Knife River Corporation (NYSE: KNF) announced today that it has entered into a definitive agreement to acquire Strata Corporation, a leading construction materials and contracting services provider in North Dakota and northwestern Minnesota. Based on Strata’s projected 2025 Adj. EBITDA, the purchase price of $454 million reflects a multiple in the high single digits.

Founded in 1910, Strata is an aggregates-based, vertically integrated company with over 75 aggregates locations, extensive aggregate reserves and rail assets to bring those reserves to market. The company has 28 ready-mix plants, three asphalt plants and a contracting services division that specializes in asphalt paving and concrete construction. Strata is headquartered in Grand Forks, North Dakota, and will provide infill growth for Knife River’s Central Segment.

“Strata is respected among its peers and in its communities, and is well-known for its strong culture and expertise,” said Knife River President and CEO Brian Gray. “It is a great success story – growing from a single gravel operation into a leading supplier of construction materials that employs over 900 team members during the peak season. We look forward to completing the transaction and welcoming the Strata team to the Life at Knife.”

The transaction is expected to close in the first half of 2025, subject to regulatory approval and customary closing conditions. Knife River expects to use cash on hand and the proceeds from the issuance of long-term debt to finance the acquisition.

“We believe this acquisition is a prime example of our ‘Competitive EDGE’ strategy to profitably grow our business,” Gray said. “We expect Strata to be accretive to Knife River’s Adj. EBITDA margin within the first year. Strata’s high-quality assets allow us to expand our service territory within a region we know well. We believe this is a great, long-term fit for us.”

Strata was founded 114 years ago as Bradshaw Gravel Supply. Majority shareholder James Bradshaw oversaw much of the company’s growth during his 46 years as president.

“It’s not easy building a family business and it’s even harder coming to the point where you are ready to step away from it,” Bradshaw, Strata’s chairman and CEO, said. “I believe there is a great fit between Strata and Knife River. Both companies are strongly aligned with our cultures of putting people first and operating with integrity. We want what is best for our team and their future, and we believe that is with Knife River.”

About Knife River

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, including with respect to the consummation of the acquisition of Strata and the timing and benefits thereof. 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, as amended. Although the company believes that its expectations are expressed in good faith and based on reasonable assumptions, there is no assurance the company’s projections or estimates for growth, shareholder value creation, long-term goals, other proposed strategies or statements related to the acquisition of Strata 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 2023 Form 10-K and subsequent filings with the Securities and Exchange Commission.

Changes in such assumptions and factors could cause actual future results to differ materially from those expressed in the forward-looking statements. 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, Knife River does not undertake to update forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

Adjusted EBITDA margin is considered a non-GAAP measure of financial performance. This non-GAAP financial measure is not a measure of financial performance under GAAP. The items excluded from this non-GAAP financial measure are significant components in understanding and assessing financial performance. Therefore, this non-GAAP financial measure should not be considered a substitute for the applicable GAAP metric.

Adjusted EBITDA margin is most directly comparable to the corresponding GAAP measure of net income margin. We believe this non-GAAP financial measure, in addition to the corresponding GAAP measure, is 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 margin is a useful performance measure because it allows 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 of Knife River from MDU Resources as those are not expected to continue. We believe Adjusted EBITDA margin is a useful performance measure because it provides clarity as to the operational results of the company. Our management uses this non-GAAP financial measure in conjunction with GAAP results when evaluating our operating results internally and calculating employee incentive compensation.

EBITDA is calculated by adding back income taxes, interest expense (net of interest income) and depreciation, depletion and amortization expense to net income. 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. This non-GAAP financial measure should not be considered as an alternative to, or more meaningful than, the GAAP financial measure of net income margin and is intended to be a helpful supplemental financial measure for investors’ understanding of our operating performance. Our non-GAAP financial measure is not standardized; therefore, it may not be possible to compare this financial measure with other companies’ Adjusted EBITDA margin measure having the same or similar names.

Knife River’s projection for Adjusted EBITDA margin and Strata’s projected 2025 Adjusted EBITDA are non-GAAP financial measures that exclude or otherwise have been adjusted for non-GAAP adjustment items from Knife River’s or Strata’s GAAP financial statements, as applicable. When the company provides its forward-looking projection for Adjusted EBITDA margin and Strata’s projected 2025 Adjusted EBITDA, it does not provide a reconciliation of these non-GAAP financial measures as Knife River is unable to predict with a reasonable degree of certainty the actual impact of the non-GAAP adjustment items. By their very nature, non-GAAP adjustment items are difficult to anticipate with precision because they are generally associated with unexpected and unplanned events that impact our company and its financial results, including, but not limited to, the potentially high variability, complexity and low visibility with respect to the items that would be excluded from the applicable GAAP measure in the relevant future period, such as unusual gains and losses, the impact and timing of potential acquisitions and divestitures, certain financing costs and other structural changes or their probable significance. Therefore, Knife River is unable to provide a reconciliation of these measures without unreasonable efforts.

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