the acquisition of Strata Corporation, which is now included in our Central segment. As part of the acquisition, we added over 30 years of aggregate reserves for Strata's operations, which is based on Strata's historical sales volumes, 24 ready-mix plants and three asphalt plants, which complements our existing operations. In March 2025, we also completed the acquisition of an aggregate quarry operation in Washington, which will supply aggregates to Southern Washington and Northern Oregon.

Current wording

Growth. Our management team continues to evaluate growth opportunities, both through organic growth and acquisitions they believe will generate shareholder value. Our business development team is focused on our growth with materials-led businesses in mid-size, high growth markets, and has several targets at various stages of completion in our acquisition pipeline. In the second quarter of 2025, we completed the acquisition of an aggregates and contracting services business in Central Minnesota. In the first quarter of 2025, we completed the acquisition of Strata Corporation, which is now included in our Central segment, as well as the acquisition of an aggregate quarry operation in Washington. Subsequent to June 30, 2025, we acquired an aggregates-led, construction materials and contracting services business in Central Oregon.

Previous wording

Workforce. As a people-first company, we continually take steps to address safety, recruitment and retention of our employees. Safety is a core value at Knife River. The fundamental tenants of our safety culture are that all injuries are preventable and that our team is committed to work safely every day. We continue to advance our culture of safety through engagement and empowering our team members to take action and make meaningful changes that improve their well-being and the well-being of others.

Current wording

Workforce. As a people-first company, we continually take steps to address safety, recruitment and retention of our employees. Safety is one of Knife River's core values. The fundamental tenets of our "I Choose Safety" program are that safety is a choice and that all injuries are preventable. Our team is committed to work safely every day and we continue to advance our culture of safety through engagement and empowering our team members to take action and make meaningful changes that improve their well-being and the well-being of others.

Previous wording

We own and operate a state-of-the-art training facility, the Knife River Training Center, which is used corporatewide to enhance the skills of both our new and existing employees through classroom education and hands-on experience. One of the most popular courses at the Knife River Training Center is the commercial driver's license training, which is helping to address an industry-wide labor shortage. The Knife River Training Center also offers a variety of courses around leadership development for all Knife River employees.

Current wording

We own and operate a state-of-the-art training facility, the Knife River Training Center. This unique, 230-acre facility, used corporatewide, provides ample space to enhance the skills of both our new and existing employees through classroom education and hands-on experience. One of the most popular courses at the Knife River Training Center is the commercial driver's license training (CDL), which is helping to address an industry-wide labor shortage. In addition to CDL training for new truck drivers, the training center offers experienced truck driver training, new and experienced equipment operator training and the center offers a diverse array of courses designed to foster leadership and facilitate professional skills development in sales, instruction, and more. These courses are available to all Knife River employees, ensuring that our team members, from frontline workers to senior leadership, have access to the training and support they need to grow in their roles.

Previous wording

Other income includes net periodic benefit costs for our benefit plan expenses, other than service costs; interest income; realized and unrealized gains and losses on investments for our nonqualified benefit plans; earnings or losses on joint venture arrangements; gain on bargain purchase; and other miscellaneous income or expenses, including expenses related to the transition services agreement with MDU Resources Group, Inc.

Current wording

Other income includes net periodic benefit costs for our benefit plan expenses, other than service costs; interest income; realized and unrealized gains and losses on investments for our nonqualified benefit plans; earnings or losses on joint venture

Previous wording

Interest expense increased $1.4 million due primarily to higher average debt balances with the issuance of a new Term Loan B in March of 2025.

Current wording

Interest expense increased $8.4 million due primarily to higher average debt balances with the issuance of a new Term Loan B in March of 2025 and borrowings under our revolving credit facility in the second quarter of 2025, offset in part by lower average interest rates.

Previous wording

Selling, general and administrative expenses increased $12.9 million for the first quarter. Our reportable segments had higher costs of $9.1 million, primarily due to additional overhead of $3.5 million from the acquisition of Strata in March of 2025 and Albina in November 2024, as well as increased labor-related costs partly due to additional employees.

Current wording

Selling, general and administrative expenses increased $22.5 million for the first half of the year. Our reportable segments had higher costs of $20.3 million, primarily due to additional overhead from the acquisitions of Strata and Albina, as well as increased labor-related costs partly due to additional employees.

