EX-99.1 2 filename2.htm

TABLE OF CONTENTS

Exhibit 99.1
[   ], 2023
Dear MDU Resources Group, Inc. Stockholder:
On August 4, 2022, we announced plans to separate our wholly owned subsidiary Knife River Corporation (“Knife River” or the “Company”) from MDU Resources Group, Inc. (“MDU Resources”). The separation will occur by means of a spinoff of a newly formed company named Knife River Holding Company, which will own Knife River, including its assets and liabilities.
MDU Resources, our existing company in which you currently own common stock, will continue to own and operate the remaining businesses, including our electric and natural gas utilities, pipeline company and construction services company.
The separation will create two publicly traded companies, MDU Resources and Knife River Holding Company, both with proven long-term strategies, sufficient scale and financial strength that will be well positioned to lead in their industries. MDU Resources’ board of directors believes that separating Knife River from our remaining businesses is in the best interest of MDU Resources and our stockholders for a number of reasons, including:

• | 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.

• | 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.

• | 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.

• | Giving each publicly traded company direct access to capital markets.

Our board of directors also considered potential concerns when evaluating the separation, including risks associated with creating a new public company, possible cost increases and one-time separation costs. MDU Resources’ board of directors decided the potential benefits of the separation significantly outweighed these possible concerns. The board believes as two distinct publicly traded companies, MDU Resources and Knife River Holding Company will be better positioned, both strategically and operationally, to grow and capitalize on strategic opportunities.
The separation will give MDU Resources stockholders equity ownership in both MDU Resources and Knife River Holding Company and is intended to qualify as tax-free to our stockholders for U.S. federal income tax purposes, except with respect to any cash received in lieu of fractional shares.
The separation will be effected by means of a pro rata distribution of approximately 80.1 percent or more of the outstanding shares of Knife River Holding Company common stock to holders of MDU Resources common stock. Following the distribution, Knife River Holding Company will be a separate public company. Each MDU Resources stockholder will receive [   ] shares of Knife River Holding Company common stock for each share of MDU Resources common stock held at the close of business on [   ], the record date for the distribution. No vote of stockholders is required for the distribution. You do not need to take any action to receive the shares of Knife River Holding Company common stock to which you are entitled. You will not be required to make any payments, or to surrender or exchange your shares of MDU Resources common stock.
Knife River Holding Company intends to apply to have its common stock authorized for listing on the New York Stock Exchange (“NYSE”) under the symbol “KNF.” Following the distribution, MDU Resources will continue to trade on the NYSE under the symbol “MDU.”

TABLE OF CONTENTS

I encourage you to read the attached information statement, which is being provided to all MDU Resources stockholders who held shares on the record date for the distribution. The information statement describes the separation in detail and contains important business and financial information about Knife River Holding Company.

| ​ | ​ | Sincerely,
| ​ | ​ |
| ​ | ​ | David L. Goodin President and Chief Executive Officer MDU Resources Group, Inc.

TABLE OF CONTENTS

[   ], 2023
Dear Future Knife River Holding Company Stockholder:
I am pleased to welcome you as a future stockholder of Knife River Holding Company (“we,” “us,” or “our”). We intend to list Knife River Holding Company common stock on the New York Stock Exchange under the symbol “KNF.” Although we will be newly public, we are the nation’s fifth-largest producer of sand and gravel, and have provided construction materials and related contracting services in the United States for the last 30 years. Knife River Holding Company will continue to be a leading vertically integrated aggregates producer and provider of construction materials and contracting services, focused on serving our customers and growing organically and through acquisitions.
Knife River Holding Company has a successful track record of growth. Since our entry into the construction materials industry in 1992, we have made over 80 acquisitions, with a focus on aggregates and related downstream businesses, including ready-mix concrete, asphalt and related contracting services. In just the past four years, we have completed 12 acquisitions and increased revenues 23%. We believe Knife River Holding Company is poised to benefit from significant investments at the federal and local levels in infrastructure development and upgrades. Along with our financial and geographic growth, we have grown into an industry leader in safety and training, putting an emphasis on our four core values: People, Safety, Quality and the Environment.
Our stockholder value proposition is simple: provide outstanding returns to our stockholders by maintaining a leading position in the construction materials and contracting services industry, investing in the growth of Knife River Holding Company and generating strong cash flows. I invite you to learn more about Knife River Holding Company and our strategic initiatives by reading the attached information statement. I thank you in advance for your support as a future stockholder of Knife River Holding Company.

| ​ | ​ | Sincerely,
| ​ | ​ |
| ​ | ​ | [   ]
| ​ | ​ | [   ]
| ​ | ​ | Knife River Holding Company

TABLE OF CONTENTS

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been confidentially submitted to the U.S. Securities and Exchange Commission under the U.S. Securities Exchange Act of 1934, as amended.
PRELIMINARY AND SUBJECT TO COMPLETION, DATED [   ]
INFORMATION STATEMENT
Knife River Holding Company
Common Stock
(par value $0.01 per share)
This information statement is being furnished in connection with the distribution by MDU Resources Group, Inc. (“MDU Resources”) to its stockholders of shares of common stock of Knife River Holding Company, a Delaware corporation (“Knife River Holding Company,” “we,” “us” or “our”) that will hold, directly or indirectly, the historical business and operations of Knife River Corporation (“Knife River” or the “Company”), a direct subsidiary of Centennial Energy Holdings, Inc. (“Centennial” or the “Parent”) and an indirect, wholly owned subsidiary of MDU Resources, and the assets and liabilities associated with it and its business. MDU Resources will distribute approximately 80.1 percent or more of the outstanding shares of Knife River Holding Company common stock on a pro rata basis to MDU Resources stockholders in a transaction intended to qualify as generally tax-free to MDU Resources stockholders for U.S. federal income tax purposes, except with respect to any cash received in lieu of fractional shares. Following the distribution, Knife River Holding Company will be a separate public company. Immediately after the distribution becomes effective, MDU Resources will own up to 19.9 percent of the outstanding shares of Knife River Holding Company common stock. Prior to completing the separation, MDU Resources may adjust the percentage of Knife River Holding Company common stock to be distributed to MDU Resources stockholders and retained by MDU Resources in response to market and other factors, and it will amend this information statement to reflect any such adjustment. The distribution is subject to certain conditions, as described in this information statement. You should consult your tax advisor as to the particular consequences of the distribution to you, including the applicability and effect of any U.S. federal, state and local and non U.S. tax laws.
For each share of MDU Resources common stock held of record by you as of the close of business on [   ], the record date for the distribution, you will receive [   ] shares of Knife River Holding Company common stock. You will receive cash in lieu of any fractional shares of Knife River Holding Company common stock that you would have received after application of the above ratio. As discussed under “The Separation and Distribution—Trading Between the Record Date and Distribution 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. Knife River Holding Company expects the shares of Knife River Holding Company common stock to be distributed by MDU Resources to you at [   ] Eastern Time, on [   ]. Knife River Holding Company refers to the date of the distribution of its shares of common stock as the “distribution date.”
No vote of MDU Resources stockholders is required for the distribution. You are not, therefore, being asked for a proxy and you are requested not to send MDU Resources a proxy in connection with the distribution. You do not need to pay any consideration or 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.
There is no current trading market for Knife River Holding Company common stock, although Knife River Holding Company expects that a limited market, commonly known as a “when-issued” trading market, will develop on or about the record date for the distribution, and Knife River Holding Company expects “regular-way” trading of its common stock to begin on the first trading day following the completion of the distribution. Knife River Holding Company intends to apply to have its common stock authorized for listing on the New York Stock Exchange (“NYSE”) under the symbol “KNF.” MDU Resources common stock will continue to trade on the NYSE under the symbol “MDU.”
In reviewing this information statement, you should carefully consider the matters described under the caption “Risk Factors” beginning on page 19.
Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.
This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.
The date of this information statement is [   ].
This information statement will be made publicly available on or about [   ]. Notice of this information statement’s availability will be first sent to MDU Resources stockholders on or about [   ].

TABLE OF CONTENTS

TABLE OF CONTENTS

| ​ | ​ | Page
QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION | ​ | ​ | 1
INFORMATION STATEMENT SUMMARY | ​ | ​ | 9
RISK FACTORS | ​ | ​ | 19
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS | ​ | ​ | 39
THE SEPARATION AND DISTRIBUTION | ​ | ​ | 40
DIVIDEND POLICY | ​ | ​ | 47
CAPITALIZATION | ​ | ​ | 48
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA | ​ | ​ | 49
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS | ​ | ​ | 50
BUSINESS | ​ | ​ | 55
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | ​ | ​ | 71
MANAGEMENT | ​ | ​ | 89
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE | ​ | ​ | 90
EXECUTIVE COMPENSATION | ​ | ​ | 96
DIRECTOR COMPENSATION | ​ | ​ | 97
KNIFE RIVER HOLDING COMPANY LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN | ​ | ​ | 98
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS | ​ | ​ | 99
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES | ​ | ​ | 105
DESCRIPTION OF MATERIAL INDEBTEDNESS | ​ | ​ | 109
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | ​ | ​ | 110
DESCRIPTION OF KNIFE RIVER HOLDING COMPANY’S CAPITAL STOCK | ​ | ​ | 111
WHERE YOU CAN FIND MORE INFORMATION | ​ | ​ | 116
INDEX TO FINANCIAL STATEMENTS | ​ | ​ | F-1

Presentation of Information
Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement about Knife River Holding Company assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution. Unless the context otherwise requires, references in this information statement to “Knife River Holding Company,” “we,” “us” or “our” refer to Knife River Holding Company, a Delaware corporation, and its consolidated subsidiaries. References in this information statement to “MDU Resources” refer to MDU Resources Group, Inc., a Delaware corporation, and its consolidated subsidiaries (other than, after the distribution, Knife River Holding Company and its consolidated subsidiaries), unless the context otherwise requires. References in this information statement to “Centennial” or the “Parent” refer to Centennial Energy Holdings, Inc., a direct wholly owned subsidiary of MDU Resources. References to Knife River Holding Company’s historical business and operations refer to the business and operations of Knife River Corporation (“Knife River” or the “Company”) that will be transferred to Knife River Holding Company in connection with the separation and distribution. References in this information statement to the “separation” refer to the separation of Knife River from MDU Resources’ other businesses and the creation, as a result of the distribution, of an independent, publicly traded company, Knife River Holding Company, to hold Knife River and the assets and liabilities associated with it and its business after the distribution. References in this information statement to the “distribution” refer to the distribution of approximately 80.1 percent or more of the outstanding shares of Knife River Holding Company common stock to MDU Resources stockholders on a pro rata basis.
The data included in this information statement regarding industry size and relative industry position is derived from a variety of sources, including company research, third-party studies and surveys, industry and general publications, and estimates based on Knife River Holding Company’s knowledge and experience in the industries in which it operates. Knife River Holding Company’s estimates have been based on information obtained from its customers, suppliers, trade and business organizations, and other contacts in the industry. This information may prove to be inaccurate due to the method by which Knife River Holding Company obtained some of the data for its estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data-gathering process and other limitations and uncertainties.

TABLE OF CONTENTS

QUESTIONS AND ANSWERS ABOUT THE SEPARATION AND DISTRIBUTION

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? | ​ | ​ | 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.”
| ​ | ​ |
Why am I receiving this document? | ​ | ​ | 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 [   ], the record date for the distribution, you will be entitled to receive [   ] shares of Knife River Holding Company common stock for each share 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.
| ​ | ​ |
How will the separation of Knife River Holding Company from MDU Resources work? | ​ | ​ | MDU Resources will distribute approximately 80.1 percent or more 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.
| ​ | ​ |
What is the record date for the distribution? | ​ | ​ | The record date for the distribution will be [   ].
| ​ | ​ |
When will the distribution occur? | ​ | ​ | It is expected that approximately 80.1 percent or more of the outstanding shares of Knife River Holding Company common stock will be distributed by MDU Resources at [   ] Eastern Time, on [   ], to holders of record of MDU Resources common stock at the close of business on [   ], the record date for the distribution.
| ​ | ​ |
What do stockholders need to do to participate in the distribution? | ​ | ​ | 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

1

TABLE OF CONTENTS

| ​ | ​ | 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.
| ​ | ​ |
How will shares of Knife River Holding Company common stock be issued? | ​ | ​ | 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.
| ​ | ​ |
| ​ | ​ | If you own MDU Resources common stock as of the close of business on [   ], 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.
| ​ | ​ |
| ​ | ​ | 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.
| ​ | ​ |
How many shares of Knife River Holding Company common stock will I receive in the distribution? | ​ | ​ | MDU Resources will distribute to you [   ] shares of Knife River Holding Company common stock for each share of MDU Resources common stock held by you as of close of business on the record date for the distribution. Based on approximately [   ] million shares of MDU Resources common stock outstanding as of [   ], and assuming a distribution of approximately 80.1 percent or more of the outstanding shares of Knife River Holding Company common stock, a total of approximately [   ] million shares of Knife River Holding Company common stock will be distributed. For additional information on the distribution, see “The Separation and Distribution.”
| ​ | ​ |
Will Knife River Holding Company issue fractional shares of its common stock in the distribution? | ​ | ​ | 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

2

TABLE OF CONTENTS

| ​ | ​ | in lieu of fractional shares will not be entitled to any interest on the amounts of payment made in lieu of fractional shares.
| ​ | ​ |
What are the conditions to the distribution? | ​ | ​ | 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:
| ​ | ​ |
| ​ | ​ | • 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;
| ​ | ​ |
| ​ | ​ | • MDU Resources shall have received a 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;
| ​ | ​ |
| ​ | ​ | • 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 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;
| ​
| ​ | ​ | • the U.S. Securities and Exchange Commission (or 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;
| ​ | ​ |
| ​ | ​ | • 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;
| ​ | ​ |
| ​ | ​ | • the transaction agreements relating to the separation 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

3

TABLE OF CONTENTS

| ​ | ​ | 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; and
| ​ | ​ |
| ​ | ​ | • 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.
| ​
| ​ | ​ | 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, see “The Separation and Distribution—Conditions to the Distribution.”
| ​ | ​ |
What is the expected date of completion of the distribution? | ​ | ​ | 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 [   ] Eastern Time, on [   ], to holders of record of MDU Resources common stock at the close of business on [   ], 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.
| ​ | ​ |
Can MDU Resources decide to cancel the distribution of Knife River Holding Company common stock even if all the conditions have been met? | ​ | ​ | Yes. 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.
| ​ | ​ |
What if I want to sell my MDU Resources common stock or my Knife River Holding Company common stock? | ​ | ​ | 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.
| ​ | ​ |
What is “regular-way” and “ex-distribution” trading of MDU Resources common stock? | ​ | ​ | Beginning on or shortly before the record date for the distribution 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

4

TABLE OF CONTENTS

| ​ | ​ | 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.
| ​ | ​ |
Where will I be able to trade shares of Knife River Holding Company common stock? | ​ | ​ | Knife River Holding Company intends to list its common stock 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 or about [   ], the record date for the distribution, 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.
| ​ | ​ |
What will happen to the listing of MDU Resources common stock? | ​ | ​ | MDU Resources common stock will continue to trade on the NYSE under the symbol “MDU.”
| ​ | ​ |
Will the number of shares of MDU Resources common stock that I own change as a result of the distribution? | ​ | ​ | No. The number of shares of MDU Resources common stock that you own will not change as a result of the distribution.
| ​ | ​ |
Will the distribution affect the market price of my shares of MDU Resources common stock? | ​ | ​ | 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.
| ​ | ​ |

5

TABLE OF CONTENTS

What are the material U.S. federal income tax consequences of the separation and distribution? | ​ | ​ | It is a condition to the distribution that MDU Resources receive a 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, including, with respect to the opinion(s), to the effect that the distribution will be a transaction described in Section 355(a) of the Internal Revenue Code (the “Code”). 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.
| ​ | ​ |
What will happen to my tax basis in my MDU Resources stock? | ​ | ​ | 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.
| ​ | ​ |
What will Knife River Holding Company’s relationship be with MDU Resources following the separation and distribution? | ​ | ​ | Following the distribution, MDU Resources stockholders will own directly approximately 80.1 percent or more 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 up to 19.9 percent 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

6

TABLE OF CONTENTS

| ​ | ​ | 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 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.”
| ​ | ​ |
How will MDU Resources vote any shares of Knife River Holding Company common stock it retains? | ​ | ​ | 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.”
| ​ | ​ |
What does MDU Resources intend to do with any shares of Knife River Holding Company common stock it retains? | ​ | ​ | MDU Resources currently plans to dispose of all shares of Knife River Holding Company common stock that it retains; such dispositions may include dispositions through one or more subsequent exchanges for debt, distributions to MDU Resources stockholders, exchanges for MDU Resources shares or sales of such shares for cash.
| ​ | ​ |
Who will manage Knife River Holding Company after the separation? | ​ | ​ | 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 [   ], who will be its [   ] 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.”
| ​ | ​ |
Are there risks associated with owning Knife River Holding Company common stock? | ​ | ​ | 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.

7

TABLE OF CONTENTS

| ​ | ​ |
Does Knife River Holding Company plan to pay dividends? | ​ | ​ | Knife River Holding Company has not yet determined the extent to which it will pay dividends on its common stock. 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.”
| ​ | ​ |
Will Knife River Holding Company incur any indebtedness prior to or at the time of the distribution? | ​ | ​ | In connection with the separation and distribution, Knife River Holding Company anticipates that it will incur short-term debt consisting of [   ] as well as long-term debt consisting of [   ] for an aggregate principal amount of up to $[   ]. Knife River Holding Company expects that all or a portion of the net proceeds of such debt will be used to repay debt owed by Knife River to Centennial. Knife River Holding Company expects that Centennial will use such net proceeds to repay a portion of its existing third-party debt. 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.”
| ​ | ​ |
Who will be the distribution agent, transfer agent and registrar for shares of Knife River Holding Company common stock? | ​ | ​ | 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.
| ​ | ​ |
Where can I find more information about MDU Resources and Knife River Holding Company? | ​ | ​ | Before the distribution, if you have any questions relating to MDU Resources, you should contact:
| ​ | ​ | MDU Resources Group, Inc. 1200 West Century Avenue P.O. Box 5650 Bismarck, North Dakota 58506-5650 Attention: Investor Relations Phone: (701) 530-1000
| ​ | ​ |
| ​ | ​ | After the distribution, stockholders who have any questions relating to Knife River Holding Company should contact Knife River Holding Company at:
| ​ | ​ |
| ​ | ​ | Knife River Holding Company 1150 West Century Avenue Bismarck, ND 58503 Attention: Investor Relations Phone: (701) 530-1400

8

TABLE OF CONTENTS

INFORMATION STATEMENT SUMMARY
Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement about Knife River Holding Company assumes the completion of all of the transactions referred to in this information statement in connection with the separation and distribution. Unless the context otherwise requires, references in this information statement to “Knife River Holding Company,” “we,” “us” or “our” refer to Knife River Holding Company, a Delaware corporation, and its combined subsidiaries. References in this information statement to “MDU Resources” refer to MDU Resources Group, Inc., a Delaware corporation, and its consolidated subsidiaries (other than, after the distribution, Knife River Holding Company and its consolidated subsidiaries), unless the context otherwise requires. References in this information statement to “Centennial” or the “Parent” refer to Centennial Energy Holdings, Inc., a direct wholly owned subsidiary of MDU Resources. References to Knife River Holding Company’s historical business and operations refer to the business and operations of Knife River Corporation (“Knife River” or the “Company”) that will be transferred to Knife River Holding Company in connection with the separation and distribution. References in this information statement to the “separation” refer to the separation of Knife River from MDU Resources’ other businesses and the creation, as a result of the distribution, of an independent, publicly traded company, Knife River Holding Company, to hold Knife River and the assets and liabilities associated with it and its business after the distribution. References in this information statement to the “distribution” refer to the distribution of approximately 80.1 percent or more of the outstanding shares of Knife River Holding Company common stock to MDU Resources stockholders on a pro rata basis.
Knife River Holding Company
Overview
Knife River is a leading aggregates-based construction materials and contracting services provider in the U.S. The Company’s 1.1 billion tons of aggregate reserves provide the foundation for a vertically integrated business strategy that includes value-added downstream products (ready-mix concrete and asphalt) and contracting services (heavy-civil construction, asphalt paving, concrete construction, site development and grading services). The Company provides construction materials and contracting services for both public and private customers. For the year ended December 31, 2021, approximately 63% of revenue was derived from construction materials and 37% from contracting services. As a vertically integrated Company, intercompany sales from materials to products and from products to services are included in revenues and represent approximately 40% of the construction materials revenue. Knife River is strategically focused on being the provider of choice in mid-size, high-growth markets. The Company is committed to continued growth and to delivering for its stakeholders—customers, communities, employees and stockholders—by executing on its four core values: People, Safety, Quality and the Environment.
Through its network of 202 aggregate sites, 113 ready-mix plants and 56 asphalt plants, Knife River supplies construction materials and contracting services to customers in 14 states. The Company has broad access to high-quality aggregates in most of its markets, which forms the foundation of its vertically integrated business model. Knife River shares resources, including plants, equipment and people, across its various locations to maximize efficiency and transports its products by truck, railroad and barge to complete the vertical value chain depending on the particular market. Knife River believes its integrated and expansive business model is a strong competitive advantage that provides scale, efficiency and operational excellence for the benefit of customers, stockholders and the broader communities that it serves.
Business Segments
Knife River operates through six operating segments: Pacific, Northwest, Mountain, North Central, South and Energy Services. The segments are determined based on how the Company organizes and manages the business and are aligned by key geographic regions due to the production of construction materials and related contracting services following the seasonal nature of the construction industry. The Company’s reportable segments are: Pacific, Northwest, Mountain and North Central, with South and Energy Services included in All Other with its corporate services.
End Markets
The Company’s public-sector customers include federal, state, and municipal governments for various projects, such as highways, bridges, airports, schools, public buildings, and other public-infrastructure projects.
9

TABLE OF CONTENTS

Knife River believes public-sector funding is subject to fewer fluctuations in spending, as government funding tends to be less correlated with economic cycles and more reliant on approvals of government appropriation bills toward infrastructure initiatives. Some of these initiatives include the American Rescue Plan Act and the Infrastructure Investment and Jobs Act. Based on this recent wave of government funding and the current state of America’s infrastructure, which received a “C–” assessment from the American Society of Civil Engineers in 2021, Knife River believes there are strong public-market factors favorably affecting the outlook in this end market.
Alternatively, Knife River’s private-sector customers include both residential and nonresidential construction applications. Unlike public-sector customers, spending by private-sector customers is more dependent on both local and national economic cycles. Knife River leverages its diverse geographic footprint to partially offset volatility originating from single local economies, and has the flexibility to reallocate resources from markets experiencing a downturn to markets that may be experiencing an economic upswing.
Strengths
Knife River’s strengths include the following:

(1) | Leading vertically integrated, aggregates-based construction materials and contracting provider.

Knife River is one of the largest aggregates-based construction materials and contracting services providers in the U.S. The Company is recognized as a Top 10 aggregate producer and the fifth-largest sand and gravel producer in the country, per the United States Geological Survey rankings. With its size and scale, Knife River operates a vertically integrated business model and serves its customers across the value chain, from raw materials to finished goods to contracting services.

(2) | Attractive geographic footprint across the western U.S. with exposure to areas demonstrating above-average growth.

In each of the segments where Knife River operates, its markets are supported by long-term economic drivers, which allow the Company to benefit from the population growth and economic build-out those drivers create. In particular, in recent years, Knife River has expanded its presence in both the Northwest and North Central segments specifically in Oregon and South Dakota, respectively, each of which include rapidly growing markets with strong construction demand. Knife River’s geographic diversity insulates it from temporary downturns in any one segment’s economy and provides flexibility to shift resources to the areas where it is getting the best returns. Knife River continually looks for growth opportunities in each segment, with a strategic focus on aggregates.

(3) | Diverse public and private customer base.

On the public side, Knife River has extensive experience with federal, state and municipal government agencies, as well as other government customers. In the year ended December 31, 2021, 11 of Knife River’s top 15 contracting services customers were state-level departments of transportation. On the private side, Knife River provides its products and expertise to a broad spectrum of customers across industrial, commercial and residential developers and other private parties. Typically, this includes projects and customers such as large data centers, warehouses and general contractors specializing in commercial buildings and residential developments.

(4) | Large exposure to public-sector customers, providing recession resiliency amidst soft macro environment.

Public projects tend to remain steady over time, largely unaffected by economic cycles, and instead depend on government funding, which bolsters Knife River’s resiliency during recessionary periods. Knife River’s contracting revenue as of December 31, 2021, was 76% public and 24% private. In addition to historic increases in federal infrastructure funding, 11 of the 14 states where Knife River operates have recently implemented their own funding mechanisms for public projects.
In today’s softening macro environment, Knife River believes it is well-positioned to benefit from the recessionary resiliency stemming from its greater involvement in public-sector versus private-sector infrastructure contracting services projects.
10

TABLE OF CONTENTS

(5) | Strong backlog and robust pipeline of projects across public and private infrastructure end markets.

As of December 31, 2021, Knife River had a backlog of $708 million, nearly all of which related to outstanding obligations for contracting services. The contracting services backlog at December 31, 2021, was comprised of 82% public and 18% private work. Based on its track record, Knife River expects future revenues from infrastructure-related contracting services to be robust.

(6) | Resilient financial profile with robust free cash flows.

Knife River continues to generate strong revenues, earnings before interest, taxes, depreciation, depletion and amortization (“EBITDA”) and free cash flows that it has historically used for targeted organic growth opportunities, strategic acquisitions, capital expenditures, debt repayment and dividend payments to Parent. Following the separation, Knife River expects to have enhanced flexibility to deploy capital toward its specific growth opportunities, capital expenditures, debt repayment and dividends. For a discussion and reconciliation of EBITDA, see the section entitled “Non-GAAP Financial Measures.”

(7) | Proven track record of growth through acquisition and highly effective integration playbook, driving both organic and inorganic growth.

Knife River’s acquisition strategy and completion of over 80 acquisitions has led to the refinement of a highly effective integration playbook, driving both organic and inorganic growth. EBITDA has been primarily driven by strong organic growth and margin expansion, supported by contributions from acquisitions. As Knife River continues to grow through acquisitions, it is able to continue achieving greater scale and synergies. Its centralized and scalable technology platform allows for integration of new companies into its efficient, vertically integrated internal processing network for fleet management, scaling, batching, financial, and operational reporting programs and other software. Knife River is actively pursuing additional acquisition opportunities, with a focus on adding high-quality materials to reserves, improving vertical integration advantage and extending geographic reach.

(8) | Best-in-class management team with a long history of operating success and integration.

Knife River’s senior management team has extensive experience, with an average of 28 years in the industry spanning several business cycles. The management team’s strategic decision to acquire and develop into a vertically integrated construction materials and contracting services business and the team’s decision to enter select geographies has proven to be important to the sustained growth of the business over several decades. Core to its operating success, management takes a conservative approach with respect to the balance sheet, focusing on maintaining prudent levels of leverage and liquidity through the business cycle.
Business Strategy
Knife River’s business strategy of maximizing its vertical integration, leveraging its core values to be the supplier of choice in all its markets and continued growth, is underpinned by several key initiatives, including:
People. Knife River is committed to its employees, customers and communities by operating with integrity and always striving for excellence. To achieve this, Knife River closely adheres to its “Life at Knife” philosophy, which is expressed in four core values: People, Safety, Quality and the Environment.
Safety. Knife River is committed to the three T’s of Safety: Tools, Training and Time. The Company provides employees the tools and training to safely and successfully perform their jobs, and asks that employees take the time to do their jobs safely.
Development and recruitment of talented employees. Knife River has taken significant steps to showcase construction as a career of choice. Knife River recently finished building a world-class training facility to enhance the skills of current employees corporatewide as well as to recruit and teach skills to new employees through both classroom education and hands-on experience.
Sustainability. Sustainable practices, whether focused on environmental goals, business innovations, recruiting and retaining personnel, or other key factors, provide an opportunity for Knife River to focus on its long-term success and the success of the communities where it operates.
11

TABLE OF CONTENTS

Environment. Every year, Knife River assesses its capital investment needs to further mitigate environmental impacts, particularly in regard to meeting or exceeding permit requirements and environmental regulations. Starting in 2022, Knife River began tracking its Scope 1 and Scope 2 carbon emissions as a first step in establishing its corporatewide baseline of emissions in support of developing future carbon intensity reduction goals. Knife River will continue to actively pursue various opportunities in the clean energy infrastructure build-out in both construction materials and contracting services.
Long-term, strategic aggregate reserve position. Knife River supplies its customers with a large and growing volume of aggregates. In 2021, Knife River sold approximately 31.1 million tons from its aggregate reserves, which was a 9% increase from 2020 levels, leading to normal and scheduled depletion of its aggregate assets. To offset the normal asset base declines, Knife River continuously explores new opportunities to replenish its assets in existing and new geographies.
Enhanced value through vertical integration and strategic acquisitions. Vertical integration provides Knife River direct control over the production process, inventory planning, optimization of supply chain and delivery to end customers, thereby providing efficiencies that result in lower costs and other benefits for customers, including greater reliability of supply. Furthermore, Knife River’s exposure to both public and private-sector customers across its vertical value chain provides better end market diversification and makes Knife River more resilient to economic downturns.
When exploring new acquisition opportunities, Knife River focuses on the additive margin potential to the overall business, as well as potential operating synergies following integration.
Supply chain. Knife River’s access to internal aggregate sources, processing plants and fleet delivery network, some with rail-to-road transloading capabilities, allows it to provide reliable, timely and efficient service to its end customers, further enhancing the value Knife River brings during complex construction projects.
Products and Services
Knife River’s product lines include: aggregates, ready-mix concrete, asphalt, and other. The Company also performs related contracting services. The following provides more information on the Company’s products and services.
Aggregates
Aggregates consist of crushed stone and sand and gravel and are a major component in the production of ready-mix concrete and asphalt. Knife River supplies high-quality aggregates through its 1.1 billion tons of permitted aggregate reserves, which are sourced from its aggregate sites across 11 states. The Company focuses primarily on supplying markets with strong local demand, and in most cases, serves customers close to its strategically located aggregate sites.
Ready-mix concrete
Ready-mix concrete is comprised of cement, aggregates, sand and water. It is the most widely used material in the construction sector today. Knife River produces ready-mix concrete through its 113 ready-mix plants situated across 13 states. Knife River’s vertically integrated portfolio of assets allows the Company to provide most of the aggregates it uses in the production of ready-mix concrete. Due to the time-sensitive nature of delivering ready-mix concrete, the Company focuses on supplying customers near its facilities.
Asphalt
Asphalt is a combination of approximately 95% aggregates bound together by approximately 5% of asphalt binder. It is the most common material used for roadways today. Knife River produces and delivers asphalt from 56 plants across 10 states, most often utilizing the Company’s own aggregates in the production process. Of the 56 plants, 22 are portable plants that support asphalt paving projects on roadways. Similar to ready-mix concrete, asphalt sets rapidly, limiting delivery to within close proximity to the production facility.
Contracting services
Knife River’s contracting services include responsibilities as general contractor and subcontractor, aggregate laydown, asphalt paving, concrete construction, site development and bridges, and in some segments the
12

TABLE OF CONTENTS

manufacturing of prestressed concrete products. In 2021, most of Knife River’s contracting services were related to “horizontal” construction, such as streets and highways, airports and bridges for customers in the public sector. In the private sector, Knife River’s contracting services projects were within the residential, commercial and industrial markets.
Other
Although not common to all locations, Knife River provides various other products and services depending on customer needs. These include retail sales of cement in Alaska and Hawaii, production and distribution of modified liquid asphalt by its Energy Services business and other construction materials and related contracting services.
Customers
Knife River’s customers can be segmented into public and private-sector customers, with public-sector customers averaging about 80% of the Company’s revenues from contracting services. The public side includes federal, state and municipal governmental agencies with construction projects related to highways, streets and other public infrastructure. The private side includes a broad spectrum of customers across industrial, commercial and residential developers and other private parties. Note that the mix of sales by customer class varies year to year depending on the fluctuation of work.
Summary of Risk Factors
An investment in Knife River Holding Company is subject to a number of risks, including risks relating to its business, the separation and distribution, and Knife River Holding Company common stock. Set forth below is a high-level summary of some, but not all, of these risks. Please read the information in the section captioned “Risk Factors” beginning on page 19 for a more thorough description of these and other risks.
Risks Related to Knife River Holding Company’s Business

• | 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.

• | Knife River Holding Company operates in a highly competitive industry.

• | Significant changes in prices for commodities, labor, or other production and delivery inputs could negatively affect Knife River Holding Company’s businesses.

• | 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.

• | Economic volatility affects Knife River Holding Company’s operations, as well as the demand for its products and services.

• | Knife River Holding Company’s backlog may not accurately represent future revenue.

• | Supply chain disruptions may adversely affect Knife River Holding Company’s operations.

• | Knife River Holding Company’s aggregate resource and reserve calculations are estimates and subject to uncertainty.

• | Knife River Holding Company depends on securing, permitting and economically mining strategically located aggregate reserves.

• | Knife River Holding Company operates in a capital-intensive industry and is subject to capital market and interest rate risks.

• | Reductions in Knife River Holding Company’s credit ratings could increase financing costs.

• | Knife River Holding Company may be negatively impacted by pending and/or future litigation, claims or investigations.

• | Financial market changes could impact Knife River Holding Company’s defined benefit pension plans and obligations.

13

TABLE OF CONTENTS

• | Increasing costs associated with health care plans may adversely affect Knife River Holding Company’s results of operations.

• | Changes in tax law may negatively affect Knife River Holding Company’s business.

• | Knife River Holding Company’s operations could be negatively impacted by import tariffs and/or other government mandates.

• | Knife River Holding Company’s operations could be adversely impacted by climate change.

• | 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.

• | 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.

• | Technology disruptions or cyberattacks could adversely impact Knife River Holding Company’s operations.

• | 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.

Risks Related to the Separation and Distribution

• | 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.

• | 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.

• | 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.

• | 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.

• | 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.

• | A lowering or withdrawal of the ratings, outlook or watch assigned to Knife River Holding Company’s new debt securities by rating agencies may increase its future borrowing costs and reduce its access to capital.

• | 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.

• | 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.

• | 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.

14

TABLE OF CONTENTS

Risks Related to Knife River Holding Company Common Stock

• | 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.

• | 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.

• | There may be substantial changes in Knife River Holding Company’s stockholder base.

• | Your percentage of ownership in Knife River Holding Company may be diluted in the future.

• | Knife River Holding Company cannot guarantee the timing, declaration, amount or payment of dividends on its common stock.

The Separation and Distribution
On August 4, 2022, MDU Resources announced its intention to separate Knife River from MDU Resources. The separation will occur by means of pro rata distribution to MDU Resources stockholders of approximately 80.1 percent or more of the outstanding shares of common stock of Knife River Holding Company, which was formed to hold Knife River and its consolidated subsidiaries.
Following the distribution, MDU Resources stockholders will own directly approximately 80.1 percent or more of the outstanding shares of Knife River Holding Company common stock, and Knife River Holding Company will be a separate public company from MDU Resources. MDU Resources will retain up to 19.9 percent of the outstanding shares of Knife River Holding Company common stock following the distribution. MDU Resources intends to dispose of all shares of Knife River Holding Company common stock that it retains after the distribution; such dispositions may include one or more exchanges of shares of the Knife River Holding Company common stock for debt, distributions to MDU Resources stockholders, exchanges for MDU Resources shares or one or more sales of such shares for cash.
On [   ], the MDU Resources board of directors approved the distribution of approximately 80.1 percent or more of Knife River Holding Company’s issued and outstanding shares of common stock on the basis of [   ] shares of Knife River Holding Company common stock for each share of MDU Resources common stock held as of the close of business on [   ], the record date for the distribution, subject to the satisfaction or waiver of the conditions to the distribution as described in this information statement. For a more detailed description of these conditions, see “The Separation and Distribution—Conditions to the Distribution.”
Knife River Holding Company’s Post-Separation Relationship with MDU Resources
After the distribution, MDU Resources and Knife River Holding Company will be separate companies with separate management teams and separate boards of directors. Prior to the distribution, Knife River Holding Company will enter into a separation and distribution agreement with MDU Resources, which is referred to in this information statement as the “separation agreement” or the “separation and distribution agreement.” In connection with the separation, Knife River Holding Company will also enter into various other agreements to effect the separation and provide a framework for its relationship with MDU Resources after the separation, 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 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) attributable to periods prior to, at and after the distribution, and will govern certain relationships between Knife River Holding Company and MDU Resources after the distribution.
For additional information regarding the separation agreement and other transaction agreements and the transactions contemplated thereby, see the sections entitled “Risk Factors—Risks Related to the Separation and Distribution,” “The Separation and Distribution” and “Certain Relationships and Related Person Transactions.”
15

TABLE OF CONTENTS

Reasons for the Separation
The MDU Resources board of directors believes that separating Knife River from the remaining businesses of MDU Resources is in the best interest of MDU Resources and its stockholders for a number of reasons, including:

• | 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. 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.