Previous wording

Other income improved $900,000, largely driven by a one-time gain of $3.5 million on the bargain purchase of an aggregates quarry operation in the West segment, offset in part by lower returns of $1.9 million on our nonqualified defined benefit plans and a decrease in interest income of $600,000.

Current wording

Other income increased $1.7 million, largely driven by a one-time gain of $3.5 million on the bargain purchase of an aggregate quarry operation in the West segment, offset in part by a decrease in interest income of $1.0 million and lower investment returns on our nonqualified defined benefit plans.

Previous wording

During the first quarter of 2025, Corporate Services contributed negative EBITDA of $18.0 million, compared to negative EBITDA of $12.7 million in the prior year. Corporate Services had higher selling, general and administrative costs of $3.8 million in the quarter, driven largely by higher due diligence and integration costs of $5.8 million related to corporate development and completed acquisitions, as well as higher labor-related costs for additional staff and stock-based compensation expense. Offsetting these increased costs was the absence of one-time Separation costs in 2024 of $1.7 million and lower health care costs due to the absence of a high dollar claim in 2024. Corporate Services also had lower returns on our nonqualified benefit plan investments in 2025, which reduced EBITDA by $1.8 million.

Current wording

During the first half of 2025, Corporate Services contributed negative EBITDA of $31.5 million, compared to negative EBITDA of $28.4 million in the prior year. Corporate Services had higher selling, general and administrative costs of $2.2 million in the year, driven largely by an increase in due diligence and integration costs of $7.5 million related to corporate development and completed acquisitions, as well as higher labor related costs for additional staff and stock-based compensation expense. Offsetting the decrease was lower incurred but not reported losses for our self-insured health care plan and the absence of one-time Separation costs in 2024 of $3.8 million. Corporate Services also had lower investment returns of $800,000 on our nonqualified defined benefit plans.

Previous wording

At March 31, 2025, we had unrestricted cash and cash equivalents of $86.1 million, working capital of $624.6 million and borrowing capacity of $477.1 million on our revolving credit agreement, net of our outstanding letters of credit. Working capital is calculated as current assets less current liabilities. As of March 31, 2025, we had sufficient liquid assets and borrowing capacity to meet our financial commitments, debt obligations and anticipated capital expenditures for at least the next 12 months.

Current wording

At June 30, 2025, we had unrestricted cash and cash equivalents of $26.6 million, working capital of $706.1 million and borrowing capacity of $294.0 million on our revolving credit facility, net of our outstanding letters of credit. Working capital is calculated as current assets less current liabilities. As of June 30, 2025, we had sufficient liquid assets and borrowing capacity to meet our financial commitments, debt obligations and anticipated capital expenditures for at least the next 12 months.

Previous wording

On March 7, 2025, we entered into an amendment to our senior secured credit agreement to increase our revolving credit agreement from $350 million to $500 million and extend the maturity to March 7, 2030, refinance our existing $275 million Term Loan A with a maturity of March 7, 2030, and provide for a new Term Loan B in an aggregate principal amount of $500.0 million with a maturity date of March 8, 2032. For more information on the debt agreements and covenant restrictions, see Note 13.

Current wording

On March 7, 2025, we entered into an amendment to our senior secured credit agreement to increase our revolving credit facility from $350 million to $500 million and extend the maturity to March 7, 2030, refinance our existing $275 million Term Loan A with a maturity of March 7, 2030, and provide for a new Term Loan B in an aggregate principal amount of $500.0 million with a maturity date of March 8, 2032. We used the proceeds from the issuance of the new Term Loan B to fund a portion of Strata's purchase price. Separately, we increased the total commitments under our existing revolving credit facility for future expenditures. For more information on the debt agreements and covenant restrictions, see Note 13.

Previous wording

We currently estimate total 2025 capital expenditures for maintenance and improvement to be between $155 million and $215 million. For the three months ended March 31, 2025, we spent $63.9 million, largely on the replacement of depleting aggregate reserves, construction equipment and plant improvements.

Current wording

We currently estimate total 2025 capital expenditures for maintenance and improvement to be between $160 million and $225 million. For the six months ended June 30, 2025, we spent $111.0 million, largely on the replacement of depleting aggregate reserves, construction equipment and plant improvements.