• | 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 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.

The MDU Resources board of directors also considered a number of potentially negative factors in evaluating the separation, including, among others, risks relating to the creation of a new public company, possible increased costs and one-time separation costs, but concluded that the potential benefits of the separation significantly outweighed these factors. For additional information, see the sections entitled “Risk Factors” and “The Separation and Distribution—Reasons for the Separation” included elsewhere in this information statement.
Reasons for MDU Resources’ Retention of Up to 19.9 Percent of Knife River Holding Company Common Stock
In considering the appropriate structure for the separation, MDU Resources determined that, immediately after the distribution becomes effective, MDU Resources will own up to 19.9 percent of the outstanding shares of Knife River Holding Company common stock. The retention of Knife River Holding Company common stock will strengthen MDU Resources’ balance sheet. The retained shares can potentially be exchanged to accelerate debt reduction or sold for cash, thereby facilitating an appropriate capital structure and the financial flexibility necessary for MDU Resources to execute its growth strategy. Knife River Holding Company understands that MDU Resources intends to dispose of all shares of Knife River Holding Company common stock that it retains after the distribution, which may include dispositions through one or more exchanges for debt, distributions to MDU Resources stockholders, exchanges for MDU Resources shares or one or more sales of such shares for cash.
16

TABLE OF CONTENTS

Corporate Information
Knife River Holding Company was incorporated in Delaware on November 9, 2022, for the purpose of holding Knife River in connection with the separation and distribution described herein. Prior to the contribution of this business to Knife River Holding Company, which will be completed prior to the distribution, Knife River Holding Company will have no operations. The address of Knife River Holding Company’s principal executive offices is 1150 West Century Avenue, Bismarck, ND 58503. Knife River Holding Company’s telephone number after the distribution will be (701) 530-1400. Knife River Holding Company maintains an Internet site at www.kniferiver.com. Knife River Holding Company’s website and the information contained therein or connected thereto shall not be deemed to be incorporated herein, and you should not rely on any such information in making an investment decision.
Reason for Furnishing this Information Statement
This information statement is being furnished solely to provide information to stockholders of MDU Resources who will receive shares of Knife River Holding Company common stock in the distribution. It is not, and is not to be construed as, an inducement or encouragement to buy or sell any of Knife River Holding Company’s securities. Knife River Holding Company believes the information contained in this information statement to be accurate as of the date set forth on the cover of this information statement. Changes may occur after that date, and neither Knife River Holding Company nor MDU Resources undertake any obligation to update such information except in the normal course of their respective disclosure obligations and practices, or as required by applicable law.
Summary Historical Consolidated Financial Data
The following tables summarize Knife River’s historical consolidated financial data. The selected consolidated balance sheet data as of December 31, 2022 and 2021, and consolidated statement of income data for the years ended December 31, 2022, 2021 and 2020, are derived from the Company’s audited consolidated financial statements included elsewhere in this information statement. The historical results set forth below may not be indicative of Knife River’s future performance as a stand-alone company following the separation and distribution. The selected consolidated financial data in this section is not intended to replace the Company’s consolidated financial statements and the related notes and should be read in conjunction with the information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical consolidated financial statements and the notes thereto included in this information statement.
Consolidated Statements of Income

| ​ | ​ | For the Year Ended December 31,
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands, except per share amounts)
Revenue: | ​ | ​ | — | ​ | ​ | $2,228,930 | ​ | ​ | $2,178,002
Cost of revenue: | ​ | ​ | — | ​ | ​ | 1,881,981 | ​ | ​ | 1,807,424
Gross profit | ​ | ​ | — | ​ | ​ | 346,949 | ​ | ​ | 370,578
Selling, general and administrative expenses | ​ | ​ |  | ​ | ​ | 155,872 | ​ | ​ | 156,080
Operating income | ​ | ​ | — | ​ | ​ | 191,077 | ​ | ​ | 214,498
Interest expense | ​ | ​ |  | ​ | ​ | 19,218 | ​ | ​ | 20,577
Other income | ​ | ​ |  | ​ | ​ | 1,355 | ​ | ​ | 835
Income before income taxes | ​ | ​ | — | ​ | ​ | 173,214 | ​ | ​ | 194,756
Income taxes | ​ | ​ |  | ​ | ​ | 43,459 | ​ | ​ | 47,431
Net income | ​ | ​ | $— | ​ | ​ | $129,755 | ​ | ​ | $147,325
Earnings per share - basic | ​ | ​ | $— | ​ | ​ | $1,621.93 | ​ | ​ | $1,841.56
Weighted average common shares outstanding – basic | ​ | ​ | — | ​ | ​ | 80 | ​ | ​ | 80

17

TABLE OF CONTENTS

Consolidated Balance Sheet

For the year ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ | (In thousands)
Working capital | ​ | ​ |  | ​ | ​ | 185,429
Due from related-party - noncurrent | ​ | ​ |  | ​ | ​ | 7,626
Total assets | ​ | ​ |  | ​ | ​ | 2,181,824
| ​ | ​ |  | ​ | ​ |
Due to related-party - noncurrent | ​ | ​ |  | ​ | ​ | 575,457
Total liabilities | ​ | ​ |  | ​ | ​ | 1,228,980
Total stockholder’s equity | ​ | ​ |  | ​ | ​ | 952,844

18

TABLE OF CONTENTS

RISK FACTORS
Knife River Holding Company’s business and financial results are subject to a number of risks and uncertainties. References to Knife River Holding Company refer to Knife River and its subsidiaries, which are to be held by Knife River Holding Company. The factors and other matters discussed herein are important factors that could cause actual results or outcomes for Knife River Holding Company to differ materially from those discussed in the forward-looking statements included elsewhere in this document. If any of the risks described below actually occur, Knife River Holding Company’s business, prospects, financial condition or financial results could be materially impacted. The following are the most material risk factors applicable to Knife River Holding Company and are not necessarily listed in order of importance or probability of occurrence. You should carefully consider the following risks and other information in this information statement in evaluating Knife River Holding Company and its common stock. The risk factors generally have been separated into three groups: risks related to Knife River Holding Company’s business, risks related to the separation and distribution, and risks related to Knife River Holding Company common stock.
Risks Related to Knife River Holding Company’s Business
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.
A majority of Knife River Holding Company’s business is seasonal, with results of operations affected by weather conditions. Construction materials production and related contracting services typically follow the activity in the construction industry, with heavier contracting services workloads in the spring, summer and fall. Extreme or unusually adverse weather conditions, such as extreme temperatures, heavy or sustained rainfall or snowfall, wildfires, storms, and wind may affect the demand for products and the ability to perform services on construction work. Knife River Holding Company could also be impacted by drought conditions, which may restrict the availability of water supplies and inhibit the ability to conduct operations. As a result, extreme or unusually adverse weather conditions could negatively affect Knife River Holding Company’s results of operations, financial position and cash flows.
Knife River Holding Company operates in a highly competitive industry.
Knife River Holding Company is subject to competition. The markets Knife River Holding Company serves are highly fragmented and Knife River Holding Company competes with a number of regional, national and international companies. These companies may have greater financial and other resources than Knife River Holding Company. Some others are smaller and more specialized, and concentrate their resources in particular areas of expertise. Knife River Holding Company’s results are also affected by the number of competitors in a market, the production capacity that a particular market can accommodate, the pricing practices of other competitors and the entry of new competitors in a market.
In addition, construction materials, products and related services are marketed under highly competitive conditions and are subject to competitive forces such as price, quality, service, delivery time and proximity to the customer. Significant competition could lead to lower prices, higher wages, lower sales volumes and higher costs. Furthermore, new acquisition opportunities are subject to competitive bidding environments, which may impact prices Knife River Holding Company must pay to successfully acquire new properties and acquisition opportunities to grow its business. Knife River Holding Company’s customers make competitive determinations based upon qualifications, experience, performance, reputation, technology, customer relationships, price, quality and ability to provide the relevant services in a timely, safe and cost-efficient manner. Increased competition may result in Knife River Holding Company’s inability to win bids for future projects and Knife River Holding Company’s failure to effectively compete could negatively affect its results of operations, financial position and cash flows.
Significant changes in prices for commodities, labor, or other production and delivery inputs could negatively affect Knife River Holding Company’s businesses.
Knife River Holding Company’s operations are exposed to fluctuations in prices for labor, oil, cement, raw materials and utilities, among other things. Prices are generally subject to change in response to fluctuations in supply and demand and other general economic and market conditions beyond Knife River Holding Company’s control. In 2022 and 2021, Knife River Holding Company experienced elevated commodity and supply chain
19

TABLE OF CONTENTS

costs including the costs of labor, raw materials, energy and other inputs used in the production and distribution of its products and services. Recent inflationary pressures have significantly increased the cost of raw materials by greater than 10% in comparison to average annual historical increases of approximately 3%. Knife River Holding Company seeks to mitigate some or all cost increases through increases in selling prices of its materials, maintaining positive relationships with numerous raw material suppliers, escalation clauses in construction services contracts and fuel surcharges.
High energy prices, specifically for diesel fuel, natural gas and liquid asphalt, have impacted and could further affect the margins realized, as well as demand for construction materials and related contracting services. Increased labor costs, due to labor shortages, competition from other industries, or other factors, could negatively affect Knife River Holding Company’s results of operations. Due to their size and weight, aggregates are costly and difficult to transport efficiently. Knife River Holding Company’s products and services are generally localized around its aggregate sites and served by truck or in certain markets by rail or barge. Knife River Holding Company could be negatively impacted by freight costs due to rising fuel costs; third party freight rate increases; truck, railcar or barge shortages, including shortages of truck drivers and rail crews; rail service interruptions; and minimum tonnage requirements, among other things. To the extent price increases or other mitigating factors are not sufficient to offset these increased costs adequately or timely, and/or if the price increases result in a significant decrease in sales volumes, Knife River Holding Company's results of operations, financial position and cash flows could be negatively impacted.
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.
Knife River Holding Company must attract, develop and retain executive officers and other professional, technical and labor forces with the skills and experience necessary to successfully manage, operate and grow. Competition for these employees is high, due in part to changing workforce demographics, a lack of younger employees who are qualified to replace employees as they retire, and remote work opportunities, among other things. In some cases, competition for these employees is on a regional or national basis. At times of low unemployment, it can be difficult for Knife River Holding Company to attract and retain qualified and affordable personnel. A shortage in the supply of skilled personnel creates competitive hiring markets, increased labor expenses, decreased productivity and potentially lost business opportunities to support Knife River Holding Company’s operating and growth strategies. Additionally, if Knife River Holding Company is unable to hire employees with the requisite skills, it may be forced to incur significant training expenses. As a result, Knife River Holding Company’s ability to maintain productivity, relationships with customers, competitive costs, and quality services is limited by the ability to employ, retain and train the necessary skilled personnel and could negatively affect its results of operations, financial position and cash flows.
Economic volatility affects Knife River Holding Company’s operations, as well as the demand for its products and services.
Unfavorable economic conditions can negatively affect the level of public and private expenditures on projects and the timing of these projects which, in turn, can negatively affect demand for Knife River Holding Company’s products and services. The level of demand for construction materials and contracting services could be adversely impacted by the economic conditions in the industries and market areas Knife River Holding Company serves, as well as in the general economy. Local, state and federal budget limitations affect the funding available for infrastructure spending, which could have an adverse impact on Knife River Holding Company’s earnings and results of operations.
The credit environment could impact Knife River Holding Company’s ability to borrow money in the future. Additional financing or refinancing might not be available and, if available, may not be at economically favorable terms. Further, an increase in Knife River Holding Company’s leverage could lead to deterioration in its credit ratings. A reduction in Knife River Holding Company’s credit ratings, regardless of the cause, could also limit the ability to obtain additional financing and/or increase the cost of obtaining financing. There is no guarantee Knife River Holding Company will be able to access the capital markets at financially economical interest rates, which could negatively affect Knife River Holding Company’s business.
Knife River Holding Company may be required to obtain financing in order to fund certain strategic acquisitions, if they arise, or to refinance outstanding debt. It is possible a large strategic acquisition would
20

TABLE OF CONTENTS

require Knife River Holding Company to issue new equity and debt securities in order to maintain its credit rating and could result in a ratings downgrade notwithstanding Knife River Holding Company’s issuance of equity securities to fund the transaction. Knife River Holding Company is also exposed to risks from tightening credit markets, through the interest payable on any variable-rate debt, including the interest cost on future borrowings under Knife River Holding Company’s credit facilities. While Knife River Holding Company believes it will continue to have adequate credit available to meet its needs, there can be no assurance of that.
Knife River Holding Company’s backlog may not accurately represent future revenue.
Backlog consists of the uncompleted portion of services to be performed under job-specific contracts. Contracts are subject to delay, default or cancellation, and contracts in Knife River Holding Company’s backlog are subject to changes in the scope of services to be provided, as well as adjustments to the costs relating to the applicable contracts. Backlog may also be affected by project delays or cancellations resulting from weather conditions, external market factors and economic factors beyond Knife River Holding Company’s control, among other things. Accordingly, there is no assurance that backlog will be realized. The timing of contract awards and duration of large new contracts can significantly affect backlog. Backlog at any given point in time may not accurately represent the revenue or net income that is realized in any period. Also, the backlog as of the end of the year may not be indicative of the revenue and net income expected to be earned in the following year and should not be relied upon as a stand-alone indicator of future revenues or net income of Knife River Holding Company.
Supply chain disruptions may adversely affect Knife River Holding Company’s operations.
At times or in certain markets, Knife River Holding Company relies on third-party vendors and manufacturers to supply or transport many of the materials necessary for its operations. Disruptions, shortages or delays in the transportation of materials; price increases from suppliers or manufacturers; or inability to source needed materials have occurred and may continue to occur, which could adversely affect Knife River Holding Company’s results of operations, financial condition, cash flows and harm customer relationships. Any material disruption at Knife River Holding Company’s facilities or those of its customers or suppliers or otherwise within its supply chain, whether as a result of downtime, pandemic-related shutdowns, work stoppages or facility damage could prevent Knife River Holding Company from meeting customer demands or expected timelines, require it to incur unplanned capital expenditures, or cause other material disruptions to its operations, any of which could have a material adverse effect on Knife River Holding Company’s operations, financial position and cash flows. Further, supply chain disruptions can occur from events out of the Knife River Holding Company’s control such as fires, floods, severe weather, natural disasters, environmental incidents or other catastrophes.
Knife River Holding Company’s aggregate resource and reserve calculations are estimates and subject to uncertainty.
Knife River Holding Company estimates aggregate reserves and resources based on the best available data. The estimates depend upon the interpretation of surface and subsurface investigations, major assumptions and other supporting data, which can be unpredictable. The quantity must be considered only an estimate until reserves are actually extracted and processed. This uncertainty in aggregate resource and reserve calculation may adversely impact Knife River Holding Company’s results of operations.
Knife River Holding Company depends on securing, permitting and economically mining strategically located aggregate reserves.
Knife River Holding Company must obtain governmental, environmental, mining, and/or other permits at many of its facilities. New quarry sites can take years to develop and in a number of states in which Knife River Holding Company operates, it can be difficult to permit new aggregate sites or expand existing aggregate sites due to community resistance. In addition, construction aggregates are difficult to transport efficiently and freight costs can make certain deposits uneconomical to mine if located in areas of little growth or without the ability to supply growing markets served by rail, barge or ship. Failure to secure, permit and mine such reserves could negatively impact Knife River Holding Company’s business, financial condition and results of operations.
Knife River Holding Company operates in a capital-intensive industry and is subject to capital market and interest rate risks.
Knife River Holding Company’s operations require significant capital investment to purchase and maintain the property and equipment required to mine and produce its products. In addition, Knife River Holding Company’s operations include a significant level of fixed and semi-fixed costs. Consequently, Knife River Holding Company relies
21

TABLE OF CONTENTS

on financing sources and capital markets, particularly in the first half of the year due to the seasonal nature of the industry, as sources of liquidity for capital requirements not satisfied by cash flows from operations. If Knife River Holding Company is not able to access capital at competitive rates, the ability to implement business plans, make capital expenditures or pursue acquisitions it would otherwise rely on for future growth may be adversely affected. Market disruptions may increase the cost of borrowing or adversely affect Knife River Holding Company’s ability to access one or more financial markets. Such market disruptions could include:

• | 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.

The issuance of a substantial amount of Knife River Holding Company’s common stock, whether issued in connection with an acquisition or otherwise, or the perception that such an issuance could occur, could have a dilutive effect on stockholders and/or may adversely affect the market price of Knife River Holding Company’s common stock. Higher interest rates on borrowings could also have an adverse effect on Knife River Holding Company’s results of operation.
Reductions in Knife River Holding Company’s credit ratings could increase financing costs.
There is no assurance Knife River Holding Company’s credit ratings will remain in effect or that a rating will not be lowered or withdrawn by a rating agency. Events affecting Knife River Holding Company’s financial results may impact its cash flows and credit metrics, potentially resulting in a change in its credit ratings. Knife River Holding Company’s credit ratings may also change as a result of the differing methodologies or changes in the methodologies used by the rating agencies.
Knife River Holding Company may be negatively impacted by pending and/or future litigation, claims or investigations.
Knife River Holding Company is, and may become party to, among other things, personal injury, environmental, commercial, contract, warranty, antitrust, tax, property entitlements and land use, product liability, health and safety, and employment claims. The outcome of pending or future lawsuits, claims, investigations or proceedings is often difficult to predict and could be adverse and material in amount. In addition to the monetary cost, litigation can divert management’s attention from its core business opportunities. Development of new information in these matters can often lead to changes in management’s estimated liabilities associated with these proceedings including the judge’s rulings or judgements, jury verdicts, settlements or changes in applicable law. The outcome of such matters is often difficult to predict and unfavorable outcomes could have a material impact to Knife River Holding Company’s results of operations, financial position and cash flows.
Financial market changes could impact Knife River Holding Company’s defined benefit pension plans and obligations.
Knife River Holding Company has defined benefit pension plans for some of its current and former employees. Assumptions regarding future costs, returns on investments, interest rates and other actuarial assumptions have a significant impact on the funding requirements and expense recorded relating to these plans. Adverse changes in economic indicators, such as consumer spending, inflation data, interest rate changes, political developments and threats of terrorism, among other things, can create volatility in the financial markets. These changes could impact the assumptions and negatively affect the value of assets held in Knife River Holding Company’s pension plans and may increase the amount and accelerate the timing of required funding contributions for those plans.
22

TABLE OF CONTENTS

Increasing costs associated with health care plans may adversely affect Knife River Holding Company’s results of operations.
Knife River Holding Company intends to be self-insured for the health care benefits for eligible employees. However, health care costs continue to increase. Increasing quantities of large individual health care claims and an overall increase in total health care claims could have an adverse impact on operating results, financial position and liquidity. Legislation related to health care could also change Knife River Holding Company’s benefit program and costs.
Knife River Holding Company is exposed to risk of loss resulting from the nonpayment and/or nonperformance by its customers and counterparties.
Knife River Holding Company’s clients include public and private entities that have been, and may continue to be, negatively impacted by the changing landscape in the global economy. A recessionary construction economy can increase the likelihood that Knife River Holding Company will not be able to collect on all accounts receivable or may experience a delay in payment from some customers. If Knife River Holding Company’s customers or counterparties experience financial difficulties, which has occurred and may recur, Knife River Holding Company could experience difficulty in collecting receivables. While no one client accounted for over 10% of Knife River Holding Company’s revenue in 2020 or 2021, Knife River Holding Company faces collection risk as a normal part of business where Knife River Holding Company performs services and subsequently bills clients for such services. In the event that Knife River Holding Company has concentrated credit risk from clients in a specific geographic area or industry, continuing negative trends or a worsening in financial conditions in that specific geographic area or industry could make Knife River Holding Company susceptible to disproportionately high levels of default. Nonpayment and/or nonperformance by Knife River Holding Company’s customers and counterparties could have a negative impact on Knife River Holding Company’s results of operations and cash flows.
Changes in tax law may negatively affect Knife River Holding Company’s business.
Changes to federal, state and local tax laws have the ability to benefit or adversely affect Knife River Holding Company’s earnings and customer costs. Significant changes to corporate tax rates could result in the impairment of deferred tax assets that are established based on existing law at the time of deferral. A number of factors may increase Knife River Holding Company’s future effective income tax rate, including:

• | 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.

Knife River Holding Company’s operations could be negatively impacted by import tariffs and/or other government mandates.
Knife River Holding Company operates in or provides services to capital-intensive industries in which federal trade policies could significantly impact the availability and cost of materials. Imposed and proposed tariffs could significantly increase the prices and delivery lead times on raw materials and finished products that are critical to Knife River Holding Company and its customers, such as cement, aluminum and steel. Knife River Holding Company faces competition from manufacturers both in the U.S. and around the world, some of which
23

TABLE OF CONTENTS

may engage in competition and trade practices involving the importation of competing products in the U.S. or other foreign laws, regulations or practices. Prolonged lead times on the delivery of raw materials and further tariff increases on raw materials and finished products could adversely affect Knife River Holding Company’s business, financial condition and results of operations.
Knife River Holding Company’s business is based in part on government-funded infrastructure projects and building activities, and any reductions or reallocation of spending or related subsidies in these areas could have an adverse effect on us.
Certain of Knife River Holding Company’s businesses depend on government spending for infrastructure and other similar building activities. As a result, demand for some of Knife River Holding Company’s products is influenced by local, state and federal government fiscal policies, tax incentives and other subsidies, and other general macroeconomic and political factors. Projects in which Knife River Holding Company participates may be funded directly by governments or privately funded, but are otherwise tied to or impacted by government policies and spending measures.
Government spending is often approved only on a short-term basis and some of the projects in which Knife River Holding Company’s products are used require longer-term funding commitments. If government funding is not approved or funding is lowered as a result of poor economic conditions, lower than expected revenues, competing spending priorities, or other factors, it could limit infrastructure projects available, increase competition for projects, result in excess inventory, and decrease sales, all of which could adversely affect the profitability of Knife River Holding Company’s business.
Additionally, certain regions or states may require or possess the means to finance only a limited number of large infrastructure projects and periods of high demand may be followed by years of little to no activity. There can be no assurances that governments will sustain or increase current infrastructure spending and tax incentive and other subsidy levels, and any reductions thereto or delays therein could affect Knife River Holding Company’s business, liquidity and financial condition, and results of operations.
Knife River Holding Company’s operations could be adversely impacted by climate change.
Severe weather events, such as tornadoes, hurricanes, rain, drought, ice and snowstorms, and high- and low- temperature extremes, occur in regions in which Knife River Holding Company operates and maintains infrastructure. Climate change could change the frequency and severity of these weather events, which may create physical and financial risks to Knife River Holding Company. Such risks could have an adverse effect on Knife River Holding Company’s financial condition, results of operations and cash flows. Increases in severe weather conditions or extreme temperatures may cause infrastructure construction projects to be delayed or canceled and limit resources available for such projects resulting in decreased revenue or increased project costs. In addition, drought conditions could restrict the availability of water supplies or limit the ability to obtain water use permits, inhibiting the ability to conduct operations.
Climate change may impact a region’s economic health, which could impact Knife River Holding Company’s revenues. Knife River Holding Company’s financial performance is tied to the health of the regional economies served. Knife River Holding Company provides construction materials and services, for some states and communities that are economically affected by the agriculture industry. Increases in severe weather events or significant changes in temperature and precipitation patterns could adversely affect the economies of the states and communities affected by that industry.
The insurance industry may be adversely affected by severe weather events which may impact availability of insurance coverage, insurance premiums and insurance policy terms.
The price of energy also has an impact on the economic health of communities. The cost of additional regulatory requirements to combat climate change, such as regulation of carbon dioxide emissions under the federal Clean Air Act, requirements to replace fossil fuels with renewable energy or credits, or other environmental regulation or taxes could impact the availability of goods and the prices charged by suppliers, which would normally be borne by consumers through higher prices for energy and purchased goods, and could adversely impact economic conditions of areas served by Knife River Holding Company. To the extent financial markets view climate change and emissions of greenhouse gas (“GHG”) as a financial risk, this could negatively affect Knife River Holding Company’s ability to access capital markets or result in less competitive terms and conditions.
24

TABLE OF CONTENTS

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.
Knife River Holding Company is subject to environmental laws and regulations affecting many aspects of its operations, including air and water quality, wastewater discharge, the generation, transmission and disposal of solid waste and hazardous substances, aggregate permitting and other environmental considerations. These laws and regulations can increase capital, operating and other costs; cause delays as a result of litigation and administrative proceedings; and create compliance, remediation, containment, monitoring and reporting obligations and environmental compliance for construction materials facilities. Environmental laws and regulations can also require Knife River Holding Company to install pollution control equipment at its facilities, clean up spills and other contamination, and correct environmental hazards, including payment of all or part of the cost to remediate sites where Knife River Holding Company’s past activities, or the activities of other parties, caused environmental contamination. These laws and regulations generally require Knife River Holding Company to obtain and comply with a variety of environmental licenses, permits, inspections and other approvals. Although Knife River Holding Company strives to comply with all applicable environmental laws and regulations, public and private entities and private individuals may interpret Knife River Holding Company’s legal or regulatory requirements differently and seek injunctive relief or other remedies against Knife River Holding Company. Knife River Holding Company cannot predict the outcome, financial or operational, of any such litigation or administrative proceedings.
Existing environmental laws and regulations may be revised and new laws and regulations seeking to protect the environment may be adopted or become applicable to Knife River Holding Company. These laws and regulations could require Knife River Holding Company to limit the use or output of certain facilities; restrict the use of certain fuels; prohibit or restrict new or existing services; replace certain fuels with renewable fuels; retire and replace certain facilities; install pollution controls; remediate environmental impacts; remove or reduce environmental hazards; or forego or limit the development of resources. Revised or new laws and regulations that increase compliance and disclosure costs and/or restrict operations could adversely affect Knife River Holding Company’s results of operations and cash flows.
Costs related to obligations under MEPPs could have a material negative effect on Knife River Holding Company’s results of operations and cash flows.
Knife River Holding Company participates in MEPPs for employees represented by certain unions. Knife River Holding Company is required to make contributions to these plans in amounts established under numerous collective bargaining agreements between the operating subsidiaries and those unions.
Knife River Holding Company may be obligated to increase its contributions to underfunded plans that are classified as being in endangered, seriously endangered or critical status as defined by the Pension Protection Act of 2006. Plans classified as being in one of these statuses are required to adopt Rehabilitation Plans or Funding Improvement Plans to improve their funded status through increased contributions, reduced benefits or a combination of the two.
Knife River Holding Company may also be required to increase its contributions to MEPPs if the other participating employers in such plans withdraw from the plans and are not able to contribute amounts sufficient to fund the unfunded liabilities associated with their participation in the plans. The amount and timing of any increase in Knife River Holding Company’s required contributions to MEPPs may depend upon one or more factors, including the outcome of collective bargaining; actions taken by trustees who manage the plans; actions taken by the plans’ other participating employers; the industry for which contributions are made; future determinations that additional plans reach endangered, seriously endangered or critical status; newly enacted government laws or regulations and the actual return on assets held in the plans; among others. Knife River Holding Company could experience increased operating expenses as a result of required contributions to MEPPs, which could have an adverse effect on its results of operations, financial position or cash flows.
In addition, pursuant to the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended by the Multiemployer Pension Plan Amendments Act, Knife River Holding Company could incur a partial or complete withdrawal liability upon withdrawing from a plan, exiting a market in which it does business with a union workforce or upon termination of a plan. Knife River Holding Company could also incur additional withdrawal liability if its withdrawal from a plan is determined by that plan to be part of a mass withdrawal.
25

TABLE OF CONTENTS

Technology disruptions or cyberattacks could adversely impact Knife River Holding Company’s operations.
Knife River Holding Company uses technology in substantially all aspects of its business operations and requires uninterrupted operation of information technology and operation technology systems, including disaster recovery and backup systems and network infrastructure. While Knife River Holding Company has policies, procedures and processes in place designed to strengthen and protect these systems, they may be vulnerable to physical and cybersecurity failures or unauthorized access, due to:

• | Hacking.

• | Human error.

• | Theft.

• | Sabotage.

• | Malicious software.

• | Ransomware.

• | Third-party compromise.

• | Acts of terrorism.

• | Acts of war.

• | Acts of nature.

• | Or other causes.

Although there are manual processes in place, should a compromise or system failure occur, interdependencies to technology may disrupt Knife River Holding Company’s ability to fulfill critical business functions. This may include interruption of facilities for delivery of construction materials or other products and services, any of which could adversely affect Knife River Holding Company’s reputation, business, cash flows and results of operations or subject Knife River Holding Company to legal costs.
Knife River Holding Company’s accounting systems and its ability to collect information and invoice customers for products and services could be disrupted. If Knife River Holding Company’s operations are disrupted, it could result in decreased revenues and remediation costs that could adversely affect Knife River Holding Company’s results of operations and cash flows.
Knife River Holding Company, through the ordinary course of business, requires access to sensitive customer, supplier, employee and Knife River Holding Company data. While Knife River Holding Company has implemented extensive security measures, including limiting the amount of sensitive information retained, a breach of its systems could compromise sensitive data and could go unnoticed for some time. Such an event could result in negative publicity and reputational harm, remediation costs, legal claims and fines that could have an adverse effect on Knife River Holding Company’s financial results. Third-party service providers that perform critical business functions for Knife River Holding Company or have access to sensitive information within Knife River Holding Company also may be vulnerable to security breaches and information technology risks that could adversely affect Knife River Holding Company.
Cyberattacks continue to increase in frequency and sophistication, which could cause Knife River Holding Company’s information systems to be a target of ongoing and sophisticated cyberattacks by a variety of sources with the apparent aim to breach Knife River Holding Company’s cyber-defenses. Such incidents could have a material adverse effect on its business, financial condition or results of operations. Knife River Holding Company is continuously reevaluating the need to upgrade and/or replace systems and network infrastructure. These upgrades and/or replacements could adversely impact operations by imposing substantial capital expenditures, creating delays or outages, or experiencing difficulties transitioning to new systems. System disruptions, if not anticipated and appropriately mitigated, could adversely affect Knife River Holding Company.
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.
Pandemics have disrupted national, state and local economies. To the extent a pandemic adversely impacts Knife River Holding Company’s businesses, operations, revenues, liquidity or cash flows, it could also have a
26

TABLE OF CONTENTS

heightened effect on other risks described in this section. The degree to which a pandemic will impact Knife River Holding Company depends on future developments, including the resurgence of COVID-19 and its variants, federal and state mandates, actions taken by governmental authorities, effectiveness of vaccines being administered, and the pace and extent to which the economy recovers and remains under relatively normal operating conditions.
Other factors associated with a pandemic that could impact Knife River Holding Company’s businesses and future operating results, revenues and liquidity include impacts related to the health, safety, and availability of employees and contractors; extended rise in unemployment; public and private-sector budget changes and constraints; counterparty credit; costs and availability of supplies; capital construction and infrastructure operation and maintenance programs; financing plans; pension valuations; travel restrictions; and legal matters. The economic and market disruptions resulting from a pandemic could also lead to greater than normal uncertainty with respect to the realization of estimated amounts, including estimates for backlog, revenue recognition, intangible assets, other investments and provisions for credit losses.
General risk factors that could impact Knife River Holding Company’s businesses.
The following are additional factors that should be considered for a better understanding of the risks to Knife River Holding Company. These factors may negatively impact Knife River Holding Company’s financial results in future periods:

• | 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.

Risks Related to the Separation and Distribution
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.
The historical information of Knife River Holding Company in this information statement refers to its business as operated by and integrated with MDU Resources. The historical and pro forma financial information of Knife River Holding Company included in this information statement is derived from the consolidated financial statements and accounting records of MDU Resources and Knife River. Accordingly, the historical and pro forma financial information included in this information statement does not necessarily reflect the financial condition, results of operations and cash flows that Knife River Holding Company would have achieved as a separate, publicly traded company during the periods presented or those that Knife River Holding Company will achieve in the future, primarily as a result of the factors described below:

• | 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.

27

TABLE OF CONTENTS

• | 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.

• | 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.

Other significant changes may occur in Knife River Holding Company’s cost structure, management, financing and business operations as a result of operating as a company separate from MDU Resources. For additional information about the past financial performance of Knife River Holding Company’s business and the basis of presentation of the historical consolidated financial statements and the unaudited pro forma consolidated financial statements, see “Selected Historical Consolidated Financial Data,” “Unaudited Pro Forma Consolidated Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the historical financial statements and accompanying notes included elsewhere in this information statement.
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.
It is a condition to the distribution that MDU Resources receive a private letter ruling from the IRS and one or more opinions of 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 the distribution, including, with respect to the opinion(s), to the effect that the distribution will be a transaction described in Section 355(a) of the Code. The IRS private letter ruling and the opinion(s) of tax advisors will be based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of MDU Resources and Knife River Holding Company, including those relating to the past and future conduct of MDU Resources and Knife River Holding Company. If any of these representations, statements or undertakings is, or becomes, inaccurate or incomplete, or if MDU Resources or Knife River Holding Company breach any of the representations or covenants contained in any of the separation-related agreements and documents or in any documents relating to the IRS private letter ruling and/or the opinion(s) of tax advisors, the IRS private letter ruling and/or the opinion(s) of tax advisors may be invalid and the conclusions reached therein could be jeopardized.
Notwithstanding receipt of the IRS private letter ruling and the opinion(s) of tax advisors, the IRS could determine that the distribution and/or certain related transactions should be treated as taxable transactions for U.S. federal income tax purposes if it determines that any of the representations, assumptions, or undertakings upon which the IRS private letter ruling or the opinion(s) of tax advisors were based are false or have been violated. In addition, neither the IRS private letter ruling nor the opinion(s) of tax advisors will address all of the issues that are relevant to determining whether the distribution, together with certain related transactions, qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes. Further, the opinion(s) of tax advisors represent the judgment of such tax advisors and are not binding on the IRS or any court, and the IRS or a court may disagree with the conclusions in the opinion(s) of tax advisors. Accordingly, notwithstanding receipt by MDU Resources of the IRS private letter ruling and the opinion(s) of tax advisors, there can be no
28

TABLE OF CONTENTS

assurance that the IRS will not assert that the distribution and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge. In the event the IRS were to prevail in such challenge, MDU Resources, Knife River Holding Company and MDU Resources stockholders could be subject to significant U.S. federal income tax liability.
If the distribution, together with related transactions, fails to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Sections 355 and 368(a)(1)(D) of the Code, in general, for U.S. federal income tax purposes, MDU Resources would recognize taxable gain as if it had sold Knife River Holding Company common stock in a taxable sale for its fair market value (unless MDU Resources and Knife River Holding Company jointly make an election under Section 336(e) of the Code with respect to the distribution, in which case, in general, (a) the MDU Resources group would recognize taxable gain as if Knife River Holding Company had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of Knife River Holding Company common stock and the assumption of all of its liabilities and (b) Knife River Holding Company would obtain a related step-up in the basis of its assets) and, if the distribution fails to qualify as a transaction that is generally tax-free for U.S. federal income tax purposes under Section 355, MDU Resources stockholders who receive Knife River Holding Company shares in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. For more information, see “Material U.S. Federal Income Tax Consequences.”
Under the tax matters agreement that MDU Resources will enter into with Knife River Holding Company, Knife River Holding Company may be required to indemnify MDU Resources against any additional taxes and related amounts resulting from (a) an acquisition of all or a portion of its equity securities or assets, whether by merger or otherwise (and regardless of whether Knife River Holding Company participated in or otherwise facilitated the acquisition), (b) other actions or failures to act by Knife River Holding Company or (c) any inaccuracy or breach of Knife River Holding Company’s representations, covenants or undertakings contained in any of the separation-related agreements and documents or in any documents relating to the IRS private letter ruling and/or the opinion(s) of tax advisors. Any such indemnity obligations could be material.
U.S. federal income tax consequences may restrict Knife River Holding Company’s ability to engage in certain desirable strategic or capital-raising transactions after the separation.
Under current law, a separation can be rendered taxable to the parent corporation and its stockholders as a result of certain post-separation acquisitions of shares or assets of the spun-off corporation. For example, a separation may result in taxable gain to the parent corporation under Section 355(e) of the Code if the separation were deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, shares representing a 50 percent or greater interest (by vote or value) in the spun-off corporation.
To preserve the U.S. federal income tax treatment of the separation and distribution, and in addition to Knife River Holding Company’s indemnity obligation described above, the tax matters agreement will restrict Knife River Holding Company, for the two-year period following the distribution, except in specific circumstances, from:

• | 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.

These restrictions may limit Knife River Holding Company’s ability to pursue certain strategic transactions or other transactions that it may believe to be in the best interests of its stockholders or that might increase the value of its business.
29

TABLE OF CONTENTS

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.
Until the separation and distribution occur, Knife River Holding Company will continue to be an indirect, wholly owned subsidiary of MDU Resources. Accordingly, MDU Resources will have the sole and absolute discretion to determine and change the terms of the separation and distribution, including the establishment of the record date for the distribution and the distribution date. These changes could be unfavorable to Knife River Holding Company. In addition, the MDU Resources board of directors, in its sole and absolute discretion, may decide not to proceed with the separation and distribution at any time prior to the distribution date.
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.
Knife River Holding Company may be unable to achieve the full strategic and financial benefits expected to result from the separation, or such benefits may be delayed or not occur at all. The separation and distribution are expected to provide the following benefits, among others:

• | 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.

Knife River Holding Company may not achieve these and other anticipated benefits for a variety of reasons, including, among others, that: (a) the separation will require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing Knife River Holding Company’s business; (b) following the separation and distribution, Knife River Holding Company may be more susceptible to market fluctuations and other adverse events than if it was still a part of MDU Resources; (c) following the separation and distribution, Knife River Holding Company’s business will be less diversified than MDU Resources’ business prior to the separation and distribution; and (d) the other actions required to separate MDU Resources’ and Knife River Holding Company’s respective businesses could disrupt its operations. If Knife River Holding Company fails to achieve some or all of the benefits expected to result from the separation, or if such benefits are delayed, it could have a material adverse effect on its financial position, results of operations and cash flows.
Knife River Holding Company or MDU Resources may fail to perform under various transaction agreements that will be executed as part of the separation or Knife River Holding Company may fail to have necessary systems and services in place when certain of the transaction agreements expire.
In connection with the separation and prior to the distribution, Knife River Holding Company and MDU Resources will enter into a separation agreement and will also enter into various other agreements, including a transition services agreement, a tax matters agreement and an employee matters agreement. The separation agreement, the tax matters agreement and the employee matters agreement will determine the allocation of assets and liabilities between the companies following the separation for those respective areas and will include any necessary indemnifications related to liabilities and obligations. The transition services agreement will provide for the performance of certain services by MDU Resources for the benefit of Knife River Holding Company for a limited period of time after the separation. Knife River Holding Company will rely on MDU Resources to satisfy its obligations under these agreements. If MDU Resources is unable to satisfy its obligations under these agreements, including its indemnification obligations, Knife River Holding Company could incur operational
30

TABLE OF CONTENTS

difficulties or losses. If Knife River Holding Company does not have agreements with other providers of these services once certain transaction agreements expire or terminate, Knife River Holding Company may not be able to operate its business effectively, which may have a material adverse effect on its financial position, results of operations and cash flows.
Knife River Holding Company’s inability to resolve favorably any disputes that arise between Knife River Holding Company and MDU Resources with respect to their past and ongoing relationships may adversely affect Knife River Holding Company’s operating results.
Disputes may arise between Knife River Holding Company and MDU Resources in a number of areas relating to Knife River Holding Company’s ongoing relationships, including:

• | 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.

Knife River Holding Company may not be able to resolve potential conflicts, and even if it does, the resolution may be less favorable than if it were dealing with an unaffiliated party.
The agreements Knife River Holding Company enters into with MDU Resources may be amended upon agreement between the parties. While Knife River Holding Company is controlled by MDU Resources, it may not have the leverage to negotiate amendments to these agreements if required on terms as favorable to it as those it would negotiate with an unaffiliated third party.
After the distribution, certain members of management, directors and stockholders will hold stock in both Knife River Holding Company and MDU Resources, and as a result may face actual or potential conflicts of interest.
After the distribution, the management and directors of each of MDU Resources and Knife River Holding Company may own both MDU Resources common stock and Knife River Holding Company common stock. This ownership overlap could create, or appear to create, potential conflicts of interest when Knife River Holding Company’s management and directors and MDU Resources’ management and directors face decisions that could have different implications for Knife River Holding Company and MDU Resources. For example, potential conflicts of interest could arise in connection with the resolution of any dispute between MDU Resources and Knife River Holding Company regarding the terms of the agreements governing the distribution and the relationship with MDU Resources thereafter. These agreements include the separation and distribution agreement, the tax matters agreement, the employee matters agreement, the transition services agreement, the stockholder and registration rights agreement and any commercial agreements between the parties or their affiliates. Potential conflicts of interest may also arise out of any commercial arrangements that Knife River Holding Company or MDU Resources may enter into in the future.
No vote of MDU Resources stockholders is required in connection with the separation and distribution. As a result, if the distribution occurs and you do not want to receive Knife River Holding Company common stock in the distribution, your sole recourse will be to divest yourself of your MDU Resources common stock prior to the record date of the distribution.
No vote of MDU Resources stockholders is required in connection with the separation and distribution. Accordingly, if this transaction occurs and you do not want to receive Knife River Holding Company common stock in the distribution, your only recourse will be to divest yourself of your MDU Resources common stock prior to the record date for the distribution or to sell your MDU Resources common stock in the “regular way” market in between the record date and the distribution date.
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.
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
31

TABLE OF CONTENTS

statements according to the rules and regulations required by the SEC. In addition, the Exchange Act requires that Knife River Holding Company file annual, quarterly and current reports. Knife River Holding Company’s failure to prepare and disclose this information in a timely manner or to otherwise comply with applicable law could subject it to penalties under federal securities laws, expose it to lawsuits and restrict its ability to access financing. In addition, the Sarbanes-Oxley Act requires that, among other things, Knife River Holding Company establish and maintain effective internal controls and procedures for financial reporting and disclosure purposes. Internal control over financial reporting is complex and may be revised over time to adapt to changes in Knife River Holding Company’s business, or changes in applicable accounting rules. Knife River Holding Company cannot assure you that its internal control over financial reporting will be effective in the future or that a material weakness will not be discovered with respect to a prior period for which it had previously believed that internal controls were effective. If Knife River Holding Company is not able to maintain or document effective internal control over financial reporting, its independent registered public accounting firm will not be able to certify as to the effectiveness of its internal control over financial reporting. While Knife River Holding Company has been adhering to these laws and regulations as a subsidiary of MDU Resources, after the distribution it will need to demonstrate its ability to manage its compliance with these corporate governance laws and regulations as an independent, public company.
Matters affecting Knife River Holding Company’s internal controls may cause it to be unable to report its financial information on a timely basis, or may cause it to restate previously issued financial information, and thereby subject Knife River Holding Company to adverse regulatory consequences, including sanctions or investigations by the SEC, or violations of applicable stock exchange listing rules. There could also be a negative reaction in the financial markets due to a loss of investor confidence in Knife River Holding Company and the reliability of its financial statements. Confidence in the reliability of Knife River Holding Company’s financial statements is also likely to suffer if it or its independent registered public accounting firm reports a material weakness in its internal control over financial reporting. This could have a material and adverse effect on Knife River Holding Company by, for example, leading to a decline in the share price and impairing its ability to raise additional capital.
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.
Knife River Holding Company expects to enter into financing arrangements in connection with the separation of approximately $[   ].
This amount of debt could potentially have important consequences to Knife River Holding Company and its debt and equity investors, including:

• | 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.

32

TABLE OF CONTENTS

To the extent that Knife River Holding Company incurs additional indebtedness, the foregoing risks could increase. In addition, Knife River Holding Company’s actual cash requirements in the future may be greater than expected. Knife River Holding Company’s cash flow from operations may not be sufficient to repay all of the outstanding debt as it becomes due, and it may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance its debt.
A lowering or withdrawal of the ratings, outlook or watch assigned to Knife River Holding Company’s new debt securities by rating agencies may increase its future borrowing costs and reduce its access to capital.
Knife River Holding Company’s indebtedness is expected to have a non-investment grade rating, and any rating, outlook or watch assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, current or future circumstances relating to the basis of the rating, outlook, or watch such as adverse changes to Knife River Holding Company’s business, so warrant. Any future lowering of Knife River Holding Company’s ratings, outlook or watch likely would make it more difficult or more expensive for Knife River Holding Company to obtain additional debt financing.
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.
Historically, Knife River Holding Company’s business has been operated as one of MDU Resources’ business segments, and MDU Resources performed substantially all the corporate functions for Knife River’s operations, including managing financial and human resources systems, internal auditing, investor relations, treasury services, financial reporting, finance and tax administration, benefits administration, legal, and regulatory functions. Following the distribution, MDU Resources will provide support to Knife River Holding Company with respect to certain of these functions on a transitional basis. Knife River Holding Company will need to replicate certain facilities, systems, infrastructure and personnel to which it will no longer have access after the distribution and will likely incur capital and other costs associated with developing and implementing its own support functions in these areas. Such costs could be material.
As an independent, publicly traded company, Knife River Holding Company may become more susceptible to market fluctuations and other adverse events than it would have been were it still a part of MDU Resources. As part of MDU Resources, Knife River Holding Company has been able to enjoy certain benefits from MDU Resources’ operating diversity and available capital for investments. As an independent, publicly traded company, Knife River Holding Company will not have similar operating diversity and may not have similar access to capital markets, which could have a material adverse effect on its financial position, results of operations and cash flows.
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.
Knife River Holding Company is in the process of further developing an information technology infrastructure and systems to support its critical business functions, including accounting and reporting, in order to replace many of the systems and functions MDU Resources currently provides. Knife River Holding Company may experience temporary interruptions in business operations if it cannot transition effectively to its own stand-alone systems and functions, which could disrupt its business operations and have a material adverse effect on profitability. In addition, Knife River Holding Company’s costs for the operation of these systems may be higher than the amounts reflected in the consolidated financial statements.
In connection with the separation from MDU Resources, MDU Resources will indemnify Knife River Holding Company for certain liabilities and Knife River Holding Company will indemnify MDU Resources for certain liabilities. If Knife River Holding Company is required to pay MDU Resources under these indemnities, Knife River Holding Company’s financial results could be negatively impacted. The MDU Resources indemnity may not be sufficient to hold Knife River Holding Company harmless from the full amount of liabilities for which MDU Resources will be allocated responsibility, and MDU Resources may not be able to satisfy its indemnification obligations in the future.
Pursuant to the separation agreement and certain other agreements with MDU Resources, MDU Resources will agree to indemnify Knife River Holding Company for certain liabilities, and Knife River Holding Company will agree to indemnify MDU Resources for certain liabilities, in each case for uncapped amounts, as discussed
33

TABLE OF CONTENTS

further in “Certain Relationships and Related Person Transactions.” Indemnities that Knife River Holding Company may be required to provide MDU Resources are not subject to any cap, may be significant and could negatively impact Knife River Holding Company’s business, particularly with respect to indemnities provided in the tax matters agreement (as described in more detail above). Third parties could also seek to hold Knife River Holding Company responsible for any of the liabilities that MDU Resources has agreed to retain. Any amounts Knife River Holding Company is required to pay pursuant to these indemnification obligations and other liabilities could require Knife River Holding Company to divert cash that would otherwise have been used in furtherance of its operating business. Further, the indemnity from MDU Resources may not be sufficient to protect Knife River Holding Company against the full amount of such liabilities, and MDU Resources may not be able to fully satisfy its indemnification obligations. Moreover, even if Knife River Holding Company ultimately succeeds in recovering from MDU Resources any amounts for which it is held liable, it may be temporarily required to bear these losses itself. Each of these risks could have a material adverse effect on Knife River Holding Company’s financial position, results of operations and cash flows.
The transfer to Knife River Holding Company of certain contracts, permits and other assets and rights may require the consents, approvals of, or provide other rights to, third parties. If such consents or approvals are not obtained, Knife River Holding Company may not be entitled to the full benefit of such contracts, permits and other assets and rights, which could increase its expenses or otherwise harm its business and financial performance.
The separation and distribution agreement will provide that certain contracts, permits and other assets and rights are to be transferred from MDU Resources or its subsidiaries to Knife River Holding Company or its subsidiaries in connection with the separation. The transfer of certain of these contracts, permits and other assets and rights may require consents or approvals of third parties or provide other rights to third parties. In addition, in some circumstances, Knife River Holding Company and MDU Resources are joint beneficiaries of contracts, and Knife River Holding Company and MDU Resources may need the consents of third parties in order to split or separate the existing contracts or the relevant portion of the existing contracts to Knife River Holding Company or MDU Resources.
Some parties may use consent requirements or other rights to seek to terminate contracts or obtain more favorable contractual terms from Knife River Holding Company, which, for example, could take the form of price increases. This could require Knife River Holding Company to expend additional resources in order to obtain the services or assets previously provided under the contract, or require Knife River Holding Company to seek arrangements with new third parties or obtain letters of credit or other forms of credit support. If Knife River Holding Company is unable to obtain required consents or approvals, it may be unable to obtain the benefits, permits, assets and contractual commitments that are intended to be allocated to Knife River Holding Company as part of its separation from MDU Resources, and Knife River Holding Company may be required to seek alternative arrangements to obtain services and assets that may be more costly and/or of lower quality. The termination or modification of these contracts or permits or the failure to timely complete the transfer or separation of these contracts or permits could negatively affect Knife River Holding Company’s business, financial condition, results of operations and cash flows.
Risks Related to Knife River Holding Company Common Stock
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.
A public market for Knife River Holding Company common stock does not currently exist. Knife River Holding Company anticipates that on or about the record date for the distribution, trading in shares of Knife River Holding Company common stock will begin on a “when-issued” basis, which will continue through the distribution date. However, Knife River Holding Company cannot guarantee that an active trading market will develop or be sustained for shares of Knife River Holding Company common stock after the distribution. Nor can it predict the prices at which shares of Knife River Holding Company common stock may trade after the distribution. Similarly, Knife River Holding Company cannot predict the effect of the distribution on the trading prices of shares of Knife River Holding Company common stock or whether the combined market value of the shares of Knife River Holding Company common stock and MDU Resources common stock will be less than, equal to or greater than the market value of shares of MDU Resources common stock prior to the distribution.
34

TABLE OF CONTENTS

Until the market has fully evaluated MDU Resources’ remaining businesses without Knife River Holding Company, the price at which shares of MDU Resources common stock trade may fluctuate more significantly than might otherwise be typical, even with other market conditions, including general volatility, held constant. Similarly, until the market has fully evaluated Knife River Holding Company’s business as a stand-alone entity, the prices at which shares of Knife River Holding Company common stock trade may fluctuate more significantly than might otherwise be typical, even with other market conditions, including general volatility, held constant. The increased volatility of Knife River Holding Company common stock price following the distribution may have a material adverse effect on its business, financial condition and results of operations.
The market price of shares of Knife River Holding Company common stock may fluctuate significantly due to a number of factors, some of which may be beyond Knife River Holding Company’s control, including:

• | 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.

A significant number of shares of Knife River Holding Company’s common stock are or will be eligible for future sale, including the disposition by MDU Resources of the shares of Knife River Holding Company’s common stock that it may retain after the distribution, which may cause the market price of Knife River Holding Company common stock to decline.
Upon completion of the separation and distribution, Knife River Holding Company will have an aggregate of approximately [   ] million shares of common stock outstanding. Virtually all of those shares will be freely tradable without restriction or registration under the Securities Act of 1933, as amended (the “Securities Act”), except for the shares of Knife River Holding Company retained by MDU Resources. Knife River Holding Company is unable to predict whether large amounts of Knife River Holding Company common stock will be sold in the open market following the separation and distribution. Knife River Holding Company is also unable to predict whether a sufficient number of buyers of Knife River Holding Company common stock to meet the demand to sell shares of Knife River Holding Company common stock at attractive prices would exist at that time. It is possible that MDU Resources stockholders will sell the shares of Knife River Holding Company common stock they receive in the distribution for various reasons. For example, such stockholders may not believe that Knife River Holding Company’s business profile or its level of market capitalization as an independent company fits their investment objectives. The sale of significant amounts of Knife River Holding Company common stock or the perception in the market that this will occur may lower the market price of Knife River Holding Company common stock.
Following the distribution, MDU Resources will retain approximately [   ] shares of Knife River Holding Company common stock. Knife River Holding Company expects that pursuant to the IRS private letter ruling, MDU Resources will be required to dispose of such shares of Knife River Holding Company common stock as soon as practicable following the distribution. Knife River Holding Company understands that MDU Resources intends to responsibly dispose of all shares of Knife River Holding Company common stock that it retains after the distribution, which may include dispositions through one or more subsequent exchanges for debt, distributions to MDU Resources stockholders, exchanges for MDU Resources shares or one or more sales of such shares for cash. Knife River Holding Company will agree that, upon the request of MDU Resources, it will use reasonable best efforts to effect a registration under applicable federal and state securities laws of any shares of Knife River Holding Company common stock retained by MDU Resources. See “Certain Relationships and Related Persons Transactions—Stockholder and Registration Rights Agreement.” Any disposition by MDU Resources, or any significant stockholder, of Knife River Holding Company common stock in the public market, or the perception that such dispositions could occur, could adversely affect prevailing market prices for Knife River Holding Company common stock.
35

TABLE OF CONTENTS

If securities or industry analysts do not publish research or publish misleading or unfavorable research about Knife River Holding Company’s business, Knife River Holding Company’s stock price and trading volume could decline.
The trading market for Knife River Holding Company common stock will depend in part on the research and reports that securities or industry analysts publish about Knife River Holding Company or its business. Knife River Holding Company does not currently have and may never obtain research coverage for Knife River Holding Company common stock. If there is no research coverage of Knife River Holding Company common stock, the trading price for shares of Knife River Holding Company common stock may be negatively impacted. If Knife River Holding Company obtains research coverage for Knife River Holding Company common stock and if one or more of the analysts downgrades its stock or publishes misleading or unfavorable research about its business, Knife River Holding Company’s stock price would likely decline. If one or more of the analysts ceases coverage of Knife River Holding Company common stock or fails to publish reports on Knife River Holding Company regularly, demand for Knife River Holding Company common stock could decrease, which could cause Knife River Holding Company common stock price or trading volume to decline.
There may be substantial changes in Knife River Holding Company’s stockholder base.
Many investors receiving shares of Knife River Holding Company common stock pursuant to the distribution may hold those shares because of a decision to invest in a company with MDU Resources’ profile. Following the distribution, the shares of Knife River Holding Company common stock held by those investors will represent an investment in a company focused exclusively on the construction materials and contracting industry, with a different profile. This may not be aligned with a holder’s investment strategy and may cause the holder to sell the shares of Knife River Holding Company common stock they receive in the distribution. As a result, Knife River Holding Company’s stock price may decline or experience volatility as its stockholder base changes.
Your percentage of ownership in Knife River Holding Company may be diluted in the future.
In the future, your percentage ownership in Knife River Holding Company may be diluted because of equity awards that it will be granting to its directors, officers and employees or otherwise as a result of equity issuances for acquisitions or capital market transactions. Knife River Holding Company’s employees will have stock-based awards relating to shares of Knife River Holding Company common stock after the distribution as a result of conversion of their MDU Resources stock-based awards (in whole or in part) to its stock-based awards. Further, Knife River Holding Company anticipates that its Compensation Committee will grant additional stock-based awards to its directors, officers and employees after the distribution. Such awards will have a dilutive effect on Knife River Holding Company’s earnings per share, which could adversely affect the market price of shares of Knife River Holding Company common stock. From time to time, Knife River Holding Company will issue additional stock-based awards to its employees under its employee benefits plans.
In addition, Knife River Holding Company’s amended and restated certificate of incorporation will authorize it to issue, without the approval of its stockholders, one or more classes or series of preferred stock that have such designation, powers, preferences and relative, participating, optional and other special rights, including preferences over Knife River Holding Company common stock respecting dividends and distributions, as its board of directors generally may determine. The terms of one or more classes or series of preferred stock could dilute the voting power or reduce the value of Knife River Holding Company common stock. Similarly, the repurchase or redemption rights or liquidation preferences Knife River Holding Company could assign to holders of preferred stock could affect the residual value of the common stock. See “Description of Knife River Holding Company’s Capital Stock.”
Knife River Holding Company has not yet determined its dividend policy, and even if Knife River Holding Company determines that its dividend policy will be to pay a regular dividend, Knife River Holding Company cannot guarantee the timing, declaration, amount or payment of dividends on its common stock.
Knife River Holding Company has not yet determined whether it expects to pay a regular dividend after the separation and distribution. The timing, declaration, amount and payment of any dividends following the separation and distribution will be within the discretion of Knife River Holding Company’s board of directors, and will depend upon many factors, including Knife River Holding Company’s financial condition, earnings, capital requirements of its operating subsidiaries, covenants associated with certain of Knife River Holding
36

TABLE OF CONTENTS

Company’s debt service obligations, legal requirements, regulatory constraints, industry practice, ability to access capital markets, and other factors deemed relevant by Knife River Holding Company’s board of directors. Moreover, if Knife River Holding Company determines to pay any dividend in the future, there can be no assurance that it will continue to pay such dividends or the amount of such dividends. For more information, see the section entitled “Dividend Policy.”
Knife River Holding Company’s amended and restated bylaws will designate the Court of Chancery of the State of Delaware or, if the Court of Chancery of the State of Delaware does not have jurisdiction, another state court of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by Knife River Holding Company’s stockholders, which could discourage lawsuits against Knife River Holding Company and its directors and officers.
Knife River Holding Company’s amended and restated bylaws will provide that, unless the board of directors otherwise determines, the Court of Chancery of the State of Delaware or, if the Court of Chancery of the State of Delaware does not have jurisdiction, another state court of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Knife River Holding Company, any action asserting a claim of breach of a fiduciary duty owed by any director or officer to Knife River Holding Company or its stockholders, creditors or other constituents, any action asserting a claim against Knife River Holding Company or any director or officer arising pursuant to any provision of the Delaware General Corporation Law, as amended (the “DGCL”), or Knife River Holding Company’s amended and restated certificate of incorporation or amended and restated bylaws, or any action asserting a claim against Knife River Holding Company or any director or officer governed by the internal affairs doctrine.
In addition, Knife River Holding Company’s amended and restated bylaws will further provide that, unless the board of directors otherwise determines, the federal district courts of the United States of America shall be the sole and exclusive forum for any action asserting a claim arising under the Securities Act. The exclusive forum provision does not apply to actions arising under the Exchange Act or the rules and regulations thereunder. While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce Knife River Holding Company’s federal forum provision described above. Knife River Holding Company’s stockholders will not be deemed to have waived compliance with the federal securities laws and the rules and regulations thereunder.
This exclusive forum provision may limit the ability of Knife River Holding Company’s stockholders to bring a claim in a judicial forum that such stockholders find favorable for disputes with Knife River Holding Company or its directors or officers, which may discourage such lawsuits against Knife River Holding Company and its directors and officers, and such provision may also make it more expensive for Knife River Holding Company’s stockholders to bring such claims.
Although Knife River Holding Company’s amended and restated bylaws will include the exclusive forum provision described above, it is possible that a court could rule that this provision is inapplicable or unenforceable. Alternatively, if a court outside of Delaware were to find this exclusive forum provision inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings described above, Knife River Holding Company may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect its business, financial condition or results of operations.
Provisions in Knife River Holding Company’s amended and restated certificate of incorporation and amended and restated bylaws and Delaware law may prevent or delay an acquisition of Knife River Holding Company, which could decrease the trading price of Knife River Holding Company common stock.
Knife River Holding Company’s amended and restated certificate of incorporation and amended and restated bylaws, and Delaware law, contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids more expensive to the acquiror and to encourage prospective acquirors to negotiate with Knife River Holding Company’s board of directors rather than to attempt a hostile takeover. These provisions include rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings and the right of Knife River Holding Company’s board of directors
37

TABLE OF CONTENTS

to issue preferred stock without stockholder approval. Delaware law also imposes some restrictions on mergers and other business combinations between any holder of 15 percent or more of Knife River Holding Company’s outstanding common stock and Knife River Holding Company. For more information, see “Description of Knife River Holding Company’s Capital Stock—Anti Takeover Effects of Various Provisions of Delaware Law and Knife River Holding Company’s Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws.”
Knife River Holding Company believes these provisions protect its stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with its board of directors and by providing its board of directors with more time to assess any acquisition proposal. These provisions are not intended to make Knife River Holding Company immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that Knife River Holding Company’s board of directors determines is not in the best interests of Knife River Holding Company and its stockholders. Accordingly, in the event that Knife River Holding Company’s board of directors determines that a potential business combination transaction is not in the best interests of Knife River Holding Company and its stockholders but certain stockholders believe that such a transaction would be beneficial to Knife River Holding Company and its stockholders, such stockholders may elect to sell their shares in Knife River Holding Company and the trading price of Knife River Holding Company common stock could decrease.
These and other provisions of Knife River Holding Company’s amended and restated certificate of incorporation, amended and restated bylaws and the DGCL could have the effect of delaying, deferring or preventing a proxy contest, tender offer, merger or other change in control, which may have a material adverse effect on Knife River Holding Company’s business, financial condition and results of operations.
In addition, applicable state insurance laws and regulations could delay or impede a change of control of Knife River Holding Company.
Furthermore, an acquisition or further issuance of Knife River Holding Company’s stock could trigger the application of Section 355(e) of the Code, causing the distribution to be taxable to MDU Resources. For a discussion of Section 355(e) of the Code, see “Material U.S. Federal Income Tax Consequences.” Under the tax matters agreement, and as described in more detail above, Knife River Holding Company would be required to indemnify MDU Resources for the resulting taxes and related amount, and this indemnity obligation might discourage, delay or prevent a change of control that you may consider favorable.
38

TABLE OF CONTENTS

CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This information statement and other materials Knife River Holding Company and MDU Resources have filed or will file with the SEC contain, or will contain, certain forward-looking statements regarding business strategies, market potential, future financial performance and other matters. The words “believe,” “expect,” “estimate,” “could,” “should,” “intend,” “may,” “plan,” “seek,” “anticipate,” “project” and similar expressions, among others, generally identify “forward-looking statements,” which speak only as of the date the statements were made. The matters discussed in these forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those projected, anticipated or implied in the forward-looking statements. In particular, information included under “Risk Factors,” “The Separation and Distribution,” “Capitalization,” “Unaudited Pro Forma Consolidated Financial Statements,” “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and other sections of this information statement contain forward-looking statements. Where, in any forward-looking statement, an expectation or belief as to future results or events is expressed, such expectation or belief is based on the current plans and expectations of Knife River Holding Company’s management and expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the expectation or belief will result or be achieved or accomplished. Whether any such forward-looking statements are in fact achieved will depend on future events, some of which are beyond Knife River Holding Company’s control. Except as may be required by law, Knife River Holding Company undertakes no obligation to modify or revise any forward-looking statements to reflect new information, events or circumstances occurring after the date of this information statement. Factors, risks, trends and uncertainties that could cause actual results or events to differ materially from those anticipated include the matters described under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
You should read this information statement completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this information statement are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this information statement, and Knife River Holding Company does not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise.
Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.
39

TABLE OF CONTENTS

THE SEPARATION AND DISTRIBUTION
Overview
On August 4, 2022, MDU Resources announced its intention to separate its indirect, wholly owned subsidiary, Knife River, from MDU Resources. MDU Resources intends to effect the separation through a pro rata distribution of approximately 80.1 percent or more of the outstanding common stock of a new entity, Knife River Holding Company. Knife River Holding Company was formed to hold Knife River and the assets and liabilities associated with it and its business. Following the distribution, MDU Resources stockholders will own directly approximately 80.1 percent or more of the outstanding shares of Knife River Holding Company common stock, and Knife River Holding Company will be a separate public company from MDU Resources. MDU Resources will retain up to 19.9 percent of the outstanding shares of Knife River Holding Company common stock following the distribution. Prior to completing the separation, MDU Resources may adjust the percentage of Knife River Holding Company common stock to be distributed to MDU Resources stockholders and retained by MDU Resources in response to market and other factors, and it will amend this information statement to reflect any such adjustment. The number of shares of MDU Resources common stock you own will not change as a result of the separation.
On [   ], the MDU Resources board of directors approved the distribution of approximately 80.1 percent or more of the issued and outstanding shares of Knife River Holding Company common stock, on the basis of [   ] shares of MDU Resources common stock for each share of MDU Resources common stock held as of the close of business on the record date of [   ], subject to the satisfaction or waiver of the conditions to the distribution as described in this information statement.
At [   ] Eastern Time, on [   ], the distribution date, each MDU Resources stockholder will receive [   ] shares of Knife River Holding Company common stock for each share of MDU Resources common stock held at the close of business on the record date for the distribution, as described below. MDU Resources stockholders will receive cash in lieu of any fractional shares of Knife River Holding Company common stock that they would have received after application of this ratio. MDU Resources stockholders will not be required to make any payment, surrender or exchange their shares of MDU Resources common stock or take any other action to receive their shares of Knife River Holding Company common stock in the distribution. The distribution of Knife River Holding Company common stock as described in this information statement is subject to the satisfaction or waiver of certain conditions. For a more detailed description of these conditions, see “—Conditions to the Distribution” within this section.
Reasons for the Separation
The MDU Resources board of directors regularly reviews MDU Resources’ businesses, operations and value creation opportunities. Pursuant to its review, the MDU Resources board of directors believes that the separation of Knife River from the remaining businesses of MDU Resources is in the best interests of MDU Resources and its stockholders. A wide variety of factors were considered by the MDU Resources board of directors in evaluating the separation. Among other things, the MDU Resources board of directors considered the following potential benefits of the separation:

• | 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. Knife River Holding Company and MDU Resources will each be able to use equity tailored to its own

40

TABLE OF CONTENTS

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.

• | 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.

The MDU Resources board of directors also considered a number of potentially unfavorable factors in evaluating the separation, including:

• | 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 standalone, public company, which may include financial reporting, tax, legal and other professional services costs.

• | 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 standalone 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 standalone 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.

• | Uncertainty Regarding Stock Prices. The effect of the separation on the trading prices of Knife River Holding Company or MDU Resources common stock are 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.

41

TABLE OF CONTENTS

In determining whether to pursue the separation, MDU Resources board of directors concluded that the potential benefits of the separation significantly outweighed these negative factors. See the section entitled “Risk Factors” included elsewhere in this information statement.
In connection with its review, the MDU Resources board of directors also considered certain alternatives to the separation of Knife River, including a combined spinoff of Knife River and MDU Construction Services Group, Inc. The MDU Resources board of directors determined, however, that spinning off Knife River and MDU Construction Services Group, Inc. together, as a combined company, would be less favorable given that, among other factors, the companies work in different industries, maintain different customers and have different business dynamics within each industry. As a result, this alternative would not result in the creation of a “pure play” business. These were some of the factors that the MDU Resources board of directors considered as part of its assessment of MDU Resources’ and Knife River’s businesses, operations and value creation opportunities. Following this assessment, the MDU Resources board of directors determined that the separation is the best path forward for MDU Resources and its stockholders. Additionally, as previously disclosed by MDU Resources, the MDU Resources board of directors has begun a strategic review of MDU Construction Services Group, Inc.
Reasons for MDU Resources’ Retention of up to 19.9 Percent of Knife River Holding Company Common Stock
In considering the appropriate structure for the separation, MDU Resources determined that, immediately after the distribution becomes effective, MDU Resources will own up to 19.9 percent of the outstanding shares of Knife River Holding Company common stock. The retention of Knife River Holding Company common stock will strengthen MDU Resources’ balance sheet. The retained shares can potentially be exchanged to accelerate debt reduction or sold for cash, thereby facilitating an appropriate capital structure and the financial flexibility necessary for MDU Resources to execute its growth strategy. Knife River Holding Company understands that MDU Resources intends to responsibly dispose of all shares of Knife River Holding Company common stock that it retains after the distribution, which may include dispositions through one or more subsequent exchanges for debt, distributions to MDU Resources stockholders, exchanges for MDU Resources shares or one or more sales of such shares for cash.
Formation of Knife River Holding Company and Internal Reorganization
Knife River Holding Company was formed as a Delaware corporation on November 9, 2022, for the purpose of holding Knife River.
As part of the plan to separate Knife River and pursuant to the separation and distribution agreement that Knife River Holding Company and MDU Resources will enter into prior to the distribution, MDU Resources and its subsidiaries expect to complete an internal reorganization to transfer the equity interests of Knife River and its consolidated subsidiaries and the assets and liabilities associated with it and its consolidated subsidiaries to Knife River Holding Company.
The internal reorganization is expected to include various restructuring transactions that may take the form of asset transfers, mergers, dividends, distributions, contributions and similar transactions, and may involve the formation of new subsidiaries in the U.S. to own and operate Knife River or MDU Resources’ remaining businesses. Following the completion of the internal reorganization and immediately following the distribution, Knife River Holding Company will own Knife River, and MDU Resources will continue to own its remaining businesses. Following the distribution, Knife River Corporation intends to change its name to “[   ]” and Knife River Holding Company intends to change its name to “Knife River Corporation.”
When and How You Will Receive the Distribution
With the assistance of Equiniti, MDU Resources expects to distribute approximately 80.1 percent or more of the outstanding shares of Knife River Holding Company common stock at [   ] Eastern Time on [   ], the distribution date, to all holders of outstanding shares of MDU Resources common stock as of the close of business on [   ], the record date for the distribution. Equiniti, which currently serves as the transfer agent and registrar for MDU Resources common stock, will serve as the settlement and distribution agent in connection with the distribution and the transfer agent and registrar for Knife River Holding Company common stock.
If you own shares of MDU Resources common stock as of the close of business on the record date for the distribution, the shares of Knife River Holding Company common stock that you will be entitled to receive in
42

TABLE OF CONTENTS

the distribution will be issued electronically, as of the distribution date, to you in direct registration form or to your bank or brokerage firm on your behalf. If you are a registered holder, Equiniti will then mail you a direct registration account statement that reflects your shares of Knife River Holding Company common stock. If you hold your shares through a bank or brokerage firm, your bank or brokerage firm will credit your account for the shares. Direct registration form refers to a method of recording share ownership when no physical share certificates are issued to stockholders, as is the case in this distribution. If you sell shares of MDU Resources common stock in the “regular-way” market up to and including the distribution date, you will be selling your right to receive shares of Knife River Holding Company common stock in the distribution.
Most MDU Resources stockholders hold their shares of MDU Resources common stock through a bank or brokerage firm. In such cases, the bank or brokerage firm would be said to hold the shares in “street name” and ownership would be recorded on the bank or brokerage firm’s books. If you hold your shares of common stock through a bank or brokerage firm, your bank or brokerage firm will credit your account for shares of Knife River Holding Company common stock that you are entitled to receive in the distribution. If you have any questions concerning the mechanics of having shares held in “street name,” please contact your bank or brokerage firm.
Transferability of Shares You Receive
Shares of Knife River Holding Company common stock distributed to holders in connection with the distribution will be transferable without restriction or registration under the Securities Act, except for shares received by persons who may be deemed to be Knife River Holding Company’s affiliates. Persons who may be deemed to be its affiliates after the distribution generally include individuals or entities that control, are controlled by or are under common control with Knife River Holding Company, which may include certain of its executive officers, directors or principal stockholders. Securities held by Knife River Holding Company’s affiliates will be subject to resale restrictions under the Securities Act. Knife River Holding Company’s affiliates will be permitted to sell shares of Knife River Holding Company common stock only pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act.
Number of Shares of Knife River Holding Company Common Stock You Will Receive
For each share of MDU Resources common stock that you own at the close of business on [   ], the record date for the distribution, you will receive [   ] shares of Knife River Holding Company common stock on the distribution date. MDU Resources will not distribute any fractional shares of Knife River Holding Company common stock to its stockholders. Instead, if you are a registered holder, Equiniti (which is sometimes referred to in this information statement as the “distribution agent”) will aggregate fractional shares into whole shares, sell the whole shares in the open market at prevailing market prices on behalf of MDU Resources stockholders and distribute the aggregate cash proceeds (net of discounts and commissions) of the sales pro rata (based on the fractional share such holder would otherwise be entitled to receive) to each holder who otherwise would have been entitled to receive a fractional share in the distribution. The distribution agent, in its sole discretion, without any influence by MDU Resources or Knife River Holding Company, will determine when, how, and through which broker-dealer and at what price to sell the whole shares. Any broker-dealer used by the distribution agent will not be an affiliate of either MDU Resources or Knife River Holding Company. Equiniti is not an affiliate of either MDU Resources or Knife River Holding Company. Neither Knife River Holding Company nor MDU Resources will be able to guarantee any minimum sale price in connection with the sale of these 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.
The aggregate net cash proceeds of these sales of fractional shares will be taxable for U.S. federal income tax purposes. See “Material U.S. Federal Income Tax Consequences” for an explanation of the material U.S. federal income tax consequences of the distribution. Knife River Holding Company estimates that it will take approximately two weeks from the distribution date for the distribution agent to complete the distributions of the aggregate net cash proceeds. If you hold your shares of MDU Resources common stock through a bank or brokerage firm, your bank or brokerage firm will receive, on your behalf, your pro rata share of the aggregate net cash proceeds of the sales and will credit your account for your share of such proceeds.
Treatment of Equity-Based Compensation
Prior to the effectiveness of the registration statement of which this information statement forms a part, information regarding the treatment of MDU Resources equity-based awards held by individuals who will serve
43

TABLE OF CONTENTS

as employees or non-employee directors of Knife River Holding Company in connection with the separation and distribution will be included in an amendment to this information statement.
Results of the Distribution
After the distribution, Knife River Holding Company will be an independent, publicly traded company. The actual number of shares to be distributed will be determined at the close of business on [   ], the record date for the distribution, and will reflect any exercise of MDU Resources options prior to the record date for the distribution. The distribution will not affect the number of outstanding shares of MDU Resources common stock or any rights of MDU Resources stockholders. MDU Resources will not distribute any fractional shares of Knife River Holding Company common stock.
Knife River Holding Company will enter into a separation agreement and other related agreements with MDU Resources before the distribution to effect the separation and provide a framework for Knife River Holding Company’s relationship with MDU Resources after the separation. These agreements will provide for the allocation between Knife River Holding Company and MDU Resources of assets, employees, liabilities and obligations (including its investments, property, employee benefits assets and liabilities and tax liabilities) associated with Knife River and will govern the relationship between MDU Resources and Knife River Holding Company after the separation. For a more detailed description of these agreements, see “Certain Relationships and Related Person Transactions.”
Market for Knife River Holding Company Common Stock
There is currently no public trading market for Knife River Holding Company common stock. Knife River Holding Company expects to apply to list Knife River Holding Company common stock on the NYSE under the symbol “KNF.” Knife River Holding Company has not and will not set the initial price of Knife River Holding Company common stock. The initial price will be established by the public markets.
Knife River Holding Company cannot predict the price at which shares of Knife River Holding Company common stock will trade after the distribution. In fact, the combined trading prices, after the distribution, of the shares of Knife River Holding Company common stock that each MDU Resources stockholder will receive in the distribution and shares of MDU Resources common stock held at the record date for the distribution may not equal the “regular-way” trading price of shares of MDU Resources common stock immediately prior to the distribution. The price at which shares of Knife River Holding Company common stock trades may fluctuate significantly, particularly until an orderly public market develops. Trading prices for shares of Knife River Holding Company common stock will be determined in the public markets and may be influenced by many factors. See “Risk Factors—Risks Related to Knife River Holding Company common stock.”
Incurrence of Debt
In connection with the separation and distribution, Knife River Holding Company anticipates that it will incur short-term debt consisting of [   ] as well as long-term debt consisting of [   ] for an aggregate principal amount of up to $[   ]. Knife River Holding Company expects that all or a portion of the net proceeds of such debt will be used to repay debt owed by Knife River to Centennial. Knife River Holding Company expects that Centennial will use such net proceeds to repay a portion of its existing third-party debt.
Trading Between the Record Date and Distribution Date
Beginning on or about the record date for the distribution and continuing up to and including the distribution date, MDU Resources expects that there will be two markets for shares of MDU Resources common stock: a “regular-way” market and an “ex-distribution” market. Shares of MDU Resources common stock that trade on the “regular-way” market will trade with an entitlement to shares of Knife River Holding Company common stock to be distributed pursuant to the separation. Shares of MDU Resources common stock that trade on the “ex-distribution” market will trade without an entitlement to shares of Knife River Holding Company common stock to be distributed pursuant to the distribution. Therefore, if you sell shares of MDU Resources common stock in the “regular-way” market up to and including the distribution date, you will be selling your right to receive shares of Knife River Holding Company common stock in the distribution. If you own shares of MDU Resources common stock at the close of business on the record date and sell those shares on the “ex-distribution” market up to and including the distribution date, you will receive the shares of Knife River Holding Company common stock that you are entitled to receive pursuant to your ownership of shares of MDU Resources common stock as of the record date.
44

TABLE OF CONTENTS

Furthermore, beginning on or about the record date for the distribution and continuing up to and including the distribution date, Knife River Holding Company expects that there will be a “when-issued” market in shares of Knife River Holding Company common stock. “When-issued” trading refers to a sale or purchase made conditionally because the security has been authorized but not yet issued. The “when-issued” trading market will be a market for shares of Knife River Holding Company common stock that will be distributed to holders of shares of MDU Resources common stock on the distribution date. If you own shares of MDU Resources common stock at the close of business on the record date for the distribution, you would be entitled to shares of Knife River Holding Company common stock distributed pursuant to the distribution. You may trade this entitlement to shares of Knife River Holding Company common stock, without the shares of MDU Resources common stock you own, on the “when-issued” market, but your transaction will not settle until after the distribution date. On the first trading day following the distribution date, “when-issued” trading with respect to shares of Knife River Holding Company common stock will end, and “regular-way” trading will begin.
Conditions to the Distribution
The distribution will be effective at [   ] Eastern Time, on [   ], which is the distribution date, provided that the conditions set forth in the separation agreement have been satisfied (or waived by MDU Resources in its sole discretion), including:

• | 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 a 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 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. and

45

TABLE OF CONTENTS

• | 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.

Knife River Holding Company cannot assure you that any or all of these conditions will be met. MDU Resources will have sole discretion to waive any of the conditions to the distribution. In addition, MDU Resources will have the sole and absolute discretion to determine (and change) the terms of, and whether to proceed with, the distribution and, to the extent it determines to so proceed, to determine the record date for the distribution, the distribution date and the distribution ratio, as well as to reduce the amount of outstanding shares of Knife River Holding Company common stock that it will retain, if any, following the distribution. MDU Resources may rescind or delay its declaration of the distribution even after the record date for the distribution. MDU Resources does not intend to notify its stockholders of any modifications to the terms of the separation and distribution that, in the judgment of its board of directors, are not material. To the extent that the MDU Resources board of directors determines that any modifications by MDU Resources materially change the material terms of the separation and distribution, MDU Resources will notify MDU Resources stockholders in a manner reasonably calculated to inform them about the modification as may be required by law, by, for example, publishing a press release, filing a current report on Form 8-K, or circulating a supplement to this information statement. For example, the MDU Resources board of directors might consider material such matters as significant changes to the distribution ratio, the assets to be contributed or the liabilities to be assumed in the separation.
Regulatory Approval
Knife River Holding Company’s registration statement on Form 10, of which this information statement forms a part, must become effective prior to the distribution, and shares of Knife River Holding Company common stock to be distributed must have been approved for listing on the NYSE, subject to official notice of distribution.
No Appraisal Rights
Under the DGCL, MDU Resources stockholders will not have appraisal rights in connection with the distribution.
46

TABLE OF CONTENTS

DIVIDEND POLICY
Knife River Holding Company has not yet determined the extent to which it will pay dividends on its common stock. The payment of any dividends in the future, and the timing and amount thereof, to its stockholders will fall within the sole discretion of its board of directors and will depend on many factors, such as its financial condition, earnings, capital requirements, potential obligations in planned financings, industry practice, legal requirements, Delaware corporate surplus requirements, and other factors that its board of directors deems relevant. Knife River Holding Company’s ability to pay dividends will depend on its ongoing ability to generate cash from operations and on its access to the capital markets. Knife River Holding Company cannot guarantee that it will pay a dividend in the future or continue to pay any dividends if it commences paying dividends.
47

TABLE OF CONTENTS

CAPITALIZATION
The following table sets forth Knife River Holding Company’s capitalization as of December 31, 2022, on a historical basis and on an unaudited as adjusted basis to give effect to the pro forma adjustments included in its unaudited pro forma consolidated financial information. The information below is not necessarily indicative of what Knife River Holding Company’s capitalization would have been had the separation, distribution and related transactions been completed as of the year ended December 31, 2022. In addition, it is not indicative of Knife River Holding Company’s future capitalization. This table should be read in conjunction with the “Unaudited Pro Forma Consolidated Financial Statements,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Description of Material Indebtedness” sections of this information statement and Knife River Holding Company’s consolidated financial statements and notes thereto included in the “Index to Financial Statements” of this information statement.

| ​ | ​ | As of December 31, 2022
| ​ | ​ | Historical | ​ | ​ | Pro Forma
| ​ | ​ | (In thousands)
Cash and cash equivalents | ​ | ​ |  | ​ | ​ |
Debt, including current and long-term: | ​ | ​ |  | ​ | ​ |
Current debt | ​ | ​ |  | ​ | ​ |
Long-term debt | ​ | ​ |  | ​ | ​ |
Total debt | ​ | ​ |  | ​ | ​ |
| ​ | ​ |  | ​ | ​ |
Equity | ​ | ​ |  | ​ | ​ |
Common stock | ​ | ​ |  | ​ | ​ |
Other paid-in-capital | ​ | ​ |  | ​ | ​ |
Parent stock held by subsidiary | ​ | ​ |  | ​ | ​ |
Accumulated other comprehensive loss | ​ | ​ |  | ​ | ​ |
Total Equity | ​ | ​ | $— | ​ | ​ | $—
Total Capitalization | ​ | ​ | $— | ​ | ​ | $—
| ​ | ​ |  | ​ | ​ |

Knife River Holding Company has not yet finalized its post-distribution capitalization. Pro forma financial information reflecting Knife River post-distribution capitalization will be included in an amendment to this information statement.
48

TABLE OF CONTENTS

SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table presents the selected historical consolidated financial data for Knife River, as of and for each of the years in the three-year period ended December 31, 2022. The selected consolidated statement of income data for the years ended December 31, 2022, 2021 and 2020, and the selected consolidated balance sheet data as of December 31, 2022 and 2021, were derived from Knife River’s audited consolidated financial statements.
The selected historical consolidated financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Consolidated Financial Statements,” and the historical consolidated financial statements and the notes thereto included in this information statement. The selected historical consolidated financial data reflects Knife River’s results as historically operated as a part of MDU Resources, and these results may not be indicative of its future performance as a stand-alone company following the separation and distribution.

December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Results for Year: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Revenues | ​ | ​ | $— | ​ | ​ | $2,228,930 | ​ | ​ | $2,178,002
Gross profit | ​ | ​ |  | ​ | ​ | 346,949 | ​ | ​ | 370,578
Net income | ​ | ​ |  | ​ | ​ | 129,755 | ​ | ​ | 147,325
Other Data: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
EBITDA | ​ | ​ | $— | ​ | ​ | $293,406 | ​ | ​ | $304,959
Balance Sheet Data: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Working capital | ​ | ​ | $— | ​ | ​ | $185,429 | ​ | ​ |
Total assets | ​ | ​ | — | ​ | ​ | 2,181,824 | ​ | ​ |
Total equity | ​ | ​ |  | ​ | ​ | 952,844 | ​ | ​ |

Non-GAAP Financial Measures
The Selected Historical Consolidated Financial Data includes financial information prepared in accordance with GAAP, as well as EBITDA and EBITDA margin financial measures. Knife River defines EBITDA as net income before interest, taxes, depreciation, depletion and amortization, and EBITDA margin as EBITDA as a percentage of revenues. EBITDA and EBITDA margin are considered non-GAAP financial measures. Knife River believes that EBITDA and EBITDA margin 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. Rating agencies and investors will also use EBITDA to calculate Knife River’s leverage as a multiple of EBITDA. Knife River’s management uses EBITDA and EBITDA margin in conjunction with GAAP results when evaluating its operating results internally and calculating compensation packages, and leverage as a multiple of EBITDA to determine the appropriate method of funding operations of the Company. EBITDA is calculated by adding back income taxes, interest expense and depreciation, depletion and amortization expense to net income. EBITDA margin is calculated by dividing EBITDA by revenues. These non-GAAP financial measures should not be considered as alternatives to, or more meaningful than, GAAP financial measures such as net income and is intended to be a helpful supplemental financial measure for investors’ understanding of Knife River’s operating performance. Knife River’s non-GAAP financial measures, EBITDA and EBITDA margin, are not standardized; therefore, it may not be possible to compare these financial measures with other companies’ EBITDA and EBITDA margin measures having the same or similar names.
The following information reconciles net income to EBITDA and provides the calculation of EBITDA margin.

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Net income | ​ | ​ | $— | ​ | ​ | $129,755 | ​ | ​ | $147,325
Adjustments: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Income taxes | ​ | ​ | — | ​ | ​ | 43,459 | ​ | ​ | 47,431
Depreciation, depletion and amortization | ​ | ​ | — | ​ | ​ | 100,974 | ​ | ​ | 89,626
Interest | ​ | ​ | — | ​ | ​ | 19,218 | ​ | ​ | 20,577
Consolidated EBITDA | ​ | ​ | $— | ​ | ​ | $293,406 | ​ | ​ | $304,959
Revenues | ​ | ​ | $— | ​ | ​ | $2,228,930 | ​ | ​ | $2,178,002
EBITDA margin | ​ | ​ | — % | ​ | ​ | 13.2% | ​ | ​ | 14.0%

49

TABLE OF CONTENTS

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Knife River is omitting the financial statements for the nine months ended September 30, 2022 because they relate to historical periods that are believed will not be required to be included in the registration statement at the time of the initial public filing of the registration statement. Knife River intends to amend this registration statement to include all financial information required by Regulation S-X at the date of such amendment, at least 15 days prior to the anticipated effective date of the registration statement for its listing on a national securities exchange.
The Unaudited Pro Forma Consolidated Financial Statements of Knife River Holding Company consist of the unaudited pro forma consolidated statement of income for the year ended December 31, 2022, as well as the unaudited pro forma consolidated balance sheet as of December 31, 2022, prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and Article 11 of the Securities and Exchange Commission’s Regulation S-X. The Unaudited Pro Forma Consolidated Financial Statements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition” and “Results of Operations.” The Unaudited Pro Forma Consolidated Financial Statements were prepared as if the pro forma adjustments had become effective January 1, 2022.
The Unaudited Pro Forma Consolidated Financial Statements are subject to assumptions and adjustments, including those described in the accompanying notes. Knife River Holding Company’s management believes these assumptions and adjustments are reasonable under the circumstances given the information and estimates available at the time. However, these adjustments are subject to change as MDU Resources and Knife River Holding Company finalize the terms of the spinoff, including the separation and distribution agreement and related transaction agreements. The Unaudited Pro Forma Consolidated Financial Statements do not purport to represent what Knife River’s financial position and results of operations actually would have been had the spinoff occurred on the dates indicated, or to project Knife River’s financial performance for any future period following the spinoff.
The Unaudited Pro Forma Consolidated Financial Statements include adjustments to reflect the following:

• | The incurrence of indebtedness by Knife River Holding Company, which Knife River Holding Company expects will include short-term debt consisting of [   ] as well as long-term debt consisting of [   ] for an aggregate principal amount of up to $[   ], and Knife River Holding Company’s expectation that all or a portion of the net proceeds of such indebtedness will be used to repay debt owed by Knife River to Centennial;

• | The adjustment for differences between Knife River’s historical consolidated balance sheet prepared on a carve-out basis and assets and liabilities expected to be contributed by MDU Resources to Knife River Holding Company;

• | The distribution of approximately 80.1 percent or more of Knife River Holding Company issued and outstanding common stock by MDU Resources in connection with the separation;

• | The one-time expenses associated with separation of Knife River Holding Company; and

• | The impact of, and transactions contemplated by, the separation and distribution agreement, the transition services agreement, the tax matters agreement, the employee matters agreement and other transaction agreements described under “Certain Relationships and Related Person Transactions.”

A final determination regarding the post-separation capital structure has not yet been made, and the separation and distribution agreement, the transition services agreement, the tax matters agreement, the employee matters agreement and other transaction agreements have not been finalized. As such, we intend to update the unaudited pro forma consolidated financial statements in a subsequent amendment to this information statement.
After the spinoff, Knife River Holding Company expects to incur incremental costs as an independent public company, including costs to replace services and fees previously provided or incurred by the Parent as well as other stand-alone costs. The estimate of these costs will range from $[   ] million to $[   ] million per year, over and above amounts currently included in the Unaudited Pro Forma Consolidated Financial Statements. Due to the scope and complexity of these activities, the amount of these costs could vary, and therefore, are not included in the Unaudited Pro Forma Consolidated Financial Statements.
50

TABLE OF CONTENTS

Knife River’s audited annual consolidated financial statements include expense allocations for certain support functions that are currently provided on a centralized basis with the Parent, such as expenses for business shared services, and other selling, general and administrative costs that benefit Knife River. MDU Resources has incurred spinoff-related transaction costs which are not reflected in the audited annual consolidated financial statements as the costs were one-time, non-recurring costs, substantially all of which have been borne by MDU Resources.
51

TABLE OF CONTENTS

Knife River Corporation
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
For the Year Ended December 31, 2022

| ​ | ​ | Historical | ​ | ​ | Autonomous Entity Adjustments | ​ | ​ | Transaction Accounting Adjustments | ​ | ​ | Pro Forma
| ​ | ​ | (In millions, except per share amounts)
Revenues | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Cost of revenue | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
| ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Gross profit | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
| ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Selling, general and administrative expenses | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Interest expense | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Other (income) expense | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Income before income taxes | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
| ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Income taxes | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
| ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Net income | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Other comprehensive loss | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Comprehensive loss | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
| ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Unaudited Pro Forma Earnings Per Share | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Basic | ​ | ​ |  | ​ | ​ | (A) | ​ | ​ |  | ​ | ​ | $—
Diluted | ​ | ​ |  | ​ | ​ | (B) | ​ | ​ |  | ​ | ​ | $—
Average number of shares used in calculating Unaudited Pro Forma Earnings Per Share: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Basic | ​ | ​ |  | ​ | ​ | (A) | ​ | ​ |  | ​ | ​ | $—
Diluted | ​ | ​ |  | ​ | ​ | (B) | ​ | ​ |  | ​ | ​ | $—

See accompanying notes to unaudited pro forma consolidated financial statements.
52

TABLE OF CONTENTS

Knife River Corporation
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
As of December 31, 2022

| ​ | ​ | Historical | ​ | ​ | Autonomous Entity Adjustments | ​ | ​ | Transaction Accounting Adjustments | ​ | ​ | Pro Forma
| ​ | ​ | (In millions)
Assets: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Current assets: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Cash and cash equivalents | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Receivables, net | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Costs and estimated earnings in excess of billings on uncompleted contracts | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Due from related-party | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Inventories | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Prepayments and other current assets | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Total current assets | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
| ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Property, plant, and equipment, net | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Goodwill | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Other intangible assets, net | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Operating lease right-of-use assets | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Investments and Other | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Due from related-party - noncurrent | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Total assets | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
| ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Liabilities and Equity: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Current liabilities: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Long-term debt - current portion | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Related-party notes payable - current portion | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Accounts payable | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Current operating lease liabilities | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Due to related-party | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Accrued compensation | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Other accrued liabilities | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Total current liabilities | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
| ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Long-term debt | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Related-party notes payable | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Deferred income taxes | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Noncurrent operating lease liabilities | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Other | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Total liabilities | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Commitments and contingencies | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Stockholder’s equity: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Common stock, $10 par value; 80,000 shares authorized, issued and outstanding | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Other paid-in capital | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Retained earnings | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Parent stock held by subsidiary | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Accumulated other comprehensive loss | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Total stockholder’s equity | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Total liabilities and stockholder’s equity | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—

See accompanying notes to unaudited pro forma consolidated financial statements.
53

TABLE OF CONTENTS

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Description of pro forma transactions
Knife River has historically operated as a wholly owned subsidiary of Centennial and an indirect, wholly owned subsidiary of MDU Resources and not as a stand-alone company. The accompanying audited consolidated financial statements and footnotes were prepared on a “carve-out” basis in connection with the expected spinoff and were derived from the consolidated financial statements of MDU Resources as if the operations had been conducted independently from Centennial and MDU Resources.
Note 2 – Pro forma adjustments to the Consolidated Balance Sheet
This note should be read in conjunction with other notes in the pro forma consolidated balance sheet. Adjustments included in the column under the headings “Autonomous Entity Adjustments” and “Transaction Accounting Adjustments” represent the following:
(a)
(b)
Note 3 – Pro forma adjustments to the Consolidated Statement of Income
This note should be read in conjunction with other notes in the pro forma consolidated statement of income. Adjustments included in the column under the headings “Autonomous Entity Adjustments” and “Transaction Accounting Adjustments” represent the following:
(a)
(b)
Note 4 – Management’s adjustments
The adjustments shown below include those that management deemed necessary for a fair statement of the pro forma information presented. The adjustments include forward-looking information that is subject to the safe harbor protections in the Exchange Act and actual results could differ materially from what is presented below.
For the year ended December 31, 2022

| ​ | ​ | Net income (loss)
| ​ | ​ | (in millions)
Pro forma consolidated* | ​ | ​ |
Management adjustments | ​ | ​ | $—
Cost savings | ​ | ​ |
Tax effect | ​ | ​ |
Pro forma consolidated after management’s adjustments | ​ | ​ | $—

* | As shown in the Unaudited Pro Forma Consolidated Statement of Income

54

TABLE OF CONTENTS

BUSINESS
This section discusses Knife River Holding Company’s business, assuming the completion of all of the transactions described in this information statement, including the separation. References to “Knife River,” “we,” “us,” “our” and the “Company” refer to Knife River Corporation and its subsidiaries, which are to be held by Knife River Holding Company.
Overview
Knife River is a leading aggregates-based construction materials and contracting services provider in the U.S. The Company’s 1.1 billion tons of aggregate reserves provide the foundation for a vertically integrated business strategy with approximately 40% of its aggregates being used internally to support value-added downstream products (ready-mix concrete and asphalt) and contracting services (heavy-civil construction, asphalt paving, concrete construction, site development and grading services). Knife River is strategically focused on being the provider of choice in mid-size, high-growth markets. The Company is committed to continued growth and to delivering for its stakeholders—customers, communities, employees and stockholders—by executing on its four core values: People, Safety, Quality and the Environment.
Knife River’s operations are conducted in six operating segments: Pacific, Northwest, Mountain, North Central, South and Energy Services. The Company’s reportable segments are: Pacific, Northwest, Mountain and North Central, with South and Energy Services included in All Other.
Through its network of 202 aggregate sites, 113 ready-mix plants and 56 asphalt plants, Knife River supplies construction materials and contracting services to customers in 14 states. Its construction materials are sold to public and private-sector customers, including federal, state and municipal governments, as well as industrial, commercial and residential developers and other private parties. Knife River’s contracting services are primarily provided to public-sector customers for the development and servicing of highways, local roads, bridges and other public-infrastructure projects.
Knife River has broad access to high-quality aggregates in most of its markets, which forms the foundation of its vertically integrated business model. The Company shares resources, including plants, equipment and people, across its various locations to maximize efficiency and transports its products by truck, railroad and barge to complete the vertical value chain depending on the particular market. Knife River’s strategically located
55

TABLE OF CONTENTS

aggregate sites, ready-mix plants and asphalt plants, along with its fleet of ready-mix and dump trucks, enable the Company to better serve its customers. Knife River believes its integrated and expansive business model is a strong competitive advantage that provides scale, efficiency and operational excellence for the benefit of customers, stockholders and the broader communities that it serves.
Business Segments
Knife River operates through six operating segments: Pacific, Northwest, Mountain, North Central, South and Energy Services, which are based on the Company’s method of internal reporting and management of the business. The segments are determined based on how Knife River organizes and manages the business and are aligned by key geographic regions due to the production of construction materials and related contracting services following the seasonal nature of the construction industry. The Company’s reportable segments are: Pacific, Northwest, Mountain and North Central, with South and Energy Services included in All Other with its corporate services. Each segment offers a vertically integrated suite of products and services, including aggregates, ready-mix concrete, asphalt, and contracting services. During the year ended December 31, 2021, revenue mix by segment was: 25% in North Central, 22% in Mountain, 21% in Northwest, 19% in Pacific and 13% in All Other.
Additional details about each of the segments and the All Other category as of December 31, 2021, is as follows:

| ​ | ​ | 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) | ​ | ​ | 170.3 million | ​ | ​ | 536.4 million | ​ | ​ | 209.2 million | ​ | ​ | 137.7 million | ​ | ​ | 80.4 million | ​ | ​ | 1.1 billion
Properties: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Aggregate Sites | ​ | ​ | 19 | ​ | ​ | 55 | ​ | ​ | 35 | ​ | ​ | 86 | ​ | ​ | 7 | ​ | ​ | 202
Ready-Mix Plants | ​ | ​ | 17 | ​ | ​ | 26 | ​ | ​ | 22 | ​ | ​ | 36 | ​ | ​ | 12 | ​ | ​ | 113
Asphalt Plants | ​ | ​ | 4 | ​ | ​ | 13 | ​ | ​ | 19 | ​ | ​ | 18 | ​ | ​ | 2 | ​ | ​ | 56
Revenue | ​ | ​ | $515.3 million | ​ | ​ | $566.1 million | ​ | ​ | $566.1 million | ​ | ​ | $724.4 million | ​ | ​ | $358.1 million | ​ | ​ | $2.7 billion
Revenue Composition: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Construction Materials | ​ | ​ | 75% | ​ | ​ | 67% | ​ | ​ | 43% | ​ | ​ | 58% | ​ | ​ | 80% | ​ | ​ | 63%
Contracting Services | ​ | ​ | 25% | ​ | ​ | 33% | ​ | ​ | 57% | ​ | ​ | 42% | ​ | ​ | 20% | ​ | ​ | 37%
Public-Sector Services | ​ | ​ | 65% | ​ | ​ | 64% | ​ | ​ | 65% | ​ | ​ | 95% | ​ | ​ | 99% | ​ | ​ | 76%
Private-Sector Services | ​ | ​ | 35% | ​ | ​ | 36% | ​ | ​ | 35% | ​ | ​ | 5% | ​ | ​ | 1% | ​ | ​ | 24%
3 Year Revenue Compound Annual Growth Rate* | ​ | ​ | 1.4% | ​ | ​ | 4.6% | ​ | ​ | 3.3% | ​ | ​ | 12.4% | ​ | ​ | 1.7% | ​ | ​ | 5.0%

* | Includes the effects of recent acquisitions.

End Markets
Public-Sector Customers. The Company’s public-sector customers include federal, state and municipal governments for various projects, such as highways, bridges, airports, schools, public buildings and other public-infrastructure projects. Knife River believes public-sector funding is subject to fewer fluctuations in spending, as government funding tends to be less correlated with economic cycles and more reliant on approvals of government appropriation bills toward infrastructure initiatives. Some of these initiatives include the American Rescue Plan Act, which provides $1.9 trillion in COVID-19 relief funding for states, schools and local governments, including, in some cases, the funding of infrastructure projects and the Infrastructure Investment
56

TABLE OF CONTENTS

and Jobs Act, which provides approximately $650 billion of funding reauthorizations for the department of transportation’s surface transportation programs and $550 billion of new infrastructure spending dollars, approximately $350 billion of which is specific to roads and bridges. While the allocation of new infrastructure spending dollars was significant, the reauthorization of the federal Department of Transportation through the Infrastructure Investment and Jobs Act was equally meaningful, as it provided clarity for states that federal cost sharing would persist at least until 2026. Based on this recent wave of government funding and the current state of America’s infrastructure, which received a “C–” assessment from the American Society of Civil Engineers in 2021, Knife River believes there are strong public-market factors favorably affecting the outlook in this end market.
Private-Sector Customers. Knife River’s private-sector customers include both residential and nonresidential construction applications. Unlike public-sector customers, spending by private-sector customers is more dependent on both local and national economic cycles. Knife River leverages its diverse geographic footprint to partially offset volatility originating from single local economies, and has the flexibility to reallocate resources from markets experiencing a downturn to markets that may be experiencing an economic upswing.
Residential construction typically includes single-family homes and multi-family units, such as apartments and condominiums. Demand for residential construction is influenced primarily by population growth, employment prospects and mortgage interest rates. While growth rates vary across the U.S., overall residential construction demand has increased in recent years, accelerated by migration trends during the COVID-19 pandemic towards rural and suburban markets, notably in Idaho, Montana, Oregon and Texas.
Alternatively, nonresidential construction includes all privately financed construction other than residential structures, such as shopping malls, restaurants, office buildings, warehouses, factories and other commercial structures. Nonresidential construction tends to lag residential activity and is mostly driven by population and economic growth trends and activity levels. Residential and nonresidential private construction are not major sources of revenue for all of Knife River’s segments, but they are important markets for the materials side of the business. In addition to providing aggregates to these end markets, the majority of Knife River’s downstream ready-mix volumes go into private-sector projects.
Strengths

(1) | Leading vertically integrated, aggregates-based construction materials and contracting provider.

Knife River is one of the largest aggregates-based construction materials and contracting services providers in the U.S. The Company is recognized as a Top 10 aggregate producer and the fifth largest sand and gravel producer in the country, per the United States Geological Survey rankings. With its size and scale, Knife River operates a vertically integrated business model and serves its customers across the value chain, from raw materials to finished goods to contracting services. Knife River mines aggregates from its 1.1 billion tons of permitted aggregate reserves and processes them into various outputs, including ready-mix concrete and asphalt through its ready-mix and asphalt plants. Knife River then delivers products to its customers’ sites and offers contracting services downstream from the products it supplies.
Knife River believes its comprehensive and integrated platform provides several key benefits. First, its vertically integrated operating model provides efficiencies that lead to reduced costs and other benefits for customers. Second, Knife River has direct access to a supply of raw materials, such as aggregates, that are integrated into products that customers need and enables Knife River to serve as a reliable source of such construction materials. Third, the Company has an internal fleet of trucks, as well as rail and barge capabilities in certain areas, to deliver its products to its customers in an efficient and timely manner. These varied transportation capabilities serve as a central part of Knife River’s value proposition.
Knife River is focused on increasing its market share and improving margins by acquiring businesses in high-margin markets that are centered on specialized products. For example, Knife River recently expanded its prestressed concrete product line by acquiring Spokane Valley operations from Oldcastle Infrastructure in 2020. Due to the complexity and expertise required in prestress concrete production, this product line averages higher margins than those of aggregates and ready-mix concrete. Through this acquisition, Knife River effectively doubled the size of its prestress operations, improved its ability to meet tighter schedules, gained access to new territories and attained synergy opportunities to further boost margins.
57

TABLE OF CONTENTS

(2) | Attractive geographic footprint across the western U.S. with exposure to areas demonstrating above-average growth.

Since Knife River’s move into construction materials and contracting in 1992, it has strategically expanded to 14 states, with a focus on being a leading construction materials provider in mid-sized, high-growth markets, including Idaho, Texas, North Dakota and Washington, which are four of the seven fastest-growing states according to the latest data from the U.S. Census Bureau.
In each of the segments where Knife River operates, its markets are supported by long-term economic drivers, which allow the Company to benefit from the population growth and economic build-out those drivers create. Knife River’s geographic diversity helps insulate it from temporary downturns in any one segment’s economy and provides flexibility to shift resources to the areas where it is getting the best returns. Knife River continually looks for growth opportunities in each segment, with a strategic focus on aggregates.
In recent years, Knife River has expanded its presence in both the Northwest and North Central segments, specifically in Oregon and South Dakota, respectively, each of which include rapidly growing markets with strong construction demand. In 2018, Knife River acquired Sweetman Const. Co. in Sioux Falls, South Dakota, adding 55 million tons of aggregate reserves to the North Central segment, along with seven ready-mix plants, three asphalt plants and 260 employees. In 2021, Knife River acquired three companies based in Oregon, including Baker Rock Resources, an aggregate and asphalt supplier, and Oregon Mainline Paving, a portable asphalt paving company. These acquisitions added an estimated 80 million tons of aggregate reserves to Knife River’s Northwest segment, as well as two stationary asphalt plants, two portable asphalt plants and 212 employees.

(3) | Diverse public and private customer base.

Knife River has a diverse customer base across both public and private sectors. On the public side, Knife River has extensive experience with federal, state and municipal government agencies, as well as other government customers. In the year ended December 31, 2021, 11 of Knife River’s top 15 contracting services customers were state-level departments of transportation. Knife River has a good reputation with the state-level departments of transportation and permitting agencies, and is a trusted partner in collaborating with engineers and other public employees on performing work safely, on time and on budget. On the private side, Knife River provides its products and expertise to a broad spectrum of customers across industrial, commercial and residential developers and other private parties. Typically, this includes projects and customers such as large data centers, warehouses and general contractors specializing in commercial buildings and residential developments.
Knife River also provides construction materials and contracting services to customers with specialized needs. For example, the Company operates a specialty prestress concrete construction business in its Northwest segment, which manufactures several products, including beams for bridges and wall panels for multi-family residential buildings. Knife River also has become a ready-mix concrete provider of choice for data centers because of its ability to meet certain exacting specifications. Also, the Company’s Energy Services business provides high-performance modified liquid asphalt, as well as cationic and anionic asphalt emulsions, for use in paving projects. Each of these products and services requires highly trained experts to complete tasks with detailed specifications in a safe and controlled environment for its customers.

(4) | Large exposure to public-sector customers, providing recession resiliency amidst soft macro environment.

Knife River provides public-infrastructure solutions, such as highways, streets, bridges and airport runway projects. These public projects tend to remain steady over time, largely unaffected by economic cycles, and instead depend on government funding, which bolsters Knife River’s resiliency during recessionary periods. Knife River’s contracting revenue as of December 31, 2021, was 76% public and 24% private. In addition to historic increases in federal infrastructure funding, 11 of the 14 states where Knife River operates have recently implemented their own funding mechanisms for public projects.

• | 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.

58

TABLE OF CONTENTS

• | 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.

In today’s softening macro environment, Knife River believes it is well-positioned to benefit from the recessionary resiliency stemming from its greater involvement in public sector versus private-sector infrastructure contracting services projects.

(5) | Strong backlog and robust pipeline of projects across public and private infrastructure end markets.

As of December 31, 2021, Knife River had a backlog of $708 million, nearly all of which related to outstanding obligations for contracting services. The contracting services backlog at December 31, 2021, was comprised of 82% public and 18% private work. Based on its track record, Knife River expects future revenues from infrastructure-related contracting services to be robust. Select examples of Knife River’s various projects in the public and private construction space include:

• | 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.

These and many other projects have been meaningful in showcasing Knife River’s expert workmanship and quality, thereby solidifying Knife River as an established leader in contracting services.

(6) | Resilient financial profile with robust free cash flows.

Knife River continues to generate strong revenues, EBITDA and free cash flows that it has historically used for targeted organic growth opportunities, strategic acquisitions, capital expenditures, debt repayment and dividend payments to Parent. Following the separation, Knife River expects to have enhanced flexibility to deploy capital toward its specific growth opportunities, capital expenditures, debt repayment and dividends, and in a downturn, Knife River has the flexibility to limit its capital spend to ensure responsible management of capital towards the existing business. For a discussion and reconciliation of EBITDA, see the section entitled “Non-GAAP Financial Measures.”

(7) | Proven track record of growth through acquisition and highly effective integration playbook, driving both organic and inorganic growth.

Knife River’s current geographic and asset footprint is the result of a deliberate acquisition growth strategy, which began in 1992 following Knife River’s first aggregate company acquisition. Since then, Knife River has completed over 80 acquisitions, built a vertically integrated business model starting from aggregates through contracting services, broadened its scope primarily into asphalt and ready-mix concrete products, and refined its value proposition through the offering of value-adding products and services such as cement, liquid asphalt and prestress concrete.
Knife River’s acquisition strategy has led to the refinement of a highly effective integration playbook, driving both organic and inorganic growth. EBITDA has been primarily driven by strong organic growth and
59

TABLE OF CONTENTS

margin expansion, supported by contributions from acquisitions. As Knife River continues to grow through acquisitions, it is able to continue achieving greater scale and synergies. Its centralized and scalable technology platform allows for integration of new companies into its efficient, vertically integrated internal processing network for fleet management, scaling, batching, financial, and operational reporting programs and other software. Knife River is actively pursuing additional acquisition opportunities, with a focus on adding high-quality materials to reserves, improving vertical integration advantage and extending geographic reach.

(8) | Best-in-class management team with a long history of operating success and integration.

Knife River’s senior management team has extensive experience, with an average of 28 years in the industry spanning several business cycles. The management team’s strategic decision to acquire and develop into a vertically integrated construction materials and contracting services business has been valuable in winning new customers and maintaining longstanding customer relationships. Furthermore, the team’s decision to enter select geographies has proven to be important to the sustained growth of the business over several decades.
Core to its operating success, management takes a conservative approach with respect to the balance sheet, focusing on maintaining prudent levels of leverage and liquidity through the business cycle. When financing organic and inorganic growth opportunities, management considers the appropriate mix of debt and equity funding to protect the balance sheet from potential downturns in construction activity. The disciplined financial policy and conservative capital structure enables Knife River to continue to efficiently execute its growth strategy, even during challenging economic environments. Furthermore, management also shares responsibilities across key corporate functions with operations, thereby fostering close collaboration across teams and maintaining lower corporate overhead.
Business Strategy
Knife River’s business strategy of maximizing its vertical integration, leveraging its core values to be the supplier of choice in all its markets and continued growth, is underpinned by several key initiatives, including:
People. Knife River is committed to its employees, customers and communities by operating with integrity and always striving for excellence. To achieve this, Knife River closely adheres to its “Life at Knife” philosophy, which is expressed in four core values:

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 people’s wellbeing. Knife River is committed to the three T’s of safety: Tools, Training and Time. The Company 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.