Previous wording

Additionally, for the three months ended March 31, 2025, we spent $454.5 million on growth initiatives, including $433.4 million on Strata (net of working capital adjustments and cash acquired), $10.0 million on an aggregate quarry operation and $11.1 million on greenfield projects. As part of the Strata acquisition, we also received proceeds of $14.5 million on the sale of four ready-mix plant operations. For the remainder of 2025, we estimate to spend an additional $57 million on organic growth projects. Capital expenditures for future acquisitions and future organic growth opportunities would be incremental to our outlined capital program. It is anticipated that capital expenditures for 2025 will be funded by various sources, including internally generated cash and debt facilities.

Current wording

Additionally, for the six months ended June 30, 2025, we spent $619.5 million on growth initiatives, which comprised of $501.9 million on acquisitions and $117.6 million on aggregate expansion and greenfield projects. In connection with the Strata acquisition, we also received proceeds of $14.5 million on the sale of four ready-mix plant operations. For the remainder of 2025, we estimate to spend $50.1 million on organic growth projects. Capital expenditures for future acquisitions and new organic growth opportunities would be incremental to our outlined capital program. It is anticipated that capital expenditures for 2025 will be funded by various sources, including internally generated cash and debt facilities.

Previous wording

Cash used in operating activities at March 31, 2025, increased $82.1 million, largely related to higher working capital needs and higher net loss in the period. Cash used by working capital components totaled $97.9 million for the three months ended March 31, 2025, compared to $39.8 million for the three months ended March 31, 2024. The change in cash was primarily the result of higher receivables due to lower collections and higher revenues in first quarter 2025; timing of prepaid insurance and income taxes; and fluctuations in the timing of payment on accounts payable. Partially offsetting these changes was lower aggregates inventory due to lower production in the quarter, offset in part by higher liquid asphalt with the addition of Albina in November of 2024.

Current wording

Cash used in operating activities at June 30, 2025, increased $78.1 million, largely related to higher working capital needs and higher net loss in the period. Cash used by working capital components totaled $234.8 million for the six months ended June 30, 2025, compared to $195.9 million for the six months ended June 30, 2024. This increase in cash usage was primarily the result of higher payroll-related costs due in part to the additional employees associated with acquisitions; timing of prepaid insurance and income taxes; and fluctuations in the timing of payment on accounts payable.

Previous wording

The increase in cash used in investing activities for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was primarily due to the acquisition of Strata and an aggregates quarry operation in the first quarter of 2025, as discussed in Note 10, as well as higher capital expenditures, including routine replacement of vehicles and equipment, plant improvements and the replenishment of depleting aggregate reserves. The increase in cash usage was offset in part by proceeds from the sale of ready-mix operations in the Central segment in the first quarter of 2025, as discussed in Note 10.

Current wording

The increase in cash used in investing activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was primarily due to additional investments to grow our company. We spent $491.7 million more on acquisitions in 2025 to acquire Strata, an aggregates quarry operation in Oregon and a construction materials and contracting services business in Minnesota, as discussed in Note 10. We also spent $125.0 million more on capital expenditures, including the replenishment of depleting aggregate reserves and greenfield projects. The increase in cash usage was offset in part by proceeds from the sale of ready-mix operations in the Central segment in the first quarter of 2025, as discussed in Note 10, and non-strategic asset sales in both the West and Central segments in the second quarter of 2025.

Previous wording

The increase in cash flows provided by financing activities for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, was largely related to the funding of a new Term Loan B in March of 2025, as discussed in Note 13. Offsetting the cash provided by long-term debt were higher debt issuance costs associated with the amendment of our senior secured credit agreement to increase our revolving credit facility capacity, extend the maturity date of the revolving credit facility and Term Loan A, and the issuance of a new Term Loan B.

Current wording

The increase in cash flows provided by financing activities for the six months ended June 30, 2025, compared to the six months ended June 30, 2024, was largely related to the funding of a new Term Loan B in March of 2025, as well as borrowings under our revolving credit facility in the second quarter of 2025, as discussed in Note 13. Offsetting the cash provided by long-term debt were higher debt issuance costs associated with the amendment of our senior secured credit agreement to increase our revolving credit facility capacity, extend the maturity date of the revolving credit facility and Term Loan A, and the issuance of a new Term Loan B.

Previous wording

At March 31, 2025, our long-term debt reflected an increase of approximately $500.0 million from the balance at December 31, 2024. This increase is due to issuing a new $500 million Term Loan B facility with the proceeds being used to fund a portion of Strata's purchase price.

Current wording

At June 30, 2025, our long-term debt reflected an increase of approximately $680.0 million from the balance at December 31, 2024. This increase is due to issuing a new $500 million Term Loan B facility with the proceeds being used to fund a portion of Strata's purchase price in addition to borrowing $183 million under our revolving credit facility to fund seasonal working capital needs, an asset purchase and additional acquisitions.

Previous wording

At March 31, 2025, our total estimated interest payments over the life of our debt reflected an increase of approximately $243.0 million from the total estimated interest payments at December 31, 2024. This increase is due to the change in long-term debt outstanding related to the new Term Loan B previously mentioned.

Current wording

At June 30, 2025, our total estimated interest payments over the life of our debt reflected an increase of approximately $259.1 million from the total estimated interest payments at December 31, 2024. This increase is primarily due to the change in long-term debt outstanding related to the new Term Loan B and borrowings under our revolving credit facility as previously mentioned.

Previous wording

We have noncontributory qualified defined benefit pension plans for certain employees. Various assumptions are used in calculating the benefit expense (income) and liability (asset) related to these plans. Costs of providing these benefits are dependent upon assumptions of future conditions and bear the risk of changing.

Current wording

We have frozen noncontributory qualified defined benefit pension plans for certain employees. Various assumptions are used in calculating the benefit expense (income) and liability (asset) related to these plans. Costs of providing these benefits are dependent upon assumptions of future conditions and bear the risk of changing.

Previous wording

EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are most directly comparable to the corresponding GAAP measures of net income and net income margin. We believe these non-GAAP financial measures, in addition to corresponding GAAP measures, are useful to investors by providing meaningful information about operational efficiency compared to our peers by excluding the impacts of differences in tax jurisdictions and structures, debt levels and capital investment. We believe Adjusted EBITDA and Adjusted EBITDA margin are useful performance measures because they allow for an effective evaluation of our operating performance by excluding stock-based compensation and unrealized gains and losses on benefit plan investments as they are considered non-cash and not part of our core operations. We also exclude the one-time, non-recurring costs associated with the Separation as those are not expected to continue. We believe EBITDA and Adjusted EBITDA assist rating agencies and investors in comparing operating performance across operating periods on a consistent basis by excluding items management does not believe

Current wording

EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are most directly comparable to the corresponding GAAP measures of net income and net income margin. We believe these non-GAAP financial measures, in addition to corresponding GAAP measures, are useful to investors by providing meaningful information about operational efficiency compared to our peers by excluding the impacts of differences in tax jurisdictions and structures, debt levels and capital investment. We believe Adjusted EBITDA and Adjusted EBITDA margin are useful performance measures because they allow for an effective evaluation of our operating performance by excluding stock-based compensation and unrealized gains and losses on benefit plan investments as they

Previous wording

are indicative of our operating performance. Additionally, EBITDA and Adjusted EBITDA are important financial metrics for debt investors who utilize debt to EBITDA and debt to Adjusted EBITDA ratios. We believe these non-GAAP financial measures, including total segment measures, as applicable, are useful performance measures because they provide clarity as to our operational results. Our management uses these non-GAAP financial measures in conjunction with GAAP results when evaluating our operating results internally and calculating employee incentive compensation.

Current wording

are considered non-cash and not part of our core operations. We also exclude the one-time, non-recurring costs associated with the Separation as those are not expected to continue. We believe EBITDA and Adjusted EBITDA assist rating agencies and investors in comparing operating performance across operating periods on a consistent basis by excluding items management does not believe are indicative of our operating performance. Additionally, EBITDA and Adjusted EBITDA are important financial metrics for debt investors who utilize debt to EBITDA and debt to Adjusted EBITDA ratios. We believe these non-GAAP financial measures, including total segment measures, as applicable, are useful performance measures because they provide clarity as to our operational results. Our management uses these non-GAAP financial measures in conjunction with GAAP results when evaluating our operating results internally and calculating employee incentive compensation.

Previous wording

The following information reconciles segment and consolidated net loss to EBITDA and Adjusted EBITDA and provides the calculation of EBITDA margin and Adjusted EBITDA margin. Interest expense, net, is net of interest income that is included in other income on the Consolidated Statements of Operations.

Current wording

The following information reconciles segment and consolidated net income (loss) to EBITDA and Adjusted EBITDA and provides the calculation of EBITDA margin and Adjusted EBITDA margin. Interest expense, net, is net of interest income that is included in other income on the Consolidated Statements of Operations.