Development and recruitment of talented employees. While labor shortages are a trend across the industry, Knife River has taken significant steps to showcase construction as a career of choice. For example, in each of its segments, the Company conducts employment outreach to many groups, including historically underrepresented populations, and provides training for employees to earn their commercial driver’s license.
Furthermore, to help attract new workers to the construction industry and enhance the skills of its current employees, Knife River recently finished building a world-class training facility on a 230-acre tract of property in the Pacific Northwest, featuring an 80,000 square-foot heated indoor arena for training on trucks and heavy equipment and an attached 16,000 square-foot classroom and conference room facility. The training center is
60

TABLE OF CONTENTS

used corporatewide to enhance the skills of current employees as well as to recruit and teach skills to new employees through both classroom education and hands-on experience. It also is used by Knife River’s customers and industry peers, who send employees to the training center to take courses on heavy equipment, truck driving, leadership development, facilitator training and safety training. The facility plays a critical role in the Company’s workforce remaining sustainable and contributes to showcasing construction as a career of choice. Knife River's outreach efforts to market the training center have included interfacing with historically underrepresented groups, and the Company has partnered with the National Association of Minority Contractors to provide scholarships for training to qualifying employees of minority-owned businesses. Knife River believes the talent nurtured through the training programs will surpass that of industry peers as it relates to safety, operating efficiency and new technology.
Sustainability. Knife River believes its focus on sustainability creates value for the communities it serves, for Knife River itself and for its stockholders. Sustainable practices, whether focused on environmental practices, business innovations, recruiting and retaining personnel, or other key factors, provide an opportunity for Knife River to focus on its long-term success and the success of the communities where it operates. Knife River’s sustainability efforts create opportunities to increase revenue and profitability, create a competitive advantage and attract a skilled and diverse workforce. As a result, sustainable development of Knife River and its communities is at the core of Knife River’s decision-making process and corporate vision.
Environment. Every year, Knife River assesses its capital investment needs to further mitigate environmental impacts, particularly in regard to meeting or exceeding permit requirements and environmental regulations. Investments have ranged from equipment that captures emissions, to companies specializing in the production of carbon-dioxide sequestering synthetic aggregates used in ready-mix concrete, to more environmentally friendly, warm mix asphalt that provides a higher quality product while reducing emissions. In Oregon, Knife River has successfully piloted the use of renewable diesel fuel in its on-road and off-road fleet vehicles, reducing GHG emissions and improving fuel efficiency, and expects that over 60% of its 2022 diesel consumption in Oregon will be renewable diesel. Additionally, Knife River’s usage of rail and barges to haul aggregates in certain markets reduces over-the-road truck deliveries by several thousand trucks each year. Knife River remains committed to establishing goals in the future on the reduction of carbon emissions while maintaining safe, reliable and affordable service for its customers. Starting in 2022, Knife River began tracking its Scope 1 and Scope 2 carbon emissions as a first step in establishing its corporatewide baseline of emissions in support of developing future carbon intensity reduction goals. Knife River will continue to actively pursue various opportunities in the clean energy infrastructure build-out in both construction materials and contracting services.
Long-term, strategic aggregate reserve position. Knife River supplies its customers with a large and growing volume of aggregates. In 2021, Knife River sold approximately 31.1 million tons from its aggregate reserves, which was a 9% increase from 2020 levels, leading to normal and scheduled depletion of its aggregate assets. To offset normal asset base declines, Knife River continuously explores new opportunities to replenish its assets in existing and new geographies. Due to the scarcity of aggregate reserves and difficulty associated with permitting new reserves, Knife River approaches this process methodically early on in its asset lifecycle, leveraging its expertise and technology to find replacement sources in desired locations. The selection process involves thorough vetting and examination to ensure high-potential sites are selected for mining.
Knife River prefers to own its crushed stone and sand and gravel sites, as demonstrated by its 126 owned aggregate-production sites as of December 31, 2021. It also operates through another 76 leased sites, with some offering the option to renew at the end of the lease term. Knife River also acquires new mines in strategic locations to service new areas and regional hubs with growing construction activity. Going forward, Knife River will continue to explore new mine acquisition opportunities to strengthen its asset base.
Enhanced value through vertical integration and strategic acquisitions. Vertical integration provides Knife River direct control over the production process, inventory planning, optimization of supply chain and delivery to end customers, thereby providing efficiencies that result in lower costs and other benefits for customers, including greater reliability of supply.
Furthermore, Knife River’s exposure to both public and private-sector customers across its vertical value chain provides better end market diversification and makes Knife River more resilient to economic downturns.
61

TABLE OF CONTENTS

When exploring new acquisition opportunities, one of the elements that Knife River focuses on is the additive margin potential to the overall business. Knife River carefully evaluates potential operating synergies following integration into its existing businesses and is also strategic about acquiring specialized materials and services businesses to improve its margin profile.
Supply chain. Knife River’s access to internal aggregate sources, processing plants and fleet delivery network, some with rail-to-road transloading capabilities, allows it to provide reliable, timely and efficient service to its end customers, further enhancing the value Knife River brings during complex contracting services projects.
Knife River’s ready-mix concrete product line relies on cement as a key ingredient in its formulation. Typically, Knife River sources its cement from a diverse mix of suppliers and has focused on developing strong relationships with individual cement suppliers, which has led to better service and availability.
Industry
The U.S. construction materials industry is highly fragmented. Industry participants typically range from small, private companies focused on a single material, product or area to large, publicly traded corporations that provide a broad suite of materials and services. Companies compete on a variety of factors, including price, service, quality, delivery time and proximity to the customer. However, limitations on the distance that materials can be transported efficiently results in primarily local or regional operations. Accordingly, the number and size of competitors varies by geography and product lines.
The U.S. construction materials industry serves a diverse customer base that includes federal, state and municipal governmental agencies, commercial and residential developers and private parties. The mix of customers varies by region and economic conditions.
The main factors and trends in the U.S. construction materials and related contracting services industry include:

• | 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 regulations 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.

Knife River participates in the following primary markets: aggregates, ready-mix concrete, asphalt and contracting services.
62

TABLE OF CONTENTS

Aggregates
Aggregates, consisting of crushed stone and sand and gravel, are a manufactured, granular material engineered to various sizes, grades and chemical compositions primarily for construction applications. Aggregates are also a major material component in the production of ready-mix concrete and asphalt. Natural aggregate sources can be found in relatively uniform sediments in certain regions of each state throughout the U.S. Generally extracted through open pits at the surface of a site, aggregates are typically produced by blasting hard rock from quarries and then crushing and screening it to various sizes according to customer needs.
The U.S. aggregates industry is highly fragmented, with many participants operating primarily in local and regional areas. The United States Geological Survey reported that throughout the U.S. in 2021, a total of 1,410 companies operating 3,440 quarries and 180 sales/distribution yards produced crushed stone and 3,870 companies operating 6,800 pits and 340 sales/distribution yards produced construction sand and gravel. This fragmentation is a result of high transportation costs that typically limit supply areas of producers.
Ready-Mix Concrete
Ready-mix concrete, a mixture principally comprised of cement, aggregates, sand and water, is measured in cubic yards and specifically batched or produced for customers’ projects and then transported and poured on site. It also can be poured at a manufacturing facility to produce prefabricated building solutions, such as wall panels, concrete roofing systems, parking garages and stadium components. According to the National Ready Mixed Concrete Association (“NRMCA”), concrete is the most widely used material in the construction sector today.
Due to the relative speed at which ready-mix concrete sets, supply is generally localized and delivered within close proximity to the production site, with an estimated 7,000-plus ready-mix concrete batching plants in the U.S. according to the NRMCA. There has been a steady increase (4% compound annual growth rate) in shipments since the industry cycle low of 257 million cubic yards in 2010, with an estimated 400 million cubic yards of ready-mix concrete in 2021, which is still 13% below the industry peak of 458 million cubic yards in 2005.
Asphalt
Asphalt is a combination of approximately 95% aggregates bound together by approximately 5% asphalt binder. Asphalt is typically used in new road construction as well as road maintenance and repair, with approximately 18 billion tons of asphalt pavement covering 94% of the 3 million miles of paved roads in the U.S., according to the National Asphalt Pavement Association (“NAPA”). Given the significant proportion of aggregates in asphalt (up to 95% by weight), local aggregate producers often participate in the asphalt business to ensure an output for the producer’s aggregates.
Like ready-mix concrete, asphalt sets rapidly, limiting delivery to within close proximity to the production facility. In 2019, there were approximately 3,600 asphalt production sites in the U.S. that produced an estimated 420 million tons of asphalt, a 20% increase compared to the approximately 350 million tons produced six years prior. The asphalt paving industry also has a record of using economically and environmentally sustainable practices. Asphalt pavement material is highly recyclable, predominantly through reclaimed asphalt pavement. In 2021, Knife River used approximately 814,000 tons of recycled asphalt pavement in its asphalt production. Additionally, the use of warm-mix asphalt—38% of all asphalt production in 2019, according to NAPA—allows producers to reduce temperatures during the mixing process, lowering energy use and carbon emissions.
Contracting Services
Knife River vertically integrates its materials products with contracting services such as aggregate laydown, asphalt paving, concrete construction, site development and bridges. Demand in the contracting services industry is influenced by the cyclical nature of the construction industry and correlates with the demand for construction materials. The contracting services portion of Knife River’s business is heavily weighted toward public markets, which provide more stability throughout the economic cycles. The contracting services industry is typically less capital-intensive than construction materials and has relatively fewer barriers to entry. Price is an important competitive factor in the award of service agreements. However, customers often consider several other factors in selecting a service provider, such as technical expertise and experience, safety ratings, geographic presence, financial and operational resources and industry reputation around dependability.
63

TABLE OF CONTENTS

Products and Services
Knife River’s product lines include: aggregates, ready-mix concrete, asphalt, and other. The Company also performs related contracting services.
As of December 31, 2021, Knife River’s revenue and gross profit by products and services were as follows:

Revenue | ​ | ​ | ($ in millions) | ​ | ​ | (%) | ​ | ​ | Gross Profit | ​ | ​ | ($ in millions) | ​ | ​ | (%)
Aggregates | ​ | ​ | 444.0 | ​ | ​ | 16% | ​ | ​ | Aggregates | ​ | ​ | 60.6 | ​ | ​ | 17%
Ready-mix concrete | ​ | ​ | 584.4 | ​ | ​ | 21% | ​ | ​ | Ready-mix concrete | ​ | ​ | 81.5 | ​ | ​ | 24%
Asphalt | ​ | ​ | 339.8 | ​ | ​ | 13% | ​ | ​ | Asphalt | ​ | ​ | 40.4 | ​ | ​ | 12%
Contracting services | ​ | ​ | 1,017.5 | ​ | ​ | 37% | ​ | ​ | Contracting services | ​ | ​ | 100.5 | ​ | ​ | 29%
Other | ​ | ​ | 344.3 | ​ | ​ | 13% | ​ | ​ | Other | ​ | ​ | 64.0 | ​ | ​ | 18%
Total gross revenue | ​ | ​ | 2,730.0 | ​ | ​ | 100% | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Internal sales | ​ | ​ | (501.1) | ​ | ​ | — | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Total revenue | ​ | ​ | 2,228.9 | ​ | ​ | — | ​ | ​ | Total gross profit | ​ | ​ | 347.0 | ​ | ​ | 100%

(1)Aggregates
Knife River supplies high-quality aggregates through its 1.1 billion tons of permitted aggregate reserves, which are sourced from its aggregate sites across 11 states. The Company focuses primarily on supplying markets with strong local demand, and in most cases, serves customers close to its strategically located aggregate sites. In 2021, Knife River sold 33.5 million tons of aggregates, with 31.1 million being produced from its aggregate reserve sites.
Knife River mines crushed stone and sand and gravel at its aggregate sites that are utilized in general construction and are a major component in its production of ready-mix concrete and asphalt paving products. Leveraging its vertically integrated platform, 37% of its aggregates revenue was derived from internal sales in 2021. For more information about the aggregate sites, see the section entitled “Business—Properties.”
(2)Ready-mix Concrete
Knife River produces ready-mix concrete through its 113 ready-mix plants situated across 13 states. Knife River’s vertically integrated portfolio of assets allows the Company to provide most of the aggregates it uses in the production of ready-mix concrete. Due to the time-sensitive nature of delivering ready-mix concrete, the Company focuses on supplying customers near its facilities. In 2021, Knife River sold 4.3 million cubic yards of ready-mix concrete.
Ready-mix concrete plants and related fleet
The following table sets forth details applicable to Knife River’s ready-mix concrete plants as of December 31, 2021:

Segment | ​ | ​ | Plants | ​ | ​ | Mixer Trucks
Pacific | ​ | ​ | 17 | ​ | ​ | 173
Northwest | ​ | ​ | 26 | ​ | ​ | 223
Mountain | ​ | ​ | 22 | ​ | ​ | 196
North Central | ​ | ​ | 36 | ​ | ​ | 262
All Other | ​ | ​ | 12 | ​ | ​ | 76
Total | ​ | ​ | 113 | ​ | ​ | 930

Incremental to the hauling capabilities across products and services, ready-mix concrete plants are complemented by the Company’s fleet of ready-mix trucks and drivers who safely deliver heavy materials on time. Knife River is an industry leader in safe and efficient delivery of ready-mix concrete and has pioneered what has become the industry-standard training program for ready-mix delivery professionals. Knife River continues to update the program with a focus on safety for drivers and the public.
64

TABLE OF CONTENTS

(3)Asphalt
Knife River produces and delivers asphalt from 56 plants across 10 states, most often utilizing the Company’s own aggregates in the production process. Of the 56 plants, 22 are portable plants that support large asphalt paving projects on roadways, airports and commercial sites. Similar to ready-mix concrete, asphalt sets rapidly, limiting delivery to within close proximity to the production facility. In 2021, Knife River sold 7.1 million tons of asphalt.
Asphalt plants
The following table sets forth details applicable to Knife River’s portable and non-portable asphalt plants as of December 31, 2021:

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

(4)Contracting Services
Knife River’s contracting services include responsibilities as general contractor and subcontractor, aggregate laydown, asphalt paving, concrete construction, site development and bridges, and in some segments the manufacturing of prestressed concrete products. Vertical integration allows Knife River to have direct internal access to critical raw materials, resulting in competitive advantages from better control of product inventory. In 2021, most of Knife River’s contracting services were related to “horizontal” construction, such as streets and highways, airports and bridges for customers in the public sector. In the private sector, Knife River’s contracting services projects were within the residential, commercial and industrial markets.
The following table sets forth revenue details applicable to Knife River’s contracting services for the year ended December 31, 2021:
2021 Contracting Services Revenue Breakdown

Public | ​ | ​ |  | ​ | ​ | Private | ​ | ​ |
Streets & Highways | ​ | ​ | 63% | ​ | ​ | Residential | ​ | ​ | 9%
Airports | ​ | ​ | 4% | ​ | ​ | Buildings/Sitework | ​ | ​ | 5%
Marine | ​ | ​ | 3% | ​ | ​ | Streets & Highways | ​ | ​ | 3%
Bridges | ​ | ​ | 3% | ​ | ​ | Other | ​ | ​ | 7%
Other | ​ | ​ | 3% | ​ | ​ |  | ​ | ​ |
Total | ​ | ​ | 76% | ​ | ​ | Total | ​ | ​ | 24%

(5)Other
Although not common to all locations, Knife River provides various other products and services depending on customer needs. These include retail sales of cement in Alaska and Hawaii, production and distribution of modified liquid asphalt by its Energy Services business and other construction materials and related contracting services.
Cement supply and storage
Cement is a key ingredient in the production of ready-mix concrete. Knife River’s core supply of cement is sourced from a diverse range of suppliers at the individual state level. Knife River has strategically located cement storage facilities in Alaska and Hawaii that can store up to 60,000 tons and 90,000 tons of cement, respectively.
65

TABLE OF CONTENTS

Liquid asphalt and related storage capacity
Knife River distributes liquid asphalt primarily at its Energy Services and Pacific sites and has the capacity to service neighboring states through storage facilities capable of storing 260,000 tons of liquid asphalt across multiple states.
Customers
Knife River’s customers can be segmented into public and private-sector customers, with public-sector customers averaging about 80% of the Company’s revenues from contracting services. The public side includes federal, state and municipal governmental agencies with contracting services projects related to highways, streets and other public infrastructure. Mandates from governmental agencies largely depend on federal, state and municipal budgets allocated to expansion and improvement of national infrastructure. The private side includes a broad spectrum of customers across industrial, commercial and residential developers and other private parties. Note that the mix of sales by customer class varies year to year depending on the fluctuation of work.
Knife River’s top 15 customers accounted for about 30% of its 2021 revenue, of which 11 were state-level departments of transportation. The Company is not dependent on any single customer or group of customers for sales of its products and services, where the loss of which would have a material adverse effect on its business. No individual customer accounted for more than 10% of its 2021 revenue.
Competition
Knife River operates in a largely fragmented industry, including large, public companies and many small, privately held companies. Smaller, independent operators make up the majority of Knife River’s competition; however, it also faces competition in some markets from large, publicly traded U.S. aggregates producers, including Cemex S.A.B. de C.V., CRH plc, Eagle Materials, Inc., Granite Construction, Inc., HeidelbergCement AG, Holcim, Martin Marietta Materials, Inc., Summit Materials, Inc. and Vulcan Materials Company. The nature of Knife River’s competition varies among its products and geographies due to the generally local and regional nature of supply.
Knife River believes that it has a competitive advantage in aggregates through its strategically located reserves and assets in key areas, its high-quality reserves and its internal fleet of trucks, rail and barge. Knife River’s vertical integration and local knowledge enables it to maintain a strong understanding of the needs of its customers. In addition, Knife River has a strong commitment to environmental stewardship, which assists it in obtaining new permits and new reserves.
Regulatory Matters
Knife River is subject to customary regulation, including federal, state and local environmental compliance and reclamation regulations. Individual permits applicable to Knife River’s various operations are managed and tracked as they relate to the statuses of the application, modification, renewal, compliance and reporting procedures.
These federal, state and local laws and regulations include, among others, the federal Clean Air Act and the federal Clean Water Act requirements for controlling air emissions and water discharges, the Resource Conservation and Recovery Act as it applies to the management of hazardous wastes and underground storage tank systems and, occasionally, the Endangered Species Act. Noncompliance with these laws and regulations can subject Knife River to fines, loss of licenses or registrations or various forms of civil or criminal prosecution, any of which could have a material adverse effect on Knife River’s reputation, business, financial position, results of operations and cash flows.
Knife River is also subject to comprehensive environmental permit requirements, which are usually associated with new mining operations. Nonetheless, Knife River has been successful in obtaining mining and other land-use permits that provide for sufficient permitted reserves to support its operations.
Knife River did not incur any material environmental expenditures in 2021 and, except as to what may be ultimately determined with regard to the cleanup of a commercial property site acquired in 1999 and part of the Portland, Oregon, Harbor Superfund Site, Knife River does not expect to incur any material capital expenditures related to environmental compliance with current laws and regulations through 2024. Please see “Notes to Consolidated Financial Statements” for more information related to the environmental matter to which the Company is a party.
66

TABLE OF CONTENTS

Seasonality
Results are affected by seasonal fluctuations, with the second and third quarters historically being the quarters with the highest activity. Knife River’s ability to provide contracting services in the states in which it operates depends on the weather. In states with colder winter weather, Knife River’s contracting services are primarily performed from April through November, compared to most of the year in states with largely consistent warmer weather.
Employees
As of December 31, 2021, Knife River employed 3,839 persons, 452 of whom were represented by labor unions. During peak construction season, Knife River has historically employed over 5,600 persons.
Knife River is committed to an inclusive environment that respects the differences and embraces the strengths of its diverse employees, and it maintains policies, programs and initiatives that are consistent with this commitment.
Knife River prioritizes a strong workforce by successfully recruiting employees through a variety of means, hiring and training employees to have the skills, abilities and motivation to achieve the results needed for their jobs, and providing opportunities for advancement through job mobility, succession planning and promotions.
Knife River is committed to safety and health in the workplace and provides training, adequate resources and appropriate follow-up in order to ensure safe work environments.
Properties
Knife River currently maintains its principal executive office at 1150 W. Century Ave., Bismarck, North Dakota 58503. In addition to the principal office, Knife River maintains and operates physical locations in 14 states throughout the U.S. Knife River’s operations include 202 aggregate sites, 113 ready-mix plants, 56 asphalt plants, eight cement terminals, five liquid-asphalt terminal sites and six used-oil collection points.
Aggregate sites and reserves
Knife River mines crushed stone and sand and gravel at its 202 aggregate sites across its operating segments. The aggregates produced by Knife River are utilized in general construction and are a major component in the production of ready-mix concrete and asphalt.
Aggregate reserve and resource estimates are calculated based on the best available data. Supporting data includes, but is not limited to, drill holes, geologic testing and other subsurface investigations; and surface feature investigations, such as, mine high walls, aerial photography, topography, and other data. Using available data, a final topography map is created with computer software and is used to calculate the volume variance between existing and final topographies. Volumes are then converted to tons using appropriate conversion factors. Property setbacks and other regulatory restrictions and limitations are identified to determine the total area available for mining. Knife River also considers mine plans, economic viability and production history in the aggregate reserve and resource estimates. Mineral reserves are defined as an estimate of tonnage that, in the opinion of the qualified person, can be economically mined or extracted, which includes diluting materials and allowances for losses that may occur throughout the process. Mineral resources are defined as a concentration or occurrence of material of economic interest in such form, grade or quality, and quantity that has a reasonable prospect to be economically extracted. Knife River’s reserve estimates include only salable tonnage and thus exclude waste materials that are generated in the crushing and processing phases of the operation. The reserves are based on estimates of volumes that can be economically extracted and sold to meet current market and product applications.
Knife River’s reserves and resources are on properties that are permitted, or are expected to be permitted, for mining under current regulatory requirements. The data used to calculate reserves and resource estimates may require revisions in the future to account for changes in customer requirements and unknown geological occurrences.
Knife River classifies the applicable quantity of a particular deposit as a reserve or resource by reviewing and analyzing, independently, each geological formation, testing results and production processes, along with
67

TABLE OF CONTENTS

other modifying factors, to determine an expected yield of recoverable tonnage an area will produce. These results may have an effect on mine plans and the selection of processing equipment. The results are reviewed by the qualified person and presented to the management team.
Management assesses the risks associated with aggregate reserve and resource estimates. These estimates may be affected by variability in the properties of the material, limits of the accuracy of the geotechnical data and operational difficulties in extraction of the computed material. Additionally, management assesses the risks associated in obtaining and maintaining the various land use, mining and environmental permits necessary for the properties to operate as mines. Annual reviews of mining reserves are conducted by the qualified individual and include procedures such as ensuring financial assumptions related to life of mine expenses are based on the most accurate estimates available.
Knife River has reviewed its properties and has determined it does not have any individual sites that are material. The following tables set forth details applicable to Knife River’s aggregate production, reserves and resources as of December 31, 2021, by the various regions the sites are located.

| ​ | ​ | Total Annual Aggregate Production
Production Area | ​ | ​ | Crushed Stone | ​ | ​ | Sand & Gravel
| ​ | ​ | (Tons in thousands)
Pacific | ​ | ​ | 1,696.9 | ​ | ​ | 3,266.4
Northwest | ​ | ​ | 4,293.8 | ​ | ​ | 4,172.5
Mountain | ​ | ​ | 949.5 | ​ | ​ | 6,484.2
North Central | ​ | ​ | 2,152.6 | ​ | ​ | 6,733.4
All Other | ​ | ​ | 715.7 | ​ | ​ | 620.4
| ​ | ​ | 9,808.5 | ​ | ​ | 21,276.9

| ​ | ​ | Aggregate Sites
Production Area | ​ | ​ | Crushed Stone | ​ | ​ | Sand & Gravel
| ​ | ​ | Owned | ​ | ​ | Leased | ​ | ​ | Owned | ​ | ​ | Leased
Pacific | ​ | ​ | — | ​ | ​ | 8 | ​ | ​ | 10 | ​ | ​ | 1
Northwest | ​ | ​ | 11 | ​ | ​ | 14 | ​ | ​ | 19 | ​ | ​ | 11
Mountain | ​ | ​ | 2 | ​ | ​ | 6 | ​ | ​ | 21 | ​ | ​ | 6
North Central | ​ | ​ | 5 | ​ | ​ | 1 | ​ | ​ | 53 | ​ | ​ | 27
All Other | ​ | ​ | 2 | ​ | ​ | 2 | ​ | ​ | 3 | ​ | ​ | —
| ​ | ​ | 20 | ​ | ​ | 31 | ​ | ​ | 106 | ​ | ​ | 45

68

TABLE OF CONTENTS

| ​ | ​ |  | ​ | ​ | 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 | ​ | ​ | 18 | ​ | ​ | 134,724 | ​ | ​ | 662 | ​ | ​ | 135,386 | ​ | ​ | 34,152 | ​ | ​ | 783 | ​ | ​ | 34,935 | ​ | ​ | 170,321
Northwest | ​ | ​ | 54 | ​ | ​ | 371,873 | ​ | ​ | 14,047 | ​ | ​ | 385,920 | ​ | ​ | 136,438 | ​ | ​ | 14,027 | ​ | ​ | 150,465 | ​ | ​ | 536,385
Mountain | ​ | ​ | 34 | ​ | ​ | 77,881 | ​ | ​ | 11,762 | ​ | ​ | 89,643 | ​ | ​ | 83,974 | ​ | ​ | 35,570 | ​ | ​ | 119,544 | ​ | ​ | 209,187
North Central | ​ | ​ | 86 | ​ | ​ | 47,276 | ​ | ​ | 3,000 | ​ | ​ | 50,276 | ​ | ​ | 69,143 | ​ | ​ | 18,247 | ​ | ​ | 87,390 | ​ | ​ | 137,666
All Other | ​ | ​ | 7 | ​ | ​ | 67,132 | ​ | ​ | 4,691 | ​ | ​ | 71,823 | ​ | ​ | 8,535 | ​ | ​ | — | ​ | ​ | 8,535 | ​ | ​ | 80,358
| ​ | ​ | 199 | ​ | ​ | 698,886 | ​ | ​ | 34,162 | ​ | ​ | 733,048 | ​ | ​ | 332,242 | ​ | ​ | 68,627 | ​ | ​ | 400,869 | ​ | ​ | 1,133,917

| ​ | ​ |  | ​ | ​ | 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 | ​ | ​ | 1 | ​ | ​ | 41,727 | ​ | ​ | — | ​ | ​ | 41,727 | ​ | ​ | —
Mountain | ​ | ​ | 1 | ​ | ​ | 11,500 | ​ | ​ | — | ​ | ​ | 11,500 | ​ | ​ | —
| ​ | ​ | 3 | ​ | ​ | 67,900 | ​ | ​ | — | ​ | ​ | 67,900 | ​ | ​ | —

* | The average selling price per ton for crushed stone and sand and gravel was $14.83 and $9.76, respectively, in 2021.

** | The aggregates mined are of suitable grade and quality to be used as construction materials and no further grade or quality disclosure is applicable.

Of Knife River’s 202 properties, 139 are in a production stage, 60 in a development stage and three are classified as exploration stage properties. As of December 31, 2021, 872.0 million tons of estimated proven and probable reserves are located on production stage properties and 261.9 million tons on developmental stage properties. The Company classifies aggregates located on exploration stage properties as resources. Knife River’s aggregate annual production in tons for all its mining properties was 31.1 million and 28.5 million for the years ended December 31, 2021 and 2020, respectively.
The average selling price per ton for crushed stone and sand and gravel was $14.83 and $9.76, respectively, in 2021. Actual pricing varies by location and market. The price for each commodity was calculated by dividing 2021 revenues by tons sold. The average pricing is based on salable product, or materials that are ready for sale. Pricing for aggregates tends to remain similar for long periods of time and resources generally realize similar pricing to reserves when extracted and sold; therefore, Knife River uses current pricing as an estimate of future pricing. Pricing is assessed at least annually to verify there have been no material changes. Knife River expects future sales prices to exceed future production costs, resulting in minimal change to the economic viability of the disclosed reserves and resources. Knife River believes the current sales price is reasonable and justifiable to estimate the aggregates’ current fair value, while the balance sheet reflects the historical costs.
Knife River owns 126 properties and leases another 76 to conduct its mining operations. Its reserves are comprised of 587 million tons on properties that are owned and 547 million tons that are leased. The remaining reserve life in years was calculated by dividing remaining reserves by the three-year average sales from 2019 through 2021. Knife River estimates the useful life of its owned reserves are approximately 38 years based on the most recent three-year sales average. Approximately 45 percent of the reserves under lease have lease expiration dates of 20 years or more and the weighted average years remaining on all leases containing estimated proven aggregate reserves is approximately 21 years, including options for renewal that are at Knife River’s discretion. The average time necessary to produce remaining aggregate reserves from its leased sites is approximately 45 years. Some sites have leases that expire prior to the exhaustion of the estimated reserves. The estimated reserve life assumes, based on Knife River’s experience, that leases will be renewed to allow sufficient time to fully recover these reserves. Actual useful lives of these reserves will be subject to, among other things, fluctuations in customer demand, customer specifications, geological conditions and changes in mining plans.
69

TABLE OF CONTENTS

Internal Controls Over Aggregate Reserves
Reserve and resource estimates are based on the analyses of available data by qualified internal mining engineers, operating personnel and third-party geologists. Senior management reviews and approves reserve and resource quantity estimates and reserve classifications, including the major assumptions used in determining the estimates, such as life, pricing, cost and volume, among other things, to ensure they are materially accurate. For aggregate reserve and resource additions, management, which includes the qualified person, performs its due diligence and reviews the study of technical, economic and operating factors, as well as applicable supplemental information, including a summary of the site’s geotechnical report. Knife River maintains a database of all aggregate reserves, which is reconciled at least annually and reviewed and approved by the qualified person.
The evaluation, classification and estimation of reserves has inherent risks, including changing geotechnical, market and permitting conditions. The qualified person and management work together to assess these risks regularly and amend the reserve and resource assessments as new information becomes available.
Intellectual Property
Knife River holds various trademarks that are important to its advertising and marketing activities. These trademarks are generally protected by registration in the U.S.
Insurance
Knife River maintains insurance coverage that it believes is appropriate for its business, including but not limited to workers’ compensation, auto liability, general liability, excess liability, contractors pollution liability, pollution legal liability, marine liability and pollution, professional liability, directors and officers liability, employment practices liability, cyber policy, terrorism insurance and property insurance. Prior to the effectiveness of the registration statement of which this information statement forms a part, information regarding the Company’s post-separation insurance policies will be included in an amendment to this information statement.
Legal Proceedings
In the ordinary course of Knife River conducting its business activities, it and its subsidiaries become involved in judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured matters that are brought on an individual, collective, representative and class-action basis, and other proceedings involving regulatory, employment, general and commercial liability, automobile liability and other matters. Knife River does not expect any of these proceedings to have a material effect on its reputation, business, financial position, results of operations or cash flows; however, Knife River can give no assurance that the results of any such proceedings will not materially affect its reputation, business, financial position, results of operations and cash flows.
70

TABLE OF CONTENTS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following information should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this information statement. The following discussion may contain forward-looking statements that reflect Knife River Holding Company’s plans, estimates and beliefs. Knife River Holding Company’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this report, particularly in the sections entitled “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors.”
References to “Knife River” or the “Company” refer to Knife River Corporation and its subsidiaries, which are to be held by Knife River Holding Company.
Overview
Knife River is a people-first construction materials and contracting company. The Company provides construction materials and contracting services to build safe roads, bridges and airport runways that connect people with where they want to go and with the supplies they need. Knife River also champions a positive workplace culture by focusing on safety, training, inclusion, compensation and work-life balance, and focuses on sustainable business practices for the benefit of its team, its stockholders and the public.
Knife River is one of the leading providers of crushed stone and sand and gravel in the U.S. and operates through six operating segments: Pacific, Northwest, Mountain, North Central, South and Energy Services, with operations across 14 states. The segments are based on the Company’s method of internal reporting and management of the business. The Company’s reportable segments are: Pacific, Northwest, Mountain, and Central, with South and Energy Services included in All Other with its corporate services. The operating segments primarily provide aggregates, asphalt and ready-mix concrete, as well as supporting contracting services such as heavy-civil construction, asphalt paving, concrete delivery and paving, site development and grading. Knife River sells approximately 60% of its aggregates externally and uses approximately 40% internally to support downstream products and contracting services it provides. Its aggregate sites and associated asphalt and ready-mix plants are in strategic locations near growth markets, providing Knife River with a transportation advantage for its materials that enables it to maintain competitive pricing and ultimately increase its margins. Knife River provides its products and services to both public and private markets, with public markets tending to be more stable, which helps to offset the cyclical nature of the private markets.
Each segment provides various products and services and operates various facility types, including aggregate quarries and mines, ready-mix concrete plants, asphalt plants and distribution facilities. Each segment operates in the following states:

• | 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

71

TABLE OF CONTENTS

The following table presents a summary of products and services provided, as well as modes of transporting those products, by each segment:

| ​ | ​ | 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

The Separation
On August 4, 2022, MDU Resources announced that its board of directors unanimously approved a plan to pursue a separation of Knife River from MDU Resources. The separation is planned as a tax-free spinoff transaction to the stockholders of MDU Resources for U.S. federal income tax purposes. The transaction is expected to result in two independent, publicly traded companies: MDU Resources and Knife River Holding Company. Completion of the separation is subject to certain conditions, including, among other things, the effectiveness of this registration statement on Form 10 with the SEC, final approval from the MDU Resources’ board of directors, receipt of one or more tax opinions and a private letter ruling from the IRS, and other customary conditions. MDU Resources may, at any time and for any reason until the proposed transaction is complete, abandon the separation or modify or change its terms. For a complete discussion of all of the conditions to and the risks and uncertainties associated with the separation and distribution, see the sections entitled “The Separation and Distribution—Conditions to the Distribution” and “Risk Factors—Risks Related to the Separation and the Distribution.”
Basis of Presentation
The accompanying audited consolidated financial statements included in this information statement were prepared on a stand-alone basis and were derived from the consolidated financial statements and accounting records of MDU Resources. For additional information related to the basis of presentation, see the section entitled “Note 2—Basis of Presentation.”
Historically, Knife River has participated in Centennial’s centralized cash management program, including its overall financing arrangements. Knife River has related-party note agreements in place with Centennial for the financing of its capital needs, which are reflected as related-party notes payable on the consolidated balance sheets. Interest expense in the consolidated statements of income reflects the allocation of interest on borrowing and funding associated with the related-party note agreements.
Certain related-party transactions that are expected to be settled in cash between Knife River and, separately, MDU Resources, Centennial and certain other subsidiaries of MDU Resources, have been included in the consolidated financial statements. For additional information regarding the agreements between Knife River and MDU Resources, see the section entitled “Certain Relationships and Related Person Transactions.”
All intercompany balances and transactions between the businesses comprising Knife River have been eliminated in the accompanying consolidated financial statements.
Market Conditions and Outlook
Knife River’s markets remain resilient and construction activity remains generally strong despite general and economic challenges, such as transportation disruptions, supply chain constraints, rising interest rates and COVID-19. With approximately 80% of the contracting work performed by Knife River being in public markets, Knife River is able to balance the cyclical nature of its private-sector customers. In addition, Knife River’s margins may be negatively impacted by increased costs resulting from inflationary pressures in the market. For more information on inflationary pressures, see the section entitled “Risk Factors.”
72

TABLE OF CONTENTS

Backlog. There is a high demand for Knife River’s products and services as evidenced by its backlog.

December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Pacific | ​ | ​ | $— | ​ | ​ | $89.3 | ​ | ​ | $137.3
Northwest | ​ | ​ | — | ​ | ​ | 108.0 | ​ | ​ | 85.8
Mountain | ​ | ​ | — | ​ | ​ | 208.5 | ​ | ​ | 200.7
North Central | ​ | ​ | — | ​ | ​ | 154.5 | ​ | ​ | 89.1
All Other | ​ | ​ | — | ​ | ​ | 147.4 | ​ | ​ | 160.2
| ​ | ​ | $— | ​ | ​ | $707.7 | ​ | ​ | $673.1

The majority of Knife River’s backlog relates to public infrastructure, including street and highway construction. Period over period increases or decreases cannot be used as an indicator of future revenues or net income. As of December 31, 2021, the Company expected to complete an estimated $665 million of backlog in 2022. Backlog increased as of December 31, 2021, primarily related to public works projects for state departments of transportation and additional work provided by recent acquisitions. Partially offsetting the increased backlog were the impacts of fewer bidding opportunities in California. Backlog at December 31, 2021, includes projects such as an airport job in Wyoming to rebuild the runway, a highway project in College Station, Texas, a residential subdivision in central California and a highway project near Waco, Texas. See the section entitled “Risk Factors” for a list of factors that can cause revenues to be realized in periods and at levels that are different from originally projected.
Public Funding. Funding for public projects is dependent on federal and state funding, such as appropriations to the Federal Highway Administration. The American Rescue Plan Act enacted in the first quarter of 2021 provides $1.9 trillion in COVID-19 relief funding for states, schools and local governments. States are beginning to move forward with allocating these funds based on federal criteria and state needs, and in some cases, funding of infrastructure projects could positively impact Knife River. Additionally, the Infrastructure Investment and Jobs Act was enacted in the fourth quarter of 2021 and is providing long-term opportunities by designating $119 billion for the repair and rebuilding of roads and bridges across Knife River’s footprint. In addition, the Inflation Reduction Act provides $369 billion in new funding for clean energy programs. These programs include new tax incentives for solar, battery storage and hydrogen development along with funding to expand the production of electric vehicles and build out the infrastructure to support electric vehicles. In addition to federal funding, 11 out of the 14 states in which Knife River operates have implemented their own funding mechanisms for public projects, including projects related to highways, airports and other public infrastructure. Knife River continues to monitor the implementation and impact of these legislative items.
Profitability. Knife River’s management continually monitors its operating margins and has been proactive in applying strategies to address the inflationary impacts seen across the U.S. The Company has increased its product pricing where necessary and continues to implement cost savings initiatives to mitigate the effects on its gross margin. Due to existing contractual provisions, there can be a lag between the announced price increases and the time when they can be fully recognized. The Company will continue to evaluate future price increases on a regular cadence to help maintain and increase margins to stay ahead of inflationary pressures and enhance stockholder value.
Knife River operates in geographically diverse and competitive markets yet strives to maximize efficiencies, including transportation costs and economies of scale, to maintain strong margins. Its operating margins can experience negative pressure from competition, as well as impacts of the volatility in the cost of raw materials, such as diesel fuel, gasoline, natural gas, liquid asphalt, cement and steel, with diesel fuel, natural gas and liquid asphalt costs having the most significant impact on recent results. Such volatility and inflationary pressures may continue to have an impact on the Company’s margins, including fixed-price contracting services contracts that are particularly vulnerable to the volatility of energy and material prices. These increases are partially offset by mitigation measures implemented by the Company including price increases, escalation clauses in construction services contracts, pre-purchased materials and other cost savings initiatives. While the Company has experienced some supply-chain constraints, it continues to have good relationships with its suppliers and has not experienced any material adverse impacts of shortages or delays on materials. Other variables that can impact Knife River’s
73

TABLE OF CONTENTS

margins include adverse weather conditions, the timing of project starts or completions, and declines or delays in new and existing projects due to the cyclical nature of the construction industry. Accordingly, operating results in any particular period may not be indicative of the results that can be expected for any other period.
Workforce. As a people-first company, Knife River continually takes steps to address the challenge of recruitment and retention of employees. To help attract new workers to the construction industry and enhance the skills of its current employees, Knife River has completed a state-of-the-art training facility. The training facility offers hands-on training for heavy-equipment operators and truck drivers in addition to safety and leadership training. As an accredited school able to train people to get their commercial driver’s license, the new training facility is expected to help address some of the recent labor trends. Today’s labor market includes an aging workforce and labor shortages, including shortages of truck drivers, which has caused increased labor-related costs and delays or inefficiencies on certain projects of the Company. Knife River continues to monitor the labor markets and assess additional opportunities to enhance and support its workforce. Despite these efforts, Knife River expects labor costs to continue to increase based on the increased demand for services and, to a lesser extent, the recent escalated inflationary environment in the U.S.
Consolidated Earnings Overview

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 vs 2021 % change | ​ | ​ | 2021 vs 2020 % change
| ​ | ​ | (In millions) | ​ | ​ |  | ​ | ​ |
Revenue | ​ | ​ | $— | ​ | ​ | $2,228.9 | ​ | ​ | $2,178.0 | ​ | ​ | — % | ​ | ​ | 2%
Cost of revenue | ​ | ​ | — | ​ | ​ | 1,881.9 | ​ | ​ | 1,807.4 | ​ | ​ | — % | ​ | ​ | 4%
Gross profit | ​ | ​ | — | ​ | ​ | 347.0 | ​ | ​ | 370.6 | ​ | ​ | — % | ​ | ​ | (6)%
Selling, general and administrative expenses | ​ | ​ | — | ​ | ​ | 155.9 | ​ | ​ | 156.1 | ​ | ​ | — % | ​ | ​ | —%
Operating income | ​ | ​ | — | ​ | ​ | 191.1 | ​ | ​ | 214.5 | ​ | ​ | — % | ​ | ​ | (11)%
Interest expense | ​ | ​ | — | ​ | ​ | 19.2 | ​ | ​ | 20.6 | ​ | ​ | — % | ​ | ​ | (7)%
Other income | ​ | ​ | — | ​ | ​ | 1.3 | ​ | ​ | 0.8 | ​ | ​ | — % | ​ | ​ | 63%
Income before income taxes | ​ | ​ | — | ​ | ​ | 173.2 | ​ | ​ | 194.7 | ​ | ​ | — % | ​ | ​ | (11)%
Income taxes | ​ | ​ | — | ​ | ​ | 43.4 | ​ | ​ | 47.4 | ​ | ​ | — % | ​ | ​ | (8)%
Net income | ​ | ​ | $— | ​ | ​ | $129.8 | ​ | ​ | $147.3 | ​ | ​ | — % | ​ | ​ | (12)%
EBITDA | ​ | ​ | $— | ​ | ​ | $293.4 | ​ | ​ | $305.0 | ​ | ​ | — % | ​ | ​ | (4)%

Revenue includes revenue from construction materials sales and contracting services. Revenue for construction materials is recognized at a point in time when delivery of the products has taken place. Contracting revenue is recognized over time using an input method based on the cost-to-cost measure of progress on a project.
Cost of revenue includes all material, labor and overhead costs incurred in the production process for Knife River’s products and services. These costs are impacted by various drivers, the most significant of which include changes in raw materials costs, energy costs and salary and benefits costs. Cost of revenue also includes depreciation, depletion and amortization attributable to the assets used in the production process.
Gross profit includes revenue less cost of revenue, as defined above, and is the difference between revenue and the cost of making a product or providing a service, before deducting selling, general and administrative expenses, income taxes and interest payments.
Selling, general and administrative expenses include the costs for estimating, bidding and business development, as well as costs related to corporate functions. Selling expenses can vary depending on the volume of projects in process and the number of employees assigned to estimating and bidding activities. Other general and administrative expenses include travel and entertainment, outside services, information technology, depreciation and amortization, training, office supplies, and other miscellaneous expenses.
Other income includes net periodic benefit costs for the Company’s benefit plan expenses, other than service costs; interest income; unrealized gains and losses on investments for the Company’s nonqualified benefit plans; and other miscellaneous income or expenses.
74

TABLE OF CONTENTS

Income tax expense consists of domestic corporate income taxes related to the sale of the Company’s products and services. The effective tax rate can be affected by many factors, including changes in tax laws, regulations or rates, new interpretations of existing laws or regulations and changes to the Company’s overall levels of income before tax.
The following tables summarize operating results for the Company.

| ​ | ​ | Revenues | ​ | ​ | Gross margin
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ |  | ​ | ​ |  | ​ | ​ | (In millions) | ​ | ​ |  | ​ | ​ |
| ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Aggregates | ​ | ​ | $— | ​ | ​ | $444.0 | ​ | ​ | $406.6 | ​ | ​ | — % | ​ | ​ | 13.6% | ​ | ​ | 15.4%
Ready-mix concrete | ​ | ​ | — | ​ | ​ | 584.4 | ​ | ​ | 547.0 | ​ | ​ | — % | ​ | ​ | 13.9% | ​ | ​ | 13.6%
Asphalt | ​ | ​ | — | ​ | ​ | 339.8 | ​ | ​ | 349.9 | ​ | ​ | — % | ​ | ​ | 11.9% | ​ | ​ | 13.0%
Contracting services | ​ | ​ | — | ​ | ​ | 1,017.5 | ​ | ​ | 1,069.7 | ​ | ​ | — % | ​ | ​ | 9.9% | ​ | ​ | 9.9%
Other* | ​ | ​ | — | ​ | ​ | 344.3 | ​ | ​ | 356.3 | ​ | ​ | — % | ​ | ​ | 18.6% | ​ | ​ | 23.2%
Internal sales | ​ | ​ | — | ​ | ​ | (501.1) | ​ | ​ | (551.5) | ​ | ​ | — % | ​ | ​ | — % | ​ | ​ | — %
| ​ | ​ | $— | ​ | ​ | $2,228.9 | ​ | ​ | $2,178.0 | ​ | ​ | — % | ​ | ​ | 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.

Gross margin is calculated by dividing gross profit by revenue. Gross margin reflects the percentage of revenue earned in comparison to cost.

| ​ | ​ | Revenues | ​ | ​ | Gross profit | ​ | ​ | EBITDA
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Pacific | ​ | ​ | $— | ​ | ​ | $427.3 | ​ | ​ | $454.4 | ​ | ​ | $— | ​ | ​ | $74.1 | ​ | ​ | $90.0 | ​ | ​ | $— | ​ | ​ | $67.1 | ​ | ​ | $79.1
Northwest | ​ | ​ | — | ​ | ​ | 478.0 | ​ | ​ | 416.2 | ​ | ​ | — | ​ | ​ | 87.5 | ​ | ​ | 79.8 | ​ | ​ | — | ​ | ​ | 80.6 | ​ | ​ | 74.4
Mountain | ​ | ​ | — | ​ | ​ | 479.6 | ​ | ​ | 450.9 | ​ | ​ | — | ​ | ​ | 71.2 | ​ | ​ | 62.9 | ​ | ​ | — | ​ | ​ | 65.0 | ​ | ​ | 52.4
North Central | ​ | ​ | — | ​ | ​ | 561.8 | ​ | ​ | 570.8 | ​ | ​ | — | ​ | ​ | 79.7 | ​ | ​ | 81.0 | ​ | ​ | — | ​ | ​ | 72.3 | ​ | ​ | 71.7
All Other | ​ | ​ | — | ​ | ​ | 317.4 | ​ | ​ | 325.9 | ​ | ​ | — | ​ | ​ | 34.5 | ​ | ​ | 56.9 | ​ | ​ | — | ​ | ​ | 8.4 | ​ | ​ | 27.4
Intersegment eliminations | ​ | ​ | — | ​ | ​ | (35.2) | ​ | ​ | (40.2) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
| ​ | ​ | $— | ​ | ​ | $2,228.9 | ​ | ​ | $2,178.0 | ​ | ​ | $— | ​ | ​ | $347.0 | ​ | ​ | $370.6 | ​ | ​ | $— | ​ | ​ | $293.4 | ​ | ​ | $305.0

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
Sales (thousands): | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Aggregates (tons) | ​ | ​ | — | ​ | ​ | 33,518 | ​ | ​ | 30,949
Ready-mix concrete (cubic yards) | ​ | ​ | — | ​ | ​ | 4,267 | ​ | ​ | 4,087
Asphalt (tons) | ​ | ​ | — | ​ | ​ | 7,101 | ​ | ​ | 7,202
Average selling price: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Aggregates (per ton) | ​ | ​ | $— | ​ | ​ | $13.25 | ​ | ​ | $13.14
Ready-mix concrete (per cubic yard) | ​ | ​ | $— | ​ | ​ | $136.94 | ​ | ​ | $133.86
Asphalt (per ton) | ​ | ​ | $— | ​ | ​ | $47.86 | ​ | ​ | $48.58

2021 Compared to 2020
Revenue
Revenue increased $50.9 million, largely driven by increases across the business on aggregates across all of its reportable segments and ready-mix concrete in its Mountain, North Central and Northwest segments. The increases in both product lines was the result of strong demand and increased product pricing of $27.9 million. Also contributing were higher volumes from recent acquisitions in the Northwest and Mountain segments, which provided additional sales of 1.5 million tons of aggregates and 33,000 cubic yards of ready-mix concrete. Higher ready-mix concrete sales volumes of $19.6 million due to increased commercial and residential projects also
75

TABLE OF CONTENTS

contributed to the increase. In addition, decreased internal sales had an overall positive impact on revenues of $50.4 million. These increases were partially offset by decreased contracting services in the North Central, Pacific and Mountain segments of $59.0 million, largely the result of less available asphalt paving work in certain states and the absence of a few large jobs in 2020.
Gross Profit and Gross Margin
Gross profit decreased by $23.6 million and gross margin decreased 1.4%. This decrease was largely attributed to increased costs across the business, including higher liquid asphalt of $15.1 million, primarily reflected in All Other, and diesel fuel across all segments of $13.3 million, as well as higher production and maintenance costs. These costs were partially offset by higher average selling prices on Knife River’s construction materials, as previously discussed. Partially offsetting the decreases were higher ready-mix concrete margins due to additional sales volumes.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased $200,000, largely resulting from the recovery of prior bad debt expense of $2.1 million and higher gains on asset sales of $1.4 million in 2021, primarily in the Mountain segment. Partially offsetting these decreases was increased payroll-related costs of $1.6 million, primarily for higher health care costs; higher acquisition costs of $700,000; and an increase in miscellaneous taxes, license and governmental fees.
Interest Expense
Interest expense decreased $1.4 million, primarily resulting from lower average interest rates creating a benefit of $2.8 million, offset in part by higher average related-party note payable balances.
Other Income
Other income increased $500,000, primarily resulting from an out-of-period adjustment in 2020 as a result of previously overstated benefit plan expenses.
Income Tax Expense
Income tax expense decreased $4.0 million as a result of lower income before income taxes.
Business Segment Financial and Operating Data
A discussion of key financial data from Knife River’s business segments follows. Knife River provides segment level information by revenue, gross profit, gross margin, EBITDA and EBITDA margin as these are measures of profitability used by management to assess operating results. EBITDA and EBITDA margin are non-GAAP financial measures. For more information and reconciliations to the nearest GAAP measure, see the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures.”
Results of Operations – Pacific

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 vs 2021 % change | ​ | ​ | 2021 vs 2020 % change
| ​ | ​ | (Dollar in millions) | ​ | ​ |  | ​ | ​ |
Revenue | ​ | ​ | $— | ​ | ​ | $427.3 | ​ | ​ | $454.4 | ​ | ​ | — % | ​ | ​ | (6)%
Gross profit | ​ | ​ | $— | ​ | ​ | $74.1 | ​ | ​ | $90.0 | ​ | ​ | — % | ​ | ​ | (18)%
Gross margin | ​ | ​ | —% | ​ | ​ | 17.3% | ​ | ​ | 19.8% | ​ | ​ |  | ​ | ​ |
EBITDA | ​ | ​ | $— | ​ | ​ | $67.1 | ​ | ​ | $79.1 | ​ | ​ | — % | ​ | ​ | (15)%
EBITDA margin | ​ | ​ | —% | ​ | ​ | 15.7% | ​ | ​ | 17.4% | ​ | ​ |  | ​ | ​ |

76

TABLE OF CONTENTS

| ​ | ​ | Revenues
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Operating results | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Aggregates | ​ | ​ | $— | ​ | ​ | $89.9 | ​ | ​ | $88.0
Ready-mix concrete | ​ | ​ | — | ​ | ​ | 123.9 | ​ | ​ | 134.7
Asphalt | ​ | ​ | — | ​ | ​ | 26.4 | ​ | ​ | 25.6
Contracting services | ​ | ​ | — | ​ | ​ | 127.6 | ​ | ​ | 145.1
Other* | ​ | ​ | — | ​ | ​ | 147.5 | ​ | ​ | 160.1
Internal sales | ​ | ​ | — | ​ | ​ | (88.0) | ​ | ​ | (99.1)
| ​ | ​ | $— | ​ | ​ | $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.

2021 Compared to 2020
Revenue
Revenue decreased $27.1 million, resulting largely from decreased contracting services revenues of 12.1% due to fewer large projects in Southern and Northern California, largely related to the timing of projects and a more competitive construction market, respectively. Other revenue also negatively impacted the segment, resulting primarily from lower cement revenue of $6.1 million in Hawaii from lower demand and project delays, as well as decreased prestress and steel fabrication, liquid asphalt and soil remediation revenues. Lower ready-mix concrete volumes of $12.0 million, or 8.8%, primarily from lower demand and delayed projects in Hawaii were partially offset by higher average pricing of $1.2 million. The segment experienced higher aggregate and asphalt sales volumes of 7.7% and 5.9%, respectively, partially due to a large project in Northern California.
Gross Profit and Gross Margin
Gross profit decreased $15.9 million and gross margin decreased 2.5%. The decrease in margin was largely due to higher costs of $23.7 million, partially as a result of inflationary pressures on fuel, material and production costs. These higher costs were somewhat offset by the higher average ready-mix concrete selling prices of $1.2 million, as previously discussed.
EBITDA and EBITDA Margin
EBITDA decreased $12.0 million and EBITDA margin decreased 1.7%. These decreases were the direct result of the previously discussed lower gross margin. Partially offsetting was lower bad debt expense of $2.2 million, which includes the recovery of prior period bad debt.
Results of Operations – Northwest

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 vs 2021 % change | ​ | ​ | 2021 vs 2020 % change
| ​ | ​ | (Dollar in millions) | ​ | ​ |  | ​ | ​ |
Revenue | ​ | ​ | $— | ​ | ​ | $478.0 | ​ | ​ | $416.2 | ​ | ​ | — % | ​ | ​ | 15%
Gross profit | ​ | ​ | $— | ​ | ​ | $87.5 | ​ | ​ | $79.8 | ​ | ​ | — % | ​ | ​ | 10%
Gross margin | ​ | ​ | —% | ​ | ​ | 18.3% | ​ | ​ | 19.2% | ​ | ​ |  | ​ | ​ |
EBITDA | ​ | ​ | $— | ​ | ​ | $80.6 | ​ | ​ | $74.4 | ​ | ​ | — % | ​ | ​ | 8%
EBITDA margin | ​ | ​ | —% | ​ | ​ | 16.9% | ​ | ​ | 17.9% | ​ | ​ |  | ​ | ​ |

77

TABLE OF CONTENTS

| ​ | ​ | Revenues
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Operating results | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Aggregates | ​ | ​ | $— | ​ | ​ | $135.2 | ​ | ​ | $113.0
Ready-mix concrete | ​ | ​ | — | ​ | ​ | 152.1 | ​ | ​ | 144.3
Asphalt | ​ | ​ | — | ​ | ​ | 78.9 | ​ | ​ | 60.5
Contracting services | ​ | ​ | — | ​ | ​ | 187.1 | ​ | ​ | 158.4
Other* | ​ | ​ | — | ​ | ​ | 12.8 | ​ | ​ | 14.0
Internal sales | ​ | ​ | — | ​ | ​ | (88.1) | ​ | ​ | (74.0)
| ​ | ​ | $— | ​ | ​ | $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.

2021 Compared to 2020
Revenue
Revenue increased $61.8 million, primarily the result of increased revenues across the segment from higher sales volumes of $38.3 million and higher average selling prices on its products of $10.1 million. Higher demand for work including asphalt paving, public-sector projects, commercial projects, health care facilities and residential fire rebuilding contributed to the increased volumes, including a 27% increase in asphalt sales volumes and a 16% increase in aggregate sales volumes over the previous year. Recent acquisitions also contributed 450,000 tons to aggregate sales volumes. Contracting services activity increased in southern and western Oregon due to more available public work and stronger commercial demand, as evidenced by the increase in internal product sales.
Gross Profit and Gross Margin
Gross profit increased $7.7 million during 2021 and gross margin decreased 0.9%. This decreased margin was due to increased costs of 5.7%, primarily as a result of inflationary pressures on fuel, raw materials, customer delivery and repair and maintenance costs. These increased costs were offset somewhat by higher average selling prices of $10.1 million across the segment, as previously discussed.
EBITDA and EBITDA Margin
EBITDA increased $6.2 million while EBITDA margin decreased 1.0%. The increase in EBITDA was the direct result of increased gross margin as the segment experienced higher sales volumes and contracting services work. This increase was partially offset by higher selling, general and administrative expense related to higher payroll-related and acquisition-related costs. EBITDA margin decreased due to higher costs of revenue and higher selling, general and administrative expense.
Results of Operations – Mountain

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 vs 2021 % change | ​ | ​ | 2021 vs 2020 % change
| ​ | ​ | (Dollar in millions) | ​ | ​ |  | ​ | ​ |
Revenue | ​ | ​ | $— | ​ | ​ | $479.6 | ​ | ​ | $450.9 | ​ | ​ | — % | ​ | ​ | 6%
Gross profit | ​ | ​ | $— | ​ | ​ | $71.2 | ​ | ​ | $62.9 | ​ | ​ | — % | ​ | ​ | 13%
Gross margin | ​ | ​ | —% | ​ | ​ | 14.8% | ​ | ​ | 13.9% | ​ | ​ |  | ​ | ​ |
EBITDA | ​ | ​ | $— | ​ | ​ | $65.0 | ​ | ​ | $52.4 | ​ | ​ | — % | ​ | ​ | 24%
EBITDA margin | ​ | ​ | —% | ​ | ​ | 13.6% | ​ | ​ | 11.6% | ​ | ​ |  | ​ | ​ |

78

TABLE OF CONTENTS

| ​ | ​ | Revenues
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Operating results | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Aggregates | ​ | ​ | $— | ​ | ​ | $72.6 | ​ | ​ | $60.0
Ready-mix concrete | ​ | ​ | — | ​ | ​ | 100.4 | ​ | ​ | 83.1
Asphalt | ​ | ​ | — | ​ | ​ | 69.3 | ​ | ​ | 72.2
Contracting services | ​ | ​ | — | ​ | ​ | 323.7 | ​ | ​ | 327.2
Other* | ​ | ​ | — | ​ | ​ | 0.1 | ​ | ​ | —
Internal sales | ​ | ​ | — | ​ | ​ | (86.5) | ​ | ​ | (91.6)
| ​ | ​ | $— | ​ | ​ | $479.6 | ​ | ​ | $450.9

* | Other includes products that individually are not considered to be a major line of business for the segment.

2021 Compared to 2020
Revenue
Revenue increased $28.7 million, primarily the result of increased revenues from higher sales volumes of $21.6 million and higher average selling prices of aggregates and ready-mix concrete of $10.6 million. Ready-mix sales volumes increased $12.8 million across the segment due to strong residential and commercial sales and aggregates experienced higher sales volumes of 17% due to an acquisition in December 2020. While asphalt sales volumes increased $2.3 million, particularly in Idaho and Western Montana, the increase was more than offset by lower average selling prices of $5.2 million due to the product mix sold. The segment was also negatively impacted by lower contracting services revenue of $3.5 million as a result of less available paving work across its businesses and the absence of a few large jobs.
Gross Profit and Gross Margin
Gross profit increased $8.3 million and gross margin increased 0.9%. The increase in margin was largely due to higher average selling prices of $10.6 million across the segment. These increases were impacted by increased costs of $2.0 million, largely the result of inflationary pressures on liquid asphalt, fuel, delivery, materials, and repair and maintenance costs.
EBITDA and EBITDA Margin
EBITDA increased $12.6 million and EBITDA margin increased 2.0%. These increases were the direct result of the previously discussed increased gross margin, as well as a gain of $1.3 million on a property sale in Montana during 2021.
Results of Operations – North Central

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 vs 2021 % change | ​ | ​ | 2021 vs 2020 % change
| ​ | ​ | (Dollar in millions) | ​ | ​ |  | ​ | ​ |
Revenue | ​ | ​ | $— | ​ | ​ | $561.8 | ​ | ​ | $570.8 | ​ | ​ | — % | ​ | ​ | (2)%
Gross profit | ​ | ​ | $— | ​ | ​ | $79.7 | ​ | ​ | $81.0 | ​ | ​ | — % | ​ | ​ | (2)%
Gross margin | ​ | ​ | —% | ​ | ​ | 14.2% | ​ | ​ | 14.2% | ​ | ​ |  | ​ | ​ |
EBITDA | ​ | ​ | $— | ​ | ​ | $72.3 | ​ | ​ | $71.7 | ​ | ​ | — % | ​ | ​ | 1%
EBITDA margin | ​ | ​ | —% | ​ | ​ | 12.9% | ​ | ​ | 12.6% | ​ | ​ |  | ​ | ​ |

79

TABLE OF CONTENTS

| ​ | ​ | Revenues
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Operating results | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Aggregates | ​ | ​ | $— | ​ | ​ | $97.5 | ​ | ​ | $94.8
Ready-mix concrete | ​ | ​ | — | ​ | ​ | 157.2 | ​ | ​ | 142.4
Asphalt | ​ | ​ | — | ​ | ​ | 140.0 | ​ | ​ | 156.4
Contracting services | ​ | ​ | — | ​ | ​ | 306.9 | ​ | ​ | 344.9
Other* | ​ | ​ | — | ​ | ​ | 22.8 | ​ | ​ | 24.8
Internal sales | ​ | ​ | — | ​ | ​ | (162.6) | ​ | ​ | (192.5)
| ​ | ​ | $— | ​ | ​ | $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.

2021 Compared to 2020
Revenue
Revenue decreased $9.0 million, primarily the result of decreased contracting work largely in the Minnesota and North Dakota markets, which also impacted asphalt volumes. Also contributing to the decrease was lower average selling prices of $2.6 million on asphalt sales driven by the product mix. Partially offsetting these decreases were increased revenues for ready-mix concrete due to higher volumes of $8.1 million and higher average selling prices of $6.7 million, largely the result of large commercial projects in the South Dakota market. Aggregate volumes also benefited by $3.4 million, partially from these large commercial projects. In addition, decreased internal sales had an overall positive impact to revenues.
Gross Profit and Gross Margin
Gross profit decreased $1.3 million while gross margin remained consistent at 14.2%. Positively impacting the segment were higher average selling prices on ready-mix concrete of $6.8 million. Offsetting this increase was less contracting work, lower average selling prices on asphalt of $2.6 million and increased costs of $1.2 million, largely the result of inflationary pressures on liquid asphalt, fuel, and materials.
EBITDA and EBITDA Margin
EBITDA increased $600,000 and EBITDA margin increased slightly at 0.3%. These increases were the result of decreased selling, general and administrative expense related to lower payroll-related costs.
Results of Operations – All Other

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 vs 2021 % change | ​ | ​ | 2021 vs 2020 % change
| ​ | ​ | (Dollar in millions)
Revenue | ​ | ​ | $— | ​ | ​ | $317.4 | ​ | ​ | $325.9 | ​ | ​ | — % | ​ | ​ | (3)%
Gross profit | ​ | ​ | $— | ​ | ​ | $34.5 | ​ | ​ | $56.9 | ​ | ​ | — % | ​ | ​ | (39)%
Gross margin | ​ | ​ | —% | ​ | ​ | 10.9% | ​ | ​ | 17.5% | ​ | ​ |  | ​ | ​ |
EBITDA | ​ | ​ | $— | ​ | ​ | $8.4 | ​ | ​ | $27.4 | ​ | ​ | — % | ​ | ​ | (70)%
EBITDA margin | ​ | ​ | —% | ​ | ​ | 2.6% | ​ | ​ | 8.4% | ​ | ​ |  | ​ | ​ |

2021 Compared to 2020
Revenue
Revenue decreased $8.5 million, primarily the result of decreased contracting work of $22.0 million in the South operating segment, directly resulting from less asphalt paving work in Texas, which also impacted asphalt volumes by $9.5 million. The average selling price of aggregates also decreased 3.3% due to a change in sales
80

TABLE OF CONTENTS

related to product mix. Partially offsetting these decreases were increased ready-mix concrete volumes of $7.4 million in the South operating segment due to the shift in demand from asphalt and 4.2% higher liquid asphalt volumes in certain markets in the Energy Services operating segment.
Gross Profit and Gross Margin
Gross profit decreased $22.4 million and gross margin decreased 6.6%. This decreased margin was largely due to $20.8 million higher costs, primarily higher inventory costs related to liquid asphalt in the Energy Services operating segment, as well as increased fuel, labor, delivery, and repair and maintenance costs partially as a result of inflationary pressures in both the South and Energy Services operating segments. The start-up activities of the Honey Creek quarry also contributed to higher costs by $2.2 million. These increased costs were somewhat offset by higher average selling prices on ready-mix concrete of $800,000 in the South operating segment.
EBITDA and EBITDA Margin
EBITDA decreased $19.0 million and EBITDA margin decreased 5.8%. These decreases were the direct result of the previously discussed decreased gross margin, offset slightly by lower selling, general and administrative expense in both the South and Energy Services operating segments as well as for corporate costs, primarily related to lower payroll-related costs.
Intersegment Transactions
Amounts presented in the preceding tables will not agree with the consolidated statements of income due to Knife River’s elimination of intersegment transactions. The amounts related to these items were as follows:

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Intersegment transactions: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Revenues | ​ | ​ | $— | ​ | ​ | $35.2 | ​ | ​ | $40.2
Cost of revenue | ​ | ​ | $— | ​ | ​ | $(35.2) | ​ | ​ | $(40.2)

Liquidity and Capital Resources
At December 31, 2021, Knife River had cash and cash equivalents of $13.8 million and working capital of $185.4 million. Historically, Knife River has participated in Centennial’s centralized cash management program, including its overall financing arrangements. Subsequent to the completion of the separation, Knife River’s cash management, capital structure and liquidity sources will change significantly. Knife River will implement its own centralized cash management model and use cash on hand and third-party credit facilities to fund day-to-day operations.
Knife River’s ability to fund its cash needs will depend on the ongoing ability to generate cash from operations and obtain debt financing with competitive rates. Knife River relies on various financing sources and access to capital markets as sources of liquidity for capital requirements not satisfied by cash flows from operations, particularly in the first half of the year due to the seasonal nature of the industry.
Knife River’s principal uses of cash in the future will be to fund its operations, working capital needs, capital expenditures, repayment of borrowings and strategic business development transactions.
Knife River expects to incur short-term and long-term debt in connection with the separation, of which a majority will be used to repay the outstanding related-party note agreements with Centennial that are reflected as related-party notes payable on the Consolidated Balance Sheets. Knife River anticipates the debt will consist of revolving credit facilities, term loan agreements and long-term bonds or notes. Knife River believes that third-party financing arrangements, future cash from operations and access to capital markets will provide adequate resources to fund future cash flow needs and, therefore, subsequent to the separation, would no longer rely on funding from Centennial.
Accounting principles generally accepted in the U.S. require that management evaluate the ability of Knife River to meet its obligations as they become due within one year after the date that the consolidated financial statements are issued. As a result of this, as further discussed in Note 19 of the audited consolidated financial
81

TABLE OF CONTENTS

statements, Centennial has committed to continue funding the Company through the central cash management and financing program to allow the Company to meet its obligations as they become due for at least one year and a day following the date that the consolidated financial statements are issued to meet this requirement.
Capital Expenditures
Knife River’s capital expenditures for the year ended December 31, 2021, were $418 million, including $235 million for the completed business combinations described in Note 6 of the audited consolidated financial statements, compared to $191 million for the year ended December 31, 2020. The 2021 capital expenditures were funded by internal sources and borrowings under credit facilities and related-party notes from Centennial.
Knife River estimates 2022, 2023 and 2024 capital expenditures to be $189 million, $125 million and $183 million, respectively. Estimated capital expenditures for the years 2022 through 2024 include:

• | Routine replacement and maintenance of vehicles and equipment;

• | Purchase of buildings and land, in addition to building improvements;

• | Aggregate reserves; and

• | Production facilities.

Knife River continues to evaluate the potential for future acquisitions and other growth opportunities that would be incremental to the outlined capital program; however, these opportunities are dependent upon the availability of economic opportunities and, as a result, capital expenditures may vary significantly from the estimates in the preceding paragraph. It is anticipated that all of the funds required for capital expenditures for the years 2022 through 2024 will be funded by various sources, including internally generated funds; credit facilities; and issuance of debt and equity securities if necessary.
Cash flows

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Net cash provided by (used in) | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Operating activities | ​ | ​ | $— | ​ | ​ | $181.2 | ​ | ​ | $232.4
Investing activities | ​ | ​ | — | ​ | ​ | (398.3) | ​ | ​ | (185.9)
Financing activities | ​ | ​ | — | ​ | ​ | 223.8 | ​ | ​ | (47.9)
Increase (decrease) in cash and cash equivalents | ​ | ​ | — | ​ | ​ | 6.7 | ​ | ​ | (1.4)
Cash and cash equivalents – beginning of year | ​ | ​ | — | ​ | ​ | 7.1 | ​ | ​ | 8.5
Cash and cash equivalents – end of year | ​ | ​ | $— | ​ | ​ | $13.8 | ​ | ​ | $7.1

Operating activities

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Net income | ​ | ​ | $— | ​ | ​ | $129.8 | ​ | ​ | $147.3
Adjustments to reconcile net income to net cash provided by operating activities | ​ | ​ | — | ​ | ​ | 128.6 | ​ | ​ | 87.3
Receivables | ​ | ​ | — | ​ | ​ | 15.3 | ​ | ​ | 7.9
Due from related-party | ​ | ​ | — | ​ | ​ | 2.9 | ​ | ​ | (7.0)
Inventories | ​ | ​ | — | ​ | ​ | (42.4) | ​ | ​ | (11.3)
Other current assets | ​ | ​ | — | ​ | ​ | (4.6) | ​ | ​ | 1.3
Accounts payable | ​ | ​ | — | ​ | ​ | (13.9) | ​ | ​ | (10.7)
Due to related-party | ​ | ​ | — | ​ | ​ | (1.0) | ​ | ​ | (0.8)
Other current liabilities | ​ | ​ | — | ​ | ​ | (21.0) | ​ | ​ | 12.9
Pension and postretirement benefit plan contributions | ​ | ​ | — | ​ | ​ | (0.4) | ​ | ​ | (0.3)
Other noncurrent changes | ​ | ​ | — | ​ | ​ | (12.1) | ​ | ​ | 5.8
Net cash provided by operating activities | ​ | ​ | $— | ​ | ​ | $181.2 | ​ | ​ | $232.4

82

TABLE OF CONTENTS

Cash provided by operating activities totaled $181.2 million in 2021, compared to $232.4 million in 2020. The reduction in cash provided directly correlates to the reduction in earnings due to the previously discussed decrease in gross margin. Also impacting the amount of cash provided was higher working capital needs. Cash used by working capital components totaled $64.6 million in 2021, compared to $7.8 million in 2020. This additional usage of cash was largely driven by higher liquid asphalt inventory balances due to higher material costs; higher inventory balances as a result of production at the businesses acquired; decreased payments of previously deferred payroll taxes due to the COVID-19 Aid, Relief and Economic Security Act and higher payments to vendors. Positively contributing to working capital was increased collections of receivables partially offset by lower costs and estimated earnings in excess of billings on uncompleted construction contracts, as well as the timing of certain income tax payments offset in part by higher bonus depreciation related to recent acquisitions.
Investing activities

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Capital expenditures | ​ | ​ | $— | ​ | ​ | $(174.2) | ​ | ​ | $(135.9)
Acquisitions, net of cash acquired | ​ | ​ | — | ​ | ​ | (235.2) | ​ | ​ | (56.7)
Net proceeds from sale or disposition of property and other | ​ | ​ | — | ​ | ​ | 12.0 | ​ | ​ | 8.2
Investments | ​ | ​ | — | ​ | ​ | (0.9) | ​ | ​ | (1.5)
Net cash used in investing activities | ​ | ​ | $— | ​ | ​ | $(398.3) | ​ | ​ | $(185.9)

The increase in cash used in investing activities from 2021 to 2020 was primarily the result of higher cash used in acquisition activity. Also contributing to the increase in cash used was higher capital expenditures, including expenditures of $13.4 million related to a prestress facility and $9.9 million related to a new training center in addition to the normal equipment replacements and upgrades.
Financing activities

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Repayment of long-term debt | ​ | ​ | $— | ​ | ​ | $(0.2) | ​ | ​ | $(0.2)
Issuance (repayment) of related-party loans, net | ​ | ​ | — | ​ | ​ | 282.0 | ​ | ​ | (2.3)
Net transfers to Parent | ​ | ​ | — | ​ | ​ | (58.0) | ​ | ​ | (45.4)
Net cash provided by (used in) financing activities | ​ | ​ | $— | ​ | ​ | $223.8 | ​ | ​ | $(47.9)

The increase in cash flows provided by financing activities from 2021 to 2020 was largely the result of an increase in related party notes for acquisitions and increased working capital needs.
Material Cash Requirements
At December 31, 2021, Knife River’s material cash requirements under its contractual obligations were as follows:

| ​ | ​ | Less than 1 year | ​ | ​ | 1-3 years | ​ | ​ | 3-5 years | ​ | ​ | More than 5 years | ​ | ​ | Total
| ​ | ​ | (In millions)
Related-party notes payable | ​ | ​ | $108.0 | ​ | ​ | $345.5 | ​ | ​ | $10.0 | ​ | ​ | $220.0 | ​ | ​ | $683.5
Interest on related-party notes* | ​ | ​ | 18.4 | ​ | ​ | 25.2 | ​ | ​ | 21.1 | ​ | ​ | 29.9 | ​ | ​ | 94.6
Operating leases | ​ | ​ | 16.1 | ​ | ​ | 19.6 | ​ | ​ | 8.5 | ​ | ​ | 13.5 | ​ | ​ | 57.7
Purchase commitments | ​ | ​ | 86.9 | ​ | ​ | 3.4 | ​ | ​ | 2.3 | ​ | ​ | 6.2 | ​ | ​ | 98.8
| ​ | ​ | $229.4 | ​ | ​ | $393.7 | ​ | ​ | $41.9 | ​ | ​ | $269.6 | ​ | ​ | $934.6

* | Represents the estimated interest payments associated with Knife River’s related-party notes payable outstanding as of December 31, 2021, assuming interest rates as of December 31, 2021, and consistent amounts outstanding until their respective maturity dates over the periods indicated in the table above.

83

TABLE OF CONTENTS

Material short-term cash requirements of Knife River include payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations. At December 31, 2021, the current portion of asset retirement obligations was $6.1 million and was included in other accrued liabilities on the consolidated balance sheets.
Material long-term cash requirements of Knife River include payments on operating lease agreements, payment of obligations on purchase commitments and asset retirement obligations. At December 31, 2021, Knife River had total liabilities of $33.4 million related to asset retirement obligations that are excluded from the table above. Due to the nature of these obligations, Knife River cannot determine precisely when the payments will be made to settle these obligations.
Critical Accounting Estimates
Knife River has prepared its financial statements in conformity with GAAP. The preparation of its financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Management reviews these estimates and assumptions based on historical experience, changes in business conditions and other relevant factors believed to be reasonable under the circumstances.
Critical accounting estimates are defined as estimates that require management to make assumptions about matters that are uncertain at the time the estimate was made, and changes in the estimates could have a material impact on Knife River’s financial position or results of operations. Knife River’s critical accounting estimates are subject to judgments and uncertainties that affect the application of its significant accounting policies. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised. Consequently, Knife River’s financial position or results of operations may be materially different when reported under different conditions or when using different assumptions in the application of the following critical accounting estimates. For more information, see the section entitled “Index to Consolidated Financial Statements.”
Revenue Recognition
Revenue is recognized over time to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The recognition of revenue requires Knife River to make estimates and assumptions that affect the reported amounts of revenue. The accuracy of revenues reported on the consolidated financial statements depends on, among other things, management’s estimates of total costs to complete projects because Knife River uses the cost-to-cost measure of progress on contracting services contracts for revenue recognition.
To determine the proper revenue recognition method for contracts, Knife River evaluates whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. For most contracts, the customer contracts with Knife River to provide a significant service of integrating a complex set of tasks and components into a single project. Hence, Knife River’s contracts are generally accounted for as a single performance obligation.
Knife River recognizes contracting services revenue over time using an input method based on the cost-to-cost measure of progress for contracts because it best depicts the transfer of assets to the customer which occurs as Knife River incurs costs on the contract. Under the cost-to-cost measure of progress, the costs incurred are compared with total estimated costs of a performance obligation. Revenues are recorded proportionately to the costs incurred. This method depends largely on the ability to make reasonably dependable estimates related to the extent of progress toward completion of the contract, contract revenues, contract costs and contract profits. Since contract prices are generally set before the work is performed, the estimates pertaining to every project could contain significant unknown risks such as volatility in labor, material and fuel costs, weather delays, adverse project site conditions, unforeseen actions by regulatory agencies, performance by subcontractors, job management and relations with project owners. Changes in estimates could have a material effect on Knife River’s results of operations, financial position and cash flows. For the years ended December 31, 2022, 2021 and 2020, Knife River’s total contracting services revenue was $[   ], $1.0 billion and $1.1 billion, respectively.
84

TABLE OF CONTENTS

Several factors are evaluated in determining the bid price for contract work. These include, but are not limited to, the complexities of the job, past history performing similar types of work, seasonal weather patterns, competition and market conditions, job site conditions, work force safety, reputation of the project owner, availability of labor, materials and fuel, project location and project completion dates. As a project commences, estimates are continually monitored and revised as information becomes available and actual costs and conditions surrounding the job become known. If a loss is anticipated on a contract, the loss is immediately recognized.
Contracts are often modified to account for changes in contract specifications and requirements. Knife River considers contract modifications to exist when the modification either creates new or changes the existing enforceable rights and obligations. Generally, contract modifications are for goods or services that are not distinct from the existing contract due to the significant integration of services provided in the context of the contract and are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and the measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue on a cumulative catch-up basis.
Knife River’s contracts for contracting services generally contain variable consideration including liquidated damages, performance bonuses or incentives, claims, unpriced change orders and penalties or index pricing. The variable amounts usually arise upon achievement of certain performance metrics or change in project scope. Knife River estimates the amount of revenue to be recognized on variable consideration using one of the two prescribed estimation methods, the expected value method or the most likely amount method, depending on which method best predicts the most likely amount of consideration Knife River expects to be entitled to or expects to incur. Assumptions as to the occurrence of future events and the likelihood and amount of variable consideration are made during the contract performance period. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on the assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available to management. Knife River only includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Changes in circumstances could impact management’s estimates made in determining the value of variable consideration recorded. When determining if the variable consideration is constrained, Knife River considers if factors exist that could increase the likelihood or the magnitude of a potential reversal of revenue. Knife River updates its estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis.
Knife River believes its estimates surrounding the cost-to-cost method are reasonable based on the information that is known when the estimates are made. Knife River has contract administration, accounting and management control systems in place that allow its estimates to be updated and monitored on a regular basis. Because of the many factors that are evaluated in determining bid prices, it is inherent that Knife River’s estimates have changed in the past and will continually change in the future as new information becomes available for each job.
Business Combinations
Knife River accounts for acquisitions on the consolidated financial statements starting from the date of the acquisition, which is the date that control is obtained. The acquisition method of accounting requires acquired assets and liabilities assumed be recorded at their respective fair values as of the date of the acquisition. The excess of the purchase price over the fair value of the assets acquired and liabilities assumed is recorded as goodwill. The estimation of fair values of acquired assets and liabilities assumed by Knife River requires significant judgment and requires various assumptions. Although independent appraisals may be used to assist in the determination of the fair value of certain assets and liabilities, the appraised values may be based on significant estimates provided by management. The amounts and useful lives assigned to depreciable and amortizable assets compared to amounts assigned to goodwill, which is not amortized, can affect the results of operations in the period of and periods subsequent to a business combination.
In determining fair values of acquired assets and liabilities assumed, Knife River uses various observable inputs for similar assets or liabilities in active markets and various unobservable inputs, which includes the use of valuation models. Fair values are based on various factors including, but not limited to, age and condition of property, maintenance records, auction values for equipment with similar characteristics, recent sales and listings
85

TABLE OF CONTENTS

of comparable properties, data collected from drill holes and other subsurface investigations and geologic data. Knife River primarily uses the market and cost approaches in determining the fair value of land and property, plant and equipment. A combination of the market and income approaches are used for aggregate reserves and intangibles, primarily a discounted cash flow model. Knife River must develop reasonable and supportable assumptions to evaluate future cash flows. The process is highly subjective and requires a large degree of management judgement. Assumptions used may vary for each specific business combination due to unique circumstances of each transaction. Assumptions may include discount rate, time period, terminal value and growth rate. The values generated from the discounted cash flow model are sensitive to the assumptions used. Inaccurate assumptions can lead to deviations from the values generated.
There is a measurement period after the acquisition date during which Knife River may adjust the amounts recognized for a business combination. Any such adjustments are recorded in the period the adjustment is determined with the corresponding offset to goodwill. These adjustments are typically based on obtaining additional information that existed at the acquisition date regarding the assets acquired and the liabilities assumed. The measurement period ends once Knife River has obtained all necessary information that existed as of the acquisition date, but does not extend beyond one year from the date of the acquisition. Once the measurement period has ended, any adjustments to assets acquired or liabilities assumed are recorded in income from continuing operations.
Goodwill
Knife River performs its goodwill impairment testing annually in the fourth quarter. In addition, the test is performed on an interim basis whenever events or circumstances indicate that the carrying amount of goodwill may not be recoverable. Examples of such events or circumstances may include a significant adverse change in business climate, weakness in an industry in which Knife River’s reporting units operate or recent significant cash or operating losses with expectations that those losses will continue.
Knife River has determined that the reporting units for its goodwill impairment test are its operating segments as they constitute a business for which discrete financial information is available and for which segment management regularly reviews the operating results. Goodwill impairment, if any, is measured by comparing the fair value of each reporting unit to its carrying value. If the fair value of a reporting unit exceeds its carrying value, the goodwill of the reporting unit is not impaired. If the carrying value of a reporting unit exceeds its fair value, Knife River must record an impairment loss for the amount that the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. For the years ended December 31, 2021 and 2020, there were no impairment losses recorded. At October 31, 2021, the fair value of each of Knife River’s reporting units substantially exceeded the carrying value.
Determining the fair value of a reporting unit requires judgment and the use of significant estimates, which include assumptions about Knife River’s future revenue, profitability and cash flows, amount and timing of estimated capital expenditures, inflation rates, weighted average cost of capital, operational plans, and current and future economic conditions, among others. The fair value of each reporting unit is determined using a weighted combination of income and market approaches. Knife River believes that the estimates and assumptions used in its impairment assessments are reasonable and based on available market information.
Knife River uses a discounted cash flow methodology for its income approach. Under the income approach, the discounted cash flow model determines fair value based on the present value of projected cash flows over a specified period and a residual value related to future cash flows beyond the projection period. Both values are discounted using a rate that reflects the best estimate of the weighted average cost of capital for the Company.
Under the market approach, Knife River estimates fair value using various multiples derived from enterprise value to EBITDA for comparative peer companies. These multiples are applied to operating data for each reporting unit to arrive at an indication of fair value. In addition, Knife River adds a reasonable control premium when calculating the fair value utilizing the peer multiples, which is estimated as the premium that would be received in a sale in an orderly transaction between market participants.
Knife River uses significant judgment in estimating its five-year forecast. The assumptions underlying cash flow projections are in sync as applicable with Knife River’s strategy and assumptions. Future projections are heavily correlated with the current year results of operations. Future results of operations may vary due to economic and financial impacts. The long-term growth rates used in the five-year forecast are developed by
86

TABLE OF CONTENTS

management based on industry data, management’s knowledge of the industry and management’s strategic plans. The long-term growth rate was [   ] percent in 2022 and 3 percent in both 2021 and 2020.
Long-Lived Assets Excluding Goodwill
Long-lived assets, which include aggregates and related assets, represent 57% of Knife River’s total assets as of December 31, 2021. Knife River reviews the carrying values of its long-lived assets when events or changes in circumstances indicate that such carrying values may not be recoverable.
Knife River tests long-lived assets for impairment at a level significantly lower than that of goodwill impairment testing. Long-lived assets or groups of assets are evaluated for impairment at the lowest level of largely independent identifiable cash flows at an individual operation or group of operations collectively serving a local market.
When indications of or triggers for impairment are noted, impairment testing is completed. The impairment testing requires the use of significant estimates, judgements and uncertainties by management, which may vary from actual results. Estimates and judgements may include, among other things, whether triggering events have occurred, estimates of future cash flows, the asset’s useful life, disposal activity obligations, growth and production.
The determination of whether an impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, compared to the carrying value of the assets. If impairment has occurred, the amount of the impairment recognized is determined by estimating the fair value of the assets and recording a loss if the carrying value is greater than the fair value.
No significant impairment losses were recorded in 2021 or 2020. Unforeseen events and changes in circumstances could require the recognition of impairment losses at some future date.
Non-GAAP Financial Measures
The Business Segment Financial and Operating Data includes financial information prepared in accordance with GAAP, as well as EBITDA and EBITDA margin financial measures. Knife River defines EBITDA as net income before interest, taxes, depreciation, depletion and amortization, and EBITDA margin as EBITDA as a percentage of revenues. EBITDA and EBITDA margin are considered non-GAAP financial measures. Knife River believes that EBITDA and EBITDA margin 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. Rating agencies and investors will also use EBITDA to calculate Knife River’s leverage as a multiple of EBITDA. Knife River’s management uses EBITDA and EBITDA margin in conjunction with GAAP results when evaluating its operating results internally and calculating compensation packages, and leverage as a multiple of EBITDA to determine the appropriate method of funding operations of the Company. EBITDA is calculated by adding back income taxes, interest expense and depreciation, depletion and amortization expense to net income. EBITDA margin is calculated by dividing EBITDA by revenues. These non-GAAP financial measures should not be considered as an alternative to, or more meaningful than, GAAP financial measures such as net income and are intended to be helpful supplemental financial measure for investors’ understanding of Knife River’s operating performance. Knife River’s non-GAAP financial measures, EBITDA and EBITDA margin, are not standardized; therefore, it may not be possible to compare these financial measures with other companies’ EBITDA and EBITDA margin measures having the same or similar names.
87

TABLE OF CONTENTS

The following information reconciles net income to EBITDA and provides the calculation of EBITDA margin.

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In millions)
Net income | ​ | ​ | $— | ​ | ​ | $​129.8 | ​ | ​ | $​147.3
Adjustments: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Income taxes | ​ | ​ | — | ​ | ​ | 43.4 | ​ | ​ | 47.4
Depreciation, depletion and amortization | ​ | ​ | — | ​ | ​ | 101.0 | ​ | ​ | 89.7
Interest | ​ | ​ | — | ​ | ​ | 19.2 | ​ | ​ | 20.6
Consolidated EBITDA | ​ | ​ | $— | ​ | ​ | $293.4 | ​ | ​ | $305.0
Revenues | ​ | ​ | $— | ​ | ​ | $2,228.9 | ​ | ​ | $2,178.0
EBITDA margin | ​ | ​ | — % | ​ | ​ | 13.2% | ​ | ​ | 14.0%

Quantitative and Qualitative Disclosures About Market Risk
Centennial operates under a centralized cash management program and is the legal obligor of the debt and borrowings. The debt and interest allocation directly attributable to Knife River is reflected in the consolidated balance sheet and statements of income.
In connection with the separation, Knife River expects to incur indebtedness, at which time Knife River’s exposure to interest rate risk is expected to increase. Knife River will undertake to update the disclosure in this section in a subsequent amendment once the terms of such indebtedness are reasonably known.
88

TABLE OF CONTENTS

MANAGEMENT
Executive Officers Following the Distribution
The following table sets forth the individuals who are expected to serve as Knife River Holding Company’s executive officers following the completion of the distribution. Knife River Holding Company is in the process of identifying the other persons who will be its executive officers following the distribution. Knife River Holding Company will disclose information regarding its executive officers in a subsequent amendment to this information statement. While some of Knife River Holding Company’s executive officers are currently officers and employees of MDU Resources, after the distribution, none of these individuals will be employees or executive officers of MDU Resources.

Name | ​ | ​ | Age | ​ | ​ | Position
| ​ | ​ |  | ​ | ​ |

89

TABLE OF CONTENTS

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Board Structure and Directors Following the Distribution
Knife River Holding Company is in the process of identifying the persons who are expected to serve on its board of directors following the completion of the distribution and will include information concerning those persons in an amendment to this information statement. Knife River Holding Company expects that, at the time of the distribution, the chair of the board of directors will be a different person than its chief executive officer and, to the extent the chair is not an “independent” director, that the board of directors will have a lead director empowered with robust authority and duties to facilitate the board’s exercise of independent oversight, which is referred to in this information statement as the “lead independent director.”
Following the completion of the distribution, Knife River Holding Company expects its board of directors to be composed of a majority of independent directors. Knife River Holding Company’s amended and restated certificate of incorporation will provide for a classified board of directors, with members of each class serving staggered three-year terms. Knife River Holding Company has [   ] directors in Class I, [   ] directors in Class II and [   ] directors in Class III. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The terms of directors in Classes I, II and III end at the annual meetings in 2024, 2025 and 2026 as indicated below.

Director | ​ | ​ | Class
[   ] | ​ | ​ | Class I—Expiring 2024 Annual Meeting
[   ] | ​ | ​ | Class I—Expiring 2024 Annual Meeting
[   ] | ​ | ​ | Class I—Expiring 2024 Annual Meeting
[   ] | ​ | ​ | Class II—Expiring 2025 Annual Meeting
[   ] | ​ | ​ | Class II—Expiring 2025 Annual Meeting
[   ] | ​ | ​ | Class II—Expiring 2025 Annual Meeting
[   ] | ​ | ​ | Class III—Expiring 2026 Annual Meeting
[   ] | ​ | ​ | Class III—Expiring 2026 Annual Meeting
[   ] | ​ | ​ | Class III—Expiring 2026 Annual Meeting

Following the completion of the distribution, at the first annual meeting of stockholders, the successors of Class I directors will be elected to serve for a term of three years each. Commencing with the third annual meeting of stockholders following the separation, directors for each class will be elected at the annual meeting of stockholders held in the year in which the term for that class expires and thereafter each director will serve for a term of one year and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. Consequently, by 2026, all of Knife River Holding Company’s directors will stand for election each year for one-year terms, and the board will therefore no longer be divided into three classes. At any meeting of stockholders for the election of directors at which a quorum is present, the election will be determined by a majority of the votes cast by the stockholders entitled to vote in the election, with directors not receiving a majority of the votes cast required to tender their resignations for consideration by the board of directors, except that in the case of a contested election, the election will be determined by a plurality of the votes cast by the stockholders entitled to vote in the election.
The number of members on the Knife River Holding Company board of directors may be fixed by resolution adopted from time to time by the board of directors. Any vacancies or newly created directorships may be filled only by the affirmative vote of a majority of directors then in office, even if less than a quorum, or by a sole remaining director. Each director shall hold office until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation or removal.
Set forth below is biographical information as well as background information relating to each director’s business experience, qualifications, attributes and skills and why Knife River Holding Company believes each individual is a valuable member of the board of directors.
90

TABLE OF CONTENTS

Class I—Directors Whose Term Expires in 2024

Name | ​ | ​ | Age | ​ | ​ | Principal Occupation and Other Information
[   ] | ​ | ​ | [ ] | ​ | ​ | [   ]
[   ] | ​ | ​ | [ ] | ​ | ​ | [   ]

Class II—Directors Whose Term Expires in 2025

Name | ​ | ​ | Age | ​ | ​ | Principal Occupation and Other Information
[   ] | ​ | ​ | [ ] | ​ | ​ | [   ]
[   ] | ​ | ​ | [ ] | ​ | ​ | [   ]

Class III—Directors Whose Term Expires in 2026

Name | ​ | ​ | Age | ​ | ​ | Principal Occupation and Other Information
[   ] | ​ | ​ | [ ] | ​ | ​ | [   ]
[   ] | ​ | ​ | [ ] | ​ | ​ | [   ]

Director Independence
A majority of the Knife River Holding Company board of directors will be composed of directors who are “independent” as defined by the rules of the NYSE and the Corporate Governance Guidelines, as described more fully below, to be adopted by the Knife River Holding Company board of directors. Knife River Holding Company will seek to have all of its non-management directors qualify as “independent” under these standards. The Knife River Holding Company board of directors is expected to establish categorical standards to assist it in making its determination of director independence. Knife River Holding Company expects these standards will provide that no director qualifies as “independent” unless the board of directors affirmatively determines that the director has no material relationship with Knife River Holding Company or its subsidiaries (either directly or as a partner, stockholder or officer of an organization that has a relationship with Knife River Holding Company or any of its subsidiaries).
In making this determination, the Knife River Holding Company board of directors will consider all relevant facts and circumstances. The Corporate Governance Guidelines will comprise a list of all categories of material relationships affecting the determination of a director’s independence. Any relationship that falls below a threshold set forth in the Corporate Governance Guidelines, or is not otherwise listed in the Corporate Governance Guidelines, and is not required to be disclosed under Item 404(a) of SEC Regulation S-K, will be deemed to be an immaterial relationship.
The Knife River Holding Company board of directors will assess on a regular basis, and at least annually, the independence of directors and, based on the recommendation of the Nominating and Governance Committee, will make a determination as to which members are independent.
Committees of the Board of Directors
Effective upon the completion of the distribution, the Knife River Holding Company board of directors will have the following standing committees: an Audit Committee, a Compensation Committee and a Nominating and Governance Committee.
Audit Committee. Following the completion of the distribution, Knife River Holding Company’s Audit Committee will be responsible, among its other duties and responsibilities, for overseeing Knife River Holding Company’s accounting and financial reporting processes, the audits of Knife River Holding Company’s financial statements, the qualifications and independence of Knife River Holding Company’s independent registered public accounting firm, the effectiveness of Knife River Holding Company’s internal control over financial reporting and the performance of Knife River Holding Company’s internal audit function and independent registered public accounting firm. Knife River Holding Company’s Audit Committee will review and assess the qualitative aspects of Knife River Holding Company’s financial reporting, its processes to manage business and financial risks, and its compliance with significant applicable legal, ethical and regulatory requirements. Knife River Holding Company’s Audit Committee will be directly responsible for the appointment, compensation, retention and oversight of Knife River Holding Company’s independent registered public accounting firm.
91

TABLE OF CONTENTS

The current members of Knife River Holding Company’s Audit Committee are [   ]. Knife River Holding Company’s board of directors has designated [   ] as an “audit committee financial expert,” and each of the [   ] members has been determined to be “financially literate” and has accounting or related financial management expertise in accordance with the NYSE rules. Knife River Holding Company’s board of directors has also determined that [   ] are “independent” as defined under the NYSE and Exchange Act rules and regulations. The charter of Knife River Holding Company’s Audit Committee states that no director may serve on the Audit Committee if such director simultaneously serves on the audit committee of more than three public companies (including Knife River Holding Company), unless the board of directors determines that such simultaneous service would not impair the ability of such director to effectively serve on the Audit Committee.
Compensation Committee. Following the completion of the distribution, Knife River Holding Company’s Compensation Committee will be responsible, among its other duties and responsibilities, for reviewing and approving all forms of compensation to be provided to, and employment agreements with, the executive officers and directors of Knife River Holding Company and its subsidiaries (including the CEO), establishing the general compensation policies of Knife River Holding Company and its subsidiaries and reviewing, approving and overseeing the administration of the employee benefits plans of Knife River Holding Company and its subsidiaries. Knife River Holding Company’s Compensation Committee will also periodically review management development and succession plans.
The current members of Knife River Holding Company’s Compensation Committee are [   ]. Knife River Holding Company’s board of directors determined that each such member of the Compensation Committee is “independent” as defined under the NYSE listing standards. The Compensation Committee has the authority to retain compensation consultants, outside counsel and other advisers after considering the independence factors outlined under the NYSE listing standards, and Knife River Holding Company will provide appropriate funding, as determined by the Compensation Committee, for payment of reasonable compensation to such compensation consultants, outside counsel and other advisers.
Nominating and Governance Committee. Following the completion of the distribution, Knife River Holding Company’s Nominating and Governance Committee will be responsible, among its other duties and responsibilities, for identifying and recommending candidates to the board of directors for election to Knife River Holding Company’s board of directors, reviewing the composition of the board of directors and its committees, developing and recommending to the board of directors corporate governance guidelines that are applicable to Knife River Holding Company and overseeing board of directors evaluations.
The current members of Knife River Holding Company’s Nominating and Governance Committee are [   ]. Knife River Holding Company’s board of directors determined that each member of the Nominating and Governance Committee is “independent” as defined under the NYSE listing standards.
Knife River Holding Company’s board of directors is expected to adopt a written charter for each of the Audit Committee, Compensation Committee and Nominating and Governance Committee. These charters will be available without charge on Knife River Holding Company’s website at www.kniferiver.com and posted on Knife River Holding Company’s investor relations website at [   ] in connection with the distribution.
Compensation Committee Interlocks and Insider Participation
Knife River Holding Company’s Compensation Committee will be established in 2023 in connection with the proposed distribution. During Knife River Holding Company’s year ended December 31, 2022, Knife River Holding Company was not an independent company, and did not have a compensation committee or any other committee serving a similar function. Decisions as to the compensation of those who currently serve as Knife River Holding Company’s executive officers were made by MDU Resources, as described in the section of this information statement captioned “Executive Compensation.” During 2022, no member of the Compensation Committee was at any time an officer or employee of MDU Resources or any of Knife River Holding Company’s subsidiaries nor was any such person a former officer of MDU Resources or any one of Knife River Holding Company’s subsidiaries. During 2022, there were no related party or conflicts of interest transactions between Knife River Holding Company and any of its Compensation Committee members that require disclosure under SEC rules.
92

TABLE OF CONTENTS

Corporate Governance
Board Leadership Structure
Following the completion of the distribution, Knife River Holding Company’s board of directors will be led by its Chair, [   ]. As stated in Knife River Holding Company’s Corporate Governance Guidelines, the board has no policy with respect to the separation of the offices of Chair of the Board and CEO. The board believes it is important to retain its flexibility to allocate the responsibilities of the offices of the Chair and CEO in any way that is in the best interests of Knife River Holding Company at a given point in time. The board believes this governance structure currently promotes a balance between the board’s independent authority to oversee Knife River Holding Company’s business and the CEO and the management team who manage the business on a day-to-day basis. The board expects to periodically review its leadership structure to ensure that it continues to meet Knife River Holding Company’s needs.
Executive Sessions
Following the completion of the distribution, Knife River Holding Company’s board of directors will hold regular and special meetings throughout each calendar year. In conjunction with those meetings, executive sessions, which are meetings of the independent directors, will be regularly scheduled throughout the year. Knife River Holding Company’s non-executive Chair will preside over the executive sessions of the board.
Selection of Nominees for Election to the Board
All of Knife River Holding Company’s current directors and those who will be elected to the board prior to the distribution will have been elected by the MDU Resources board of directors. Following the completion of the distribution, Knife River Holding Company’s Corporate Governance Guidelines provide that the Nominating and Governance Committee will identify and select, or recommend that the board select, board candidates who the Nominating and Governance Committee believes are qualified and suitable to become members of the board consistent with the criteria for selection of new directors adopted from time to time by the board. The Nominating and Governance Committee will consider the board’s current composition, including expertise, diversity, and balance of inside, outside and independent directors, and considers the general qualifications of the potential nominees, such as: integrity and honesty; the ability to exercise sound, mature and independent business judgment in the best interests of the stockholders as a whole; a background and experience with construction materials, operations, finance or marketing or other fields that will complement the talents of the other board members; willingness and capability to take the time to actively participate in board and committee meetings and related activities; ability to work professionally and effectively with other board members and Knife River Holding Company’s management; availability to remain on the board long enough to make an effective contribution; satisfaction of applicable independence standards; and absence of material relationships with competitors or other third parties that could present reasonable possibilities of conflict of interest or legal issues.
In identifying candidates for election to the board of directors, the Nominating and Governance Committee will consider nominees recommended by directors, stockholders and other sources. The Nominating and Governance Committee will review each candidate’s qualifications, including whether a candidate possesses any of the specific qualities and skills desirable in certain members of the board of directors. Evaluations of candidates generally involve a review of background materials, internal discussions and interviews with selected candidates as appropriate. Upon selection of a qualified candidate, the Nominating and Governance Committee will recommend the candidate for consideration by the full board of directors. The Nominating and Governance Committee may engage consultants or third-party search firms to assist in identifying and evaluating potential nominees.
Following the completion of the distribution, the Nominating and Corporate Governance Committee will consider director candidates proposed by stockholders on the same basis as recommendations from other sources. Following the completion of the distribution, any stockholder who wishes to recommend a prospective candidate for the board of directors for consideration by the Nominating and Governance Committee may do so by submitting the name and qualifications of the prospective candidate in writing to the following address: [   ]. Any such submission should also describe the experience, qualifications, attributes and skills that make the prospective candidate a suitable nominee for the board of directors. Knife River Holding Company’s by-laws set forth the requirements for direct nomination by a stockholder of persons for election to the board of directors.
93

TABLE OF CONTENTS

Corporate Governance Guidelines
Knife River Holding Company’s board of directors is expected to adopt Corporate Governance Guidelines to address significant corporate governance issues. Following the completion of the distribution, a copy of these guidelines will be available on the Knife River Holding Company website at www.kniferiver.com. These guidelines provide a framework for Knife River Holding Company’s corporate governance initiatives and cover topics including, but not limited to, director qualification and responsibilities, board composition, director compensation and management, independence standards and succession planning. The Nominating and Governance Committee is responsible for overseeing and reviewing the guidelines and reporting and recommending to Knife River Holding Company’s board of directors any changes to the guidelines.
Stockholder Engagement
Knife River Holding Company expects all of its directors to attend its annual meetings of stockholders and be available to answer questions from stockholders at the meetings. Between meetings, Knife River Holding Company expects [   ], the CEO, and/or [   ], the Chief Financial Officer, to engage with stockholders on a regular basis at industry and financial conferences, road shows, and one-on-one meetings. Knife River Holding Company will also make [   ], its non-executive Chair or lead independent director, as applicable, available to meet with stockholders on matters that they believe are better addressed by an independent director.
Communicating with the Board of Directors
Following the completion of the distribution, any stockholder or interested party who wishes to communicate with Knife River Holding Company’s board of directors as a whole, the independent directors, or any individual member of the board or any committee of the board may write to or email Knife River Holding Company at: [   ].
Communications addressed to the Knife River Holding Company board of directors or to an individual director will be distributed to the Knife River Holding Company board of directors or to any individual director or directors as appropriate, depending upon the facts and circumstances outlined in the communication. The Knife River Holding Company board of directors is expected to ask the Corporate Secretary’s Office to submit to the Knife River Holding Company board of directors all communications received, excluding only those items that are not related to Knife River Holding Company board of directors duties and responsibilities, such as junk mail and mass mailings; product complaints and product inquiries; new product or technology suggestions; job inquiries and resumes; advertisements or solicitations; and surveys.
Director Qualification Standards
The Nominating and Governance Committee charter will set forth certain criteria for the committee to consider in evaluating potential director nominees. In addition to evaluating a potential director’s independence, the committee will consider whether director candidates have relevant experience in business and industry, government, education and other areas, and will monitor the mix of skills and experience of directors in order to assure that Knife River Holding Company’s board of directors will have the necessary breadth and depth to perform its oversight function effectively. The committee may reevaluate the relevant criteria for board membership from time to time in response to changing business factors or regulatory requirements. Knife River Holding Company’s full board of directors will be responsible for selecting candidates for election as directors based on the recommendation of the Nominating and Governance Committee.
Risk Oversight
Knife River Holding Company’s board of directors as a whole will have responsibility for overseeing Knife River Holding Company’s risk management. The board of directors will exercise this oversight responsibility directly and through its committees. The oversight responsibility of the board of directors and its committees will be informed by reports from Knife River Holding Company’s management team and from Knife River Holding Company’s internal audit department that are designed to provide visibility to the board of directors about the identification and assessment of key risks and Knife River Holding Company’s risk mitigation strategies. The full board of directors will have primary responsibility for evaluating strategic and operational risk management, and succession planning. Following the completion of the distribution, Knife River Holding Company’s Audit Committee will have the responsibility for overseeing its major financial and accounting risk exposures and the
94

TABLE OF CONTENTS

steps its management has taken to monitor and control these exposures, including policies and procedures for assessing and managing risk, including oversight on compliance related to legal and regulatory exposure, and meets regularly with Knife River Holding Company’s chief legal and compliance officers. Following the completion of the distribution, Knife River Holding Company’s Compensation Committee will evaluate risks arising from its compensation policies and practices, as more fully described above. The Audit Committee and Compensation Committee will provide reports to the full board of directors regarding these and other matters.
Code of Conduct
Knife River Holding Company’s board of directors is expected to adopt a code of business conduct and ethics that will apply to all of its employees, directors and officers, including its principal executive officer, principal financial officer and principal accounting officer or controller, or persons performing similar functions. Following the completion of the distribution, the guide will be available without charge on Knife River Holding Company’s website at www.kniferiver.com.
Knife River Holding Company will promptly disclose any substantive changes in or waiver of, together with reasons for any waiver of, the guide granted to its executive officers, including its principal executive officer, principal financial officer, principal accounting officer and controller, or persons performing similar functions, and its directors, by posting such information on its website at www.kniferiver.com.
The Knife River Holding Company website and the information contained therein or connected thereto are not incorporated into this information statement or the registration statement of which this information statement forms a part, or in any other filings with, or any information furnished or submitted to, the SEC.
95

TABLE OF CONTENTS

EXECUTIVE COMPENSATION
Knife River Holding Company is in the process of identifying the persons who will be its executive officers following the distribution and the compensation arrangements that will be applicable to such individuals. Prior to the effectiveness of the registration statement of which this information statement forms a part, information regarding the compensation of the Knife River Holding Company executive officers will be included in an amendment to this information statement.
96

TABLE OF CONTENTS

DIRECTOR COMPENSATION
Knife River Holding Company is in the process of identifying the persons who will be its directors following the distribution and the compensation arrangements that will be applicable to such individuals. Prior to the effectiveness of the registration statement of which this information statement forms a part, information regarding the compensation of the Knife River Holding Company directors will be included in an amendment to this information statement.
97

TABLE OF CONTENTS

KNIFE RIVER HOLDING COMPANY LONG-TERM PERFORMANCE-BASED INCENTIVE PLAN
In connection with the separation and distribution, Knife River Holding Company expects to adopt the Knife River Holding Company Long-Term Performance-Based Incentive Plan. Prior to the effectiveness of the registration statement of which this information statement forms a part, a summary of the material terms of the Knife River Holding Company Long-Term Performance-Based Incentive Plan will be included in an amendment to this information statement.
98

TABLE OF CONTENTS

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Agreements with MDU Resources
Following the separation and distribution, Knife River Holding Company and MDU Resources will operate separately, each as an independent public company. MDU Resources will retain a passive ownership interest in up to 19.9 percent of the Knife River Holding Company common stock at the time of the distribution. MDU Resources currently plans to dispose of all of the Knife River Holding Company common stock that it retains after the distribution, which may include dispositions through one or more subsequent exchanges for debt, distributions to MDU Resources stockholders, exchanges for MDU Resources shares or one or more sales of such shares for cash.
Prior to the distribution, Knife River Holding Company will enter into a separation and distribution agreement with MDU Resources, which is referred to in this information statement as the “separation agreement” or the “separation and distribution agreement.” Knife River Holding Company will also enter into various other agreements to provide a framework for its relationship with MDU Resources after the separation and distribution, such as a transition services agreement, a tax matters agreement, an employee matters agreement and a stockholder and registration rights agreement.
These agreements will provide for the allocation between Knife River Holding Company and MDU Resources of MDU Resources’ assets, employees, liabilities and obligations (including investments, property and employee benefits and tax-related assets and liabilities) associated with Knife River and will govern certain relationships between Knife River Holding Company and MDU Resources after the separation and distribution. The agreements listed above will be filed as exhibits to the registration statement on Form 10 of which this information statement is a part.
The summaries of each of the agreements listed above are qualified in their entireties by reference to the full text of the applicable agreements, which are incorporated by reference into this information statement. When used in this section, “distribution date” refers to the date on which MDU Resources distributes shares of Knife River Holding Company common stock to the holders of shares of MDU Resources common stock.
Separation Agreement
Transfer of Assets and Assumption of Liabilities
The separation agreement will identify the assets to be transferred, the liabilities to be assumed and the contracts to be assigned to each of Knife River Holding Company and MDU Resources as part of the separation, and provide for when and how these transfers, assumptions and assignments will occur. In particular, the separation agreement will provide, among other things, that:

• | 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.

• | Certain third-party vendor contracts for services primarily related to Knife River.

• | Rights to technology, software and intellectual property primarily related to Knife River.

• | Exclusive rights to information exclusively related to Knife River and nonexclusive rights to information related to Knife River.

• | 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.

• | Permits used by Knife River.

• | Other assets that are included in Knife River Holding Company’s pro forma balance sheet.

99

TABLE OF CONTENTS

• | 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.

• | 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.

Except as expressly set forth in the separation agreement or any ancillary agreement, neither Knife River Holding Company nor MDU Resources will make any representation or warranty as to (1) the assets, business or liabilities transferred or assumed as part of the separation, (2) any approvals or notifications required in connection with the transfers, (3) the value of or the freedom from any security interests of any of the assets transferred, (4) the absence or presence of any defenses or right of setoff or freedom from counterclaim with respect to any claim or other asset of either Knife River Holding Company or MDU Resources, or (5) the legal sufficiency of any assignment, document or instrument delivered to convey title to any asset or thing of value to be transferred in connection with the separation. All assets will be transferred on an “as is,” “where is” basis, and the respective transferees will bear the economic and legal risks that any conveyance will prove to be insufficient to vest in the transferee good and marketable title, free and clear of all security interests, and that any necessary consents or governmental approvals are not obtained or that any requirements of laws, agreements, security interests or judgments are not complied with.
Information in this information statement with respect to the assets and liabilities of the parties following the distribution is presented based on the allocation of such assets and liabilities pursuant to the separation agreement, unless the context otherwise requires. The separation agreement will provide that, in the event that the transfer or assignment of certain assets and liabilities to Knife River Holding Company or MDU Resources, as applicable, does not occur prior to the separation, then until such assets or liabilities are able to be transferred or assigned, Knife River Holding Company or MDU Resources, as applicable, will hold such assets on behalf and for the benefit of the other party and will pay, perform, and discharge such liabilities, for which the other party will reimburse Knife River Holding Company or MDU Resources, as applicable, for all commercially reasonable payments made in connection with the performance and discharge of such liabilities.
The Distribution
The separation agreement will also govern the rights and obligations of the parties regarding the distribution following the completion of the separation. On the distribution date, MDU Resources will distribute to its stockholders that hold shares of MDU Resources common stock as of the record date for the distribution of approximately 80.1 percent or more of the issued and outstanding shares of Knife River Holding Company common stock on a pro rata basis. Stockholders will receive cash in lieu of any fractional shares.
Conditions to the Distribution
The separation agreement will provide that the distribution is subject to satisfaction (or waiver by MDU Resources) of certain conditions. These conditions are described under “The Separation and Distribution—Conditions to the Distribution.” MDU Resources has the sole and absolute discretion to determine (and change) the terms of, and to determine whether to proceed with, the distribution and, to the extent it determines to so proceed, to determine the record date for the distribution, the distribution date and the distribution ratio.
Financing
In connection with the separation and distribution, Knife River Holding Company anticipates that it will incur short-term debt consisting of $[   ] as well as long-term debt consisting of $[   ] for an aggregate principal amount of up to $[   ]. Knife River Holding Company expects that all or a portion of the net proceeds of such debt will be used to repay debt owed by Knife River to Centennial. Knife River Holding Company expects that Centennial will use such net proceeds to repay a portion of its existing third-party debt.
100

TABLE OF CONTENTS

Claims
In general, each party to the separation agreement will assume liability for all pending, threatened and unasserted legal matters related to its own business or its assumed or retained liabilities and will indemnify the other party for any liability to the extent arising out of or resulting from such assumed or retained legal matters.
Releases
The separation agreement will provide that Knife River Holding Company and its affiliates will release and discharge MDU Resources and its affiliates from all liabilities assumed by Knife River Holding Company as part of the separation, from all acts and events occurring or failing to occur, and all conditions existing, on or before the distribution date relating to its business, and from all liabilities existing or arising in connection with the implementation of the separation, except as expressly set forth in the separation agreement. MDU Resources and its affiliates will release and discharge Knife River Holding Company and its affiliates from all liabilities retained by MDU Resources and its affiliates as part of the separation and from all liabilities existing or arising in connection with the implementation of the separation, except as expressly set forth in the separation agreement.
These releases will not extend to obligations or liabilities under any agreements between the parties that remain in effect following the separation, which agreements include, but are not limited to, the separation agreement, the transition services agreement, the tax matters agreement, the employee matters agreement, a stockholder and registration rights agreement and certain other agreements, including the transfer documents in connection with the separation.
Indemnification
In the separation agreement, Knife River Holding Company will agree to indemnify, defend and hold harmless MDU Resources, each of its affiliates and each of their respective directors, officers and employees, from and against all liabilities relating to, arising out of or resulting from:

• | The Knife River Holding Company Liabilities.

• | 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.

• | 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.

• | Any breach by Knife River Holding Company of the separation agreement or any of the ancillary agreements.

• | 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.

In the separation agreement, MDU Resources will agree to indemnify, defend and hold harmless Knife River Holding Company, each of its affiliates and each of their respective directors, officers and employees from and against all liabilities relating to, arising out of or resulting from:

• | The MDU Resources Liabilities.

• | 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.

• | Except to the extent relating to an 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.

101

TABLE OF CONTENTS

• | 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).

The separation agreement will also establish procedures with respect to claims subject to indemnification and related matters.
Insurance
The separation agreement will provide for the allocation between the parties of rights and obligations under existing insurance policies with respect to occurrences prior to the distribution date and sets forth procedures for the administration of insured claims and addresses certain other insurance matters.
Further Assurances
In addition to the actions specifically provided for in the separation agreement, except as otherwise set forth therein or in any ancillary agreement, both Knife River Holding Company and MDU Resources will agree in the separation agreement to use reasonable best efforts, prior to, on and after the distribution date, to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws, regulations and agreements to consummate and make effective the transactions contemplated by the separation agreement and the ancillary agreements.
Dispute Resolution
The separation agreement will contain provisions that govern, except as otherwise provided in any ancillary agreement, the resolution of disputes, controversies or claims that may arise between MDU Resources and Knife River Holding Company related to the separation or distribution. These provisions will contemplate that efforts will be made to resolve disputes, controversies and claims by elevation of the matter to executives of MDU Resources and Knife River Holding Company. If such efforts are not successful, either Knife River Holding Company or MDU Resources may submit the dispute, controversy or claim to binding arbitration, subject to the provisions of the separation agreement.
Expenses
Except as expressly set forth in the separation agreement or in any ancillary agreement, all costs and expenses incurred in connection with the separation and distribution, including costs and expenses relating to legal and tax counsel, financial advisors and accounting advisory work related to the separation and distribution, will be paid by the party incurring such cost and expense.
Other Matters
Other matters governed by the separation agreement will include access to financial and other information, confidentiality, access to and provision of records and treatment of outstanding guarantees and similar credit support.
Termination
The separation agreement will provide that it may be terminated, and the separation and distribution may be modified or abandoned, at any time prior to the distribution date in the sole discretion of MDU Resources without the approval of any person, including Knife River Holding Company stockholders or MDU Resources stockholders. In the event of a termination of the separation agreement, no party, nor any of its directors, officers, or employees, will have any liability of any kind to the other party or any other person. After the distribution date, the separation agreement may not be terminated, except by an agreement in writing signed by both MDU Resources and Knife River Holding Company.
Transition Services Agreement
Knife River Holding Company and MDU Resources will enter into a transition services agreement prior to the distribution pursuant to which MDU Resources will provide certain services to Knife River Holding Company, on an interim, transitional basis. The services to be provided will include [   ]. The transition services agreement will specify the fees payable for these services.
102

TABLE OF CONTENTS

The transition services agreement will terminate on the expiration of the term of the last service provided under it, which will generally be up to [   ] months following the distribution date.
Subject to certain exceptions in the case of willful misconduct or fraud, the liability of MDU Resources and Knife River Holding Company under the transition services agreement for the services they provide will be limited to a specified maximum amount. The transition services agreement also provides that neither company shall be liable to the other for any indirect, exemplary, incidental, consequential, remote, speculative, punitive or similar damages.
Tax Matters Agreement
Knife River Holding Company and MDU Resources will enter into a tax matters agreement prior to the distribution that will govern the parties’ respective rights, responsibilities and obligations after the distribution with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the distribution and certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, tax elections, the control of audits and other tax proceedings and assistance and cooperation in respect of tax matters.
The tax matters agreement will also impose certain restrictions on Knife River Holding Company and its subsidiaries (including, among others, restrictions on share issuances, business combinations, sales of assets and similar transactions) designed to preserve the tax-free status of the distribution and certain related transactions. The tax matters agreement will provide special rules that allocate tax liabilities in the event the distribution, together with certain related transactions, is not tax-free. In general, under the tax matters agreement, each party is expected to be responsible for any taxes imposed on MDU Resources or Knife River Holding Company that arise from the failure of the distribution, together with certain related transactions, to qualify as a transaction that is generally tax-free under Sections 355 and 368(a)(1)(D) and certain other relevant provisions of the Code, to the extent that the failure to so qualify is attributable to actions, events or transactions relating to such party’s respective stock, assets or business, or a breach of the relevant representations or covenants made by that party in the tax matters agreement. However, if such failure was the result of any acquisition of Knife River Holding Company’s shares or assets, Knife River Holding Company generally will be responsible for all taxes imposed as a result of such acquisition or breach.
As discussed below under the heading “Material U.S. Federal Income Tax Consequences,” notwithstanding receipt by MDU Resources of the IRS private letter ruling and the opinion(s) of tax advisors, the IRS could assert that the distribution or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes. If the IRS were successful in taking this position, Knife River Holding Company, MDU Resources, and MDU Resources stockholders could be subject to significant U.S. federal income tax liability. In addition, certain events that may or may not be within the control of MDU Resources or Knife River Holding Company could cause the distribution and certain related transactions to fail to qualify for tax-free treatment for U.S. federal income tax purposes. Depending on the circumstances, Knife River Holding Company may be required to indemnify MDU Resources for taxes and certain related amounts resulting from the distribution and certain related transactions not qualifying as tax-free.
Employee Matters Agreement
Knife River Holding Company and MDU Resources will enter into an employee matters agreement prior to the distribution to allocate liabilities and responsibilities relating to employment matters, employee compensation and benefits plans and programs and other related matters. The employee matters agreement will govern certain compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of each company.
The employee matters agreement will provide that, unless otherwise specified, MDU Resources will be responsible for liabilities associated with employees who will be employed by MDU Resources following the separation, former employees whose last employment was with the MDU Resources businesses, and Knife River Holding Company will be responsible for liabilities associated with employees who will be employed by Knife River Holding Company following the separation and former employees whose last employment was with Knife River Holding Company’s businesses.
103

TABLE OF CONTENTS

The employee matters agreement will also govern the terms of equity-based awards granted by MDU Resources prior to the distribution. See “The Separation and Distribution—Treatment of Equity-Based Compensation.”
Stockholder and Registration Rights Agreement
Knife River Holding Company will enter into a stockholder and registration rights agreement with MDU Resources pursuant to which it will agree that, upon the request of MDU Resources, Knife River Holding Company will use its reasonable best efforts to effect the registration under applicable federal and state securities laws of any shares of Knife River Holding Company common stock retained by MDU Resources. In addition, MDU Resources will agree to vote any shares of Knife River Holding Company common stock that it retains immediately after the separation in proportion to the votes cast by Knife River Holding Company’s other stockholders. In connection with such agreement, MDU Resources will grant Knife River Holding Company a proxy to vote its shares of Knife River Holding Company common stock in such proportion. This proxy, however, will be automatically revoked as to any particular share upon any sale or transfer of such share from MDU Resources to a person other than MDU Resources, and neither the voting agreement nor proxy will limit or prohibit any such sale or transfer.
Procedures for Approval of Related Person Transactions
Knife River Holding Company’s board of directors is expected to adopt a written policy on related person transactions. The policy will apply to any transaction subject to the requirements of Item 404(a) of Regulation S-K under the Exchange Act in which Knife River Holding Company or a Knife River Holding Company subsidiary is a participant and a related person has a direct or indirect material interest. The policy will cover transactions involving Knife River Holding Company in excess of $120,000 in any year in which any director, director nominee, executive officer or greater than five percent beneficial owner of Knife River Holding Company, or any of their respective immediate family members, has or had a direct or indirect interest, other than as a director or less than 10 percent owner, of an entity involved in the transaction. This policy will be posted to the corporate governance section of Knife River Holding Company’s investor relations website (www.[    ].com) as of the distribution date.
Under this policy, the general counsel must advise the Audit Committee of any related person transaction of which he or she becomes aware. The Audit Committee must then either approve or reject the transaction in accordance with the terms of the policy. In the course of making this determination, the Audit Committee will consider all relevant information available to it and, as appropriate, take into consideration the size of the transaction and the amount payable to the related person; the nature of the interest of the related person in the transaction; whether the transaction may involve a conflict of interest; the purpose, and the potential benefits to Knife River Holding Company, of the transaction; whether the transaction was undertaken in the ordinary course of business; and whether the transaction involved the provision of goods or services to Knife River Holding Company that are available from unaffiliated third parties and, if so, whether the transaction is on terms and made under circumstances that are at least as favorable to Knife River Holding Company as would be available in comparable transactions with or involving unaffiliated third parties.
104

TABLE OF CONTENTS

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of material U.S. federal income tax consequences of the distribution of Knife River Holding Company common stock to “U.S. holders” (as defined below) of MDU Resources common stock. This discussion is based on the Code, U.S. Treasury regulations promulgated thereunder and judicial and administrative interpretations thereof, all as in effect on the date of this information statement, and all of which are subject to differing interpretations and change at any time, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. This discussion applies only to U.S. holders of shares of MDU Resources common stock who hold such shares as a capital asset within the meaning of Section 1221 of the Code (generally, property held for investment).
The distribution is conditioned upon the receipt by MDU Resources of a 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 the distribution, including, with respect to the opinion(s), to the effect that, subject to the accuracy of and compliance with certain representations, assumptions, and covenants, the distribution will be a transaction described in Section 355(a) of the Code.
This discussion assumes that the distribution, together with certain related transactions, will be consummated in accordance with the separation and distribution agreement and the other separation-related agreements that MDU Resources and Knife River Holding Company will enter into prior to the distribution and as described in this information statement, and that the IRS takes no position inconsistent with the opinion(s) described above. This discussion is not a complete description of all U.S. federal income tax consequences of the separation and the distribution, nor does it address the effects of any state, local or non-U.S. tax laws or U.S. federal tax laws other than those relating to income taxes. The distribution may be taxable under such other tax laws and all holders should consult their own tax advisors with respect to the applicability and effect of any such tax laws. This discussion does not discuss all aspects of U.S. federal income taxation that may be relevant to a particular holder in light of its particular circumstances or to holders subject to special rules under the Code (including, but not limited to, insurance companies, tax-exempt organizations, financial institutions, broker-dealers, partners in partnerships that hold MDU Resources or Knife River Holding Company common stock, pass-through entities (or investors therein), traders in securities who elect to apply a mark-to-market method of accounting, holders who hold MDU Resources or Knife River Holding Company common stock as part of a “hedge,” “straddle,” “conversion,” “synthetic security,” “integrated investment” or “constructive sale transaction,” individuals who receive Knife River Holding Company common stock upon the exercise of employee stock options or otherwise as compensation, holders who are liable for alternative minimum tax or any holders who actually or constructively own more than five percent of MDU Resources common stock). This discussion also does not address any tax consequences arising under the unearned Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010 nor does it address any tax consequences arising under the corporate book minimum tax or the stock buyback tax of the Inflation Reduction Act of 2022. If a partnership, including for this purpose any entity or arrangement that is treated as a partnership for U.S. federal income tax purposes, holds MDU Resources common stock, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. An investor that is a partnership and the partners in such partnership should consult their tax advisors about the U.S. federal income tax consequences of the distribution.
For purposes of this discussion, a “U.S. holder” is any beneficial owner of MDU Resources common stock that is, for U.S. federal income tax purposes:

• | An individual who is a citizen or a resident of the United States.

• | 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.

• | An estate, the income of which is subject to U.S. federal income taxation regardless of its source.

• | 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.

105

TABLE OF CONTENTS

THIS DISCUSSION IS FOR GENERAL INFORMATION PURPOSES ONLY, AND IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR STOCKHOLDER. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE DISTRIBUTION, INCLUDING THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE AND LOCAL AND FOREIGN TAX LAWS, IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES AND THE EFFECT OF POSSIBLE CHANGES IN LAW THAT MIGHT AFFECT THE TAX CONSEQUENCES DESCRIBED IN THIS INFORMATION STATEMENT.
The IRS private letter ruling and the opinion(s) of tax advisors will be based upon and rely on, among other things, various facts and assumptions, as well as certain representations, statements and undertakings of Knife River Holding Company and MDU Resources (including those relating to the past and future conduct of Knife River Holding Company and MDU Resources). If any of these representations, statements or undertakings is, or becomes, inaccurate or incomplete, or if Knife River Holding Company or MDU Resources breach any of their respective representations or covenants contained in any of the separation-related agreements and documents or in any documents relating to the IRS private letter ruling and/or the opinion(s) of tax advisors, such IRS private letter ruling and/or the opinion(s) of tax advisors may be invalid and the conclusions reached therein could be jeopardized.
Notwithstanding receipt by MDU Resources of the IRS private letter ruling and the opinion(s) of tax advisors, the IRS could determine that the distribution and/or certain related transactions should be treated as taxable transactions for U.S. federal income tax purposes if it determines that any of the representations, assumptions or undertakings upon which the IRS private letter ruling or the opinion(s) of tax advisors were based are false or have been violated. In addition, neither the IRS private letter ruling nor the opinion(s) of tax advisors will address all of the issues that are relevant to determining whether the distribution, together with certain related transactions, qualifies as a transaction that is generally tax-free for U.S. federal income tax purposes. An opinion of a tax advisor represents the judgment of such tax advisor and is not binding on the IRS or any court, and the IRS or a court may disagree with the conclusions in the opinion(s) of tax advisors. Accordingly, notwithstanding receipt by MDU Resources of the IRS private letter ruling and the opinion(s) of tax advisors, there can be no assurance that the IRS will not assert that the distribution and/or certain related transactions do not qualify for tax-free treatment for U.S. federal income tax purposes or that a court would not sustain such a challenge. In the event the IRS were to prevail in such challenge, MDU Resources, Knife River Holding Company and MDU Resources stockholders could be subject to significant U.S. federal income tax liability. Please refer to “Material U.S. Federal Income Tax Consequences if the Distribution is Taxable” below.
It is expected that, for U.S. federal income tax purposes:

• | 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.

• | 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).

• | 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

106

TABLE OF CONTENTS

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.

• | 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.

A U.S. holder who receives cash in lieu of a fractional share of Knife River Holding Company common stock in the distribution will be treated as having sold such fractional share for cash, and will recognize capital gain or loss in an amount equal to the difference between the amount of cash received and such U.S. holder’s adjusted tax basis in such fractional share. Such gain or loss will be long-term capital gain or loss if the U.S. holder’s holding period for its MDU Resources common stock exceeds one year at the time of distribution.
If a U.S. holder of MDU Resources common stock holds different blocks of MDU Resources common stock (generally shares of MDU Resources common stock purchased or acquired on different dates or at different prices), such holder should consult its tax advisor regarding the determination of the basis and holding period of shares of Knife River Holding Company common stock received in the distribution in respect of particular blocks of MDU Resources common stock.
U.S. Treasury Regulations require certain U.S. holders who receive shares of Knife River Holding Company common stock in the distribution to attach to such U.S. holder’s federal income tax return for the year in which the distribution occurs a detailed statement setting forth certain information relating to the tax-free nature of the distribution.
Material U.S. Federal Income Tax Consequences if the Distribution is Taxable
As discussed above, notwithstanding receipt by MDU Resources of the IRS private letter ruling and the opinion(s) of tax advisors, the IRS could assert that the distribution does not qualify for tax-free treatment for U.S. federal income tax purposes. If the IRS were successful in taking this position, some or all of the consequences described above would not apply and MDU Resources, Knife River Holding Company and MDU Resources stockholders could be subject to significant U.S. federal income tax liability. In addition, certain events that may or may not be within the control of MDU Resources or Knife River Holding Company could cause the distribution and certain related transactions to fail to qualify for tax-free treatment for U.S. federal income tax purposes. Depending on the circumstances, Knife River Holding Company may be required to indemnify MDU Resources for taxes (and certain related amounts) resulting from the distribution and certain related transactions not qualifying as tax-free.
If the distribution fails to qualify as a tax-free transaction for U.S. federal income tax purposes, in general, MDU Resources would recognize taxable gain as if it had sold Knife River Holding Company common stock in a taxable sale for its fair market value (unless MDU Resources and Knife River Holding Company jointly make an election under Section 336(e) of the Code with respect to the distribution, in which case, in general, (i) the MDU Resources group would recognize taxable gain as if Knife River Holding Company had sold all of its assets in a taxable sale in exchange for an amount equal to the fair market value of Knife River Holding Company common stock and the assumption of all of its liabilities and (ii) Knife River Holding Company would obtain a related step-up in the basis of its assets) and MDU Resources stockholders who receive Knife River Holding Company common stock in the distribution would be subject to tax as if they had received a taxable distribution equal to the fair market value of Knife River Holding Company common stock.
Even if the distribution were otherwise to qualify as tax-free under Sections 355 and 368(a)(1)(D) of the Code, it may result in taxable gain to MDU Resources under Section 355(e) of the Code if the distribution were deemed to be part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, shares representing a 50 percent or greater interest (by vote or value) in MDU Resources or Knife River Holding Company. For this purpose, any acquisitions of the shares of MDU Resources or Knife River Holding Company within the period beginning two years before the distribution and ending two years after the distribution are presumed to be part of such a plan, although Knife River Holding Company or MDU Resources may be able to rebut that presumption.
107

TABLE OF CONTENTS

In connection with the distribution, Knife River Holding Company and MDU Resources will enter into a tax matters agreement pursuant to which Knife River Holding Company will be responsible for certain liabilities and obligations following the distribution. In general, under the tax matters agreement, each party is expected to be responsible for any taxes imposed on MDU Resources or Knife River Holding Company that arise from the failure of the distribution, together with certain related transactions, to qualify as a transaction that is generally tax-free under Sections 355 and 368(a)(1)(D) and certain other relevant provisions of the Code (including as a result of Section 355(e) of the Code), to the extent that the failure to so qualify is attributable to actions, events or transactions relating to such party’s respective stock, assets or business, or a breach of the relevant representations or covenants made by that party in the tax matters agreement. However, if such failure was the result of any acquisition of Knife River Holding Company’s shares or assets, Knife River Holding Company generally will be responsible for all taxes imposed as a result of such acquisition or breach. Knife River Holding Company’s indemnification obligations to MDU Resources under the tax matters agreement are not expected to be limited in amount or subject to any cap. If Knife River Holding Company is required to pay any taxes or indemnify MDU Resources and its subsidiaries and their respective officers and directors under the circumstances set forth in the tax matters agreement, Knife River Holding Company may be subject to substantial liabilities.
Backup Withholding and Information Reporting
Payments of cash to U.S. holders of MDU Resources common stock in lieu of fractional shares of Knife River Holding Company common stock may be subject to information reporting and backup withholding (currently, at a rate of 24 percent), unless such U.S. holder delivers a properly completed IRS Form W-9 certifying such U.S. holder’s correct taxpayer identification number and certain other information, or otherwise establishing a basis for exemption from backup withholding. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a U.S. holder’s U.S. federal income tax liability provided that the required information is timely furnished to the IRS.
108

TABLE OF CONTENTS

DESCRIPTION OF MATERIAL INDEBTEDNESS
In connection with the separation and distribution, Knife River Holding Company anticipates that it will incur short-term debt consisting of $[   ] as well as long-term debt consisting of $[   ] for an aggregate principal amount of up to $[   ]. Knife River Holding Company expects that all or a portion of the net proceeds of such debt will be used to repay debt owed by Knife River to Centennial. Knife River Holding Company expects that Centennial will use such net proceeds to repay a portion of its existing third-party debt.
109

TABLE OF CONTENTS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Before the distribution, all of the outstanding shares of Knife River Holding Company common stock will be owned beneficially and of record by MDU Resources. Following the distribution, Knife River Holding Company expects to have outstanding an aggregate of approximately [   ] million shares of common stock based upon approximately [   ] million shares of MDU Resources common stock outstanding on [   ], excluding treasury shares and assuming no exercise of MDU Resources options, and applying the distribution ratio. MDU Resources will continue to own up to 19.9 percent of the shares of Knife River Holding Company common stock following the distribution.
Securities Owned by Certain Beneficial Owners
As of the date hereof, all of the issued and outstanding shares of Knife River Holding Company common stock are owned indirectly by MDU Resources. After the separation and distribution, MDU Resources will own up to 19.9 percent of the shares of Knife River Holding Company common stock. The following table reports the number of shares of Knife River Holding Company common stock that Knife River Holding Company expects will be beneficially owned, immediately following the completion of the distribution by each person who will beneficially own more than five percent of Knife River Holding Company common stock. The table is based upon information available as of [   ] as to those persons who beneficially own more than five percent of MDU Resources common stock and an assumption that, for each share of MDU common stock held by such persons, they will receive [   ] shares of Knife River Holding Company common stock.

Name and Address of Beneficial Owner | ​ | ​ | Amount and Nature of Beneficial Ownership | ​ | ​ | Percent of Class
MDU Resources 1200 West Century Avenue P.O. Box 5650 Bismarck, North Dakota 58506 | ​ | ​ | [   ] | ​ | ​ | [   ]%
[   ] | ​ | ​ | [   ] | ​ | ​ | [   ]%

Stock Ownership of Directors and Executive Officers
The following table sets forth information, immediately following the completion of the distribution, calculated as of [   ], based upon the distribution of [   ] shares of Knife River Holding Company common stock for each share of MDU Resources common stock, regarding (1) each of Knife River Holding Company’s expected directors and executive officers and (2) all of Knife River Holding Company’s expected directors and executive officers as a group. The address of each director, director nominee and executive officer shown in the table below is c/o Knife River Holding Company, [   ], Attention: Secretary.

Name of Beneficial Owner | ​ | ​ | Shares Beneficially Owned | ​ | ​ | Percent of Class
[   ] | ​ | ​ | [   ] | ​ | ​ | [   ]%

* | Less than one percent.

110

TABLE OF CONTENTS

DESCRIPTION OF KNIFE RIVER HOLDING COMPANY’S CAPITAL STOCK
Knife River Holding Company’s certificate of incorporation and bylaws will be amended and restated prior to the completion of the distribution. The following is a summary of the material terms of Knife River Holding Company capital stock that will be contained in the amended and restated certificate of incorporation and amended and restated bylaws. The summaries and descriptions below do not purport to be complete statements of the relevant provisions of the amended and restated certificate of incorporation or of the amended and restated bylaws to be in effect at the time of the distribution, which you must read for complete information on Knife River Holding Company capital stock as of the time of the distribution. Knife River Holding Company has not yet finalized the terms of its amended and restated certificate of incorporation and amended and restated bylaws and will include descriptions thereof in an amendment to this information statement. The amended and restated certificate of incorporation and amended and restated bylaws, each in a form expected to be in effect at the time of the distribution, will be included as exhibits to Knife River Holding Company’s registration statement on Form 10, of which this information statement forms a part. The summaries and descriptions below do not purport to be complete statements of the DGCL.
General
Knife River Holding Company’s authorized capital stock consists of [   ] shares of common stock, par value $0.01 per share, and [   ] shares of preferred stock, par value $0.01 per share, all of which shares of preferred stock are undesignated. Knife River Holding Company’s board of directors may establish the rights and preferences of the preferred stock from time to time. Immediately following the distribution, Knife River Holding Company expect that approximately [   ] million shares of Knife River Holding Company common stock will be issued and outstanding, based on approximately [   ] million shares of MDU Resources common stock issued and outstanding on [   ], and that no shares of preferred stock will be issued and outstanding.
Common Stock
Each holder of shares of Knife River Holding Company common stock will be entitled to one vote for each share on all matters to be voted upon by the common stockholders, and there will be no cumulative voting rights. Subject to any preferential rights of any outstanding preferred stock, holders of shares of Knife River Holding Company common stock will be entitled to receive ratably the dividends, if any, as may be declared from time to time by its board of directors out of funds legally available for that purpose. If there is a liquidation, dissolution or winding up of Knife River Holding Company, holders of its common stock would be entitled to a ratable distribution of its assets remaining after the payment in full of liabilities and any preferential rights of any then-outstanding preferred stock.
Holders of Knife River Holding Company common stock will have no preemptive or conversion rights or other subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. After the distribution, all outstanding shares of Knife River Holding Company common stock will be fully paid and non-assessable. The rights, preferences and privileges of the holders of Knife River Holding Company common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that it may designate and issue in the future.
Preferred Stock
Under the terms of Knife River Holding Company’s amended and restated certificate of incorporation, its board of directors will be authorized, subject to limitations prescribed by the DGCL, and by its amended and restated certificate of incorporation, to issue up to [   ] million shares of preferred stock in one or more series without further action by the holders of its common stock. Knife River Holding Company’s board of directors will have the discretion, subject to the limitations proscribed by the DGCL and by its amended and restated certificate of incorporation, to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.
Corporate Governance
Knife River Holding Company will institute stockholder-friendly corporate governance practices, as described below and elsewhere in this information statement. Responsible and appropriate corporate governance will ensure that Knife River Holding Company’s management always keeps stockholder interests in mind when crafting value-creating strategies at all levels of the organization.
111

TABLE OF CONTENTS

Single Class Capital Structure. Upon completion of the separation, Knife River Holding Company will have a single class share capital structure with all stockholders entitled to vote for director nominees and each holder of common stock entitled to one vote per share.
Director Elections. Upon completion of the separation, the Knife River Holding Company board of directors will initially be divided into three classes, with Class I composed of [   ] directors, Class II composed of [   ] directors and Class III composed of [   ] directors. The directors designated as Class I directors will have terms expiring at the first annual meeting of stockholders following the distribution, which Knife River Holding Company expects to hold in 2024. The directors designated as Class II directors will have terms expiring at the following year’s annual meeting of stockholders, which Knife River Holding Company expects to hold in 2025, and the directors designated as Class III directors will have terms expiring at the following year’s annual meeting of stockholders, which Knife River Holding Company expects to hold in 2026. At the first annual meeting of stockholders following the distribution, the successors of Class I directors will be elected to serve for a term of three years each. Commencing with the third annual meeting of stockholders following the separation, directors for each class will be elected at the annual meeting of stockholders held in the year in which the term for that class expires and thereafter each director will serve for a term of one year and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. Consequently, by 2026, all of Knife River Holding Company’s directors will stand for election each year for one year terms, and its board will therefore no longer be divided into three classes.
At any meeting of stockholders for the election of directors at which a quorum is present, the election will be determined by a majority of the votes cast by the stockholders entitled to vote in the election, with directors not receiving a majority of the votes cast required to tender their resignations for consideration by the board, except that in the case of a contested election, the election will be determined by a plurality of the votes cast by the stockholders entitled to vote in the election. Before the board is declassified, it would take at least two elections of directors for any individual or group to gain control of Knife River Holding Company’s board of directors. Accordingly, while the classified board is in effect, these provisions could discourage a third party from initiating a proxy contest, making a tender offer or otherwise attempting to gain control of Knife River Holding Company.
Special Stockholder Meetings. Knife River Holding Company’s amended and restated certificate of incorporation and/or amended and restated bylaws will provide that the chair of the board of directors or the board of directors pursuant to a resolution adopted by a majority of the entire board of directors may call special meetings of Knife River Holding Company’s stockholders. Stockholders may not call special meetings of stockholders.
Majority Vote for Mergers and Other Business Combinations. Mergers and other business combinations involving Knife River Holding Company will generally be required to be approved by a majority vote where such stockholder approval is required.
Other Expected Corporate Governance Features. Governance features related to Knife River Holding Company’s board of directors are set forth in the section of this information statement captioned “Directors.”
Anti-Takeover Effects of Various Provisions of Delaware Law and Knife River Holding Company Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws
Provisions of the DGCL and Knife River Holding Company’s amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult to acquire Knife River Holding Company by means of a tender offer, a proxy contest, merger or otherwise, or to remove incumbent officers and directors. These provisions, summarized below and in the “Special Stockholder Meetings” section described above, may discourage certain types of coercive takeover practices and takeover bids that the Knife River Holding Company board of directors may consider inadequate and to encourage persons seeking to acquire control of Knife River Holding Company to first negotiate with its board of directors. Knife River Holding Company believes that the benefits of increased protection of its ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure it outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.
Delaware Anti-Takeover Statute. Knife River Holding Company will be subject to Section 203 of the DGCL, an anti-takeover statute. In general, Section 203 of the DGCL prohibits a publicly held Delaware
112

TABLE OF CONTENTS

corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an interested stockholder, unless the business combination or the acquisition of shares that resulted in a stockholder becoming an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years prior to the determination of interested stockholder status did own) 15 percent or more of a corporation’s voting stock. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by Knife River Holding Company’s board of directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by Knife River Holding Company stockholders.
Size of Board and Vacancies. Knife River Holding Company’s amended and restated certificate of incorporation and amended and restated bylaws will provide that the number of directors on its board of directors will be fixed exclusively by its board of directors. Any vacancies created in its board of directors resulting from any increase in the authorized number of directors or the death, resignation, retirement, disqualification, removal from office or other cause will be filled by a majority of the board of directors then in office, even if less than a quorum is present, or by a sole remaining director. Any director appointed to fill a vacancy on Knife River Holding Company’s board of directors will be appointed for a term expiring at the next annual meeting of stockholders, and until his or her successor has been elected and qualified.
Director Removal. Knife River Holding Company’s amended and restated certificate of incorporation and/or amended and restated bylaws will provide that (i) prior to the board being fully declassified as discussed above stockholders will be permitted to remove a director only for cause, consistent with the DGCL requirements for classified boards; and (ii) after the board has been fully declassified, stockholders may remove Knife River Holding Company’s directors with or without cause. Removal will require the affirmative vote of at least two thirds of Knife River Holding Company’s voting stock.
Stockholder Action by Written Consent. Knife River Holding Company’s amended and restated certificate of incorporation will expressly eliminate the right of its stockholders to act by written consent. Stockholder action may only take place at an annual or a special meeting of Knife River Holding Company stockholders.
Requirements for Advance Notification of Stockholder Nominations and Proposals. Knife River Holding Company’s amended and restated bylaws will establish advance notice procedures with respect to stockholder proposals and nomination of candidates for election as directors other than nominations made by or at the direction of its board of directors or a committee of its board of directors.
No Cumulative Voting. The DGCL provides that stockholders are denied the right to cumulate votes in the election of directors, unless the company’s certificate of incorporation provides otherwise. Knife River Holding Company’s amended and restated certificate of incorporation will not provide for cumulative voting.
Undesignated Preferred Stock. The authority that Knife River Holding Company’s board of directors will possess to issue preferred stock could potentially be used to discourage attempts by third parties to obtain control of Knife River Holding Company through a merger, tender offer, proxy contest or otherwise by making such attempts more difficult or more costly. Knife River Holding Company’s board of directors may be able to issue preferred stock with voting rights or conversion rights that, if exercised, could adversely affect the voting power of the holders of common stock.
Limitations on Liability, Indemnification of Officers and Directors and Insurance
The DGCL authorizes corporations to limit or eliminate the personal liability of directors and officers to corporations and their stockholders for monetary damages for breaches of fiduciary duties, and Knife River Holding Company’s amended and restated certificate of incorporation will include such an exculpation provision. Knife River Holding Company’s amended and restated certificate of incorporation and amended and restated bylaws will include provisions that indemnify, to the fullest extent allowable under the DGCL, the personal liability of directors or officers for monetary damages for actions taken as a director or officer of Knife River Holding Company, or for serving at Knife River Holding Company’s request as a director or officer or another position at another corporation or enterprise, as the case may be. Knife River Holding Company’s amended and restated certificate of incorporation and amended and restated bylaws will also provide that it must indemnify
113

TABLE OF CONTENTS

and advance reasonable expenses to its directors and officers, subject to its receipt of an undertaking from the indemnified party as may be required under the DGCL. Knife River Holding Company’s amended and restated certificate of incorporation will expressly authorize it to carry directors’ and officers’ insurance to protect Knife River Holding Company and its directors, officers and certain employees against some liabilities.
The limitation of liability and indemnification provisions that will be in Knife River Holding Company’s amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors or officers for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against Knife River Holding Company’s directors, even though such an action, if successful, might otherwise benefit Knife River Holding Company and its stockholders. However, these provisions will not limit or eliminate Knife River Holding Company’s rights, or those of any stockholder, to seek non-monetary relief such as an injunction or rescission in the event of a breach of a duty of care. The provisions will not alter the liability of directors or officers under the federal securities laws. In addition, your investment may be adversely affected to the extent that, in a class action or direct suit, Knife River Holding Company pays the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. There is currently no pending material litigation or proceeding against any of Knife River Holding Company’s directors, officers or employees for which indemnification is sought.
Exclusive Forum
Knife River Holding Company’s amended and restated bylaws will provide that, unless the board of directors otherwise determines, the Court of Chancery of the State of Delaware or, if the Court of Chancery of the State of Delaware does not have jurisdiction, another state court of the State of Delaware, or, if no state court located in the State of Delaware has jurisdiction, the federal court for the District of Delaware, will be the sole and exclusive forum for any derivative action or proceeding brought on behalf of Knife River Holding Company, any action asserting a claim of breach of a fiduciary duty owed by any of Knife River Holding Company’s directors or officers to Knife River Holding Company or its stockholders, creditors or other constituents, any action asserting a claim against Knife River Holding Company or any of its directors or officers arising pursuant to any provision of the DGCL or Knife River Holding Company’s amended and restated certificate of incorporation or amended and restated bylaws, or any action asserting a claim against Knife River Holding Company or any of its directors or officers governed by the internal affairs doctrine.
In addition, Knife River Holding Company’s amended and restated bylaws will further provide that, unless the board of directors otherwise determines, the federal district courts of the United States of America shall be the sole and exclusive forum for any action asserting a claim arising under the Securities Act. The exclusive forum provision does not apply to actions arising under the Exchange Act or the rules and regulations thereunder. While the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce Knife River Holding Company’s federal forum provision described above. Knife River Holding Company’s stockholders will not be deemed to have waived compliance with the federal securities laws and the rules and regulations thereunder.
Authorized but Unissued Shares
Knife River Holding Company’s authorized but unissued shares of common stock and preferred stock will be available for future issuance without your approval. Knife River Holding Company may use additional shares for a variety of purposes, including future public offerings to raise additional capital, to fund acquisitions and as employee compensation. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of Knife River Holding Company by means of a proxy contest, tender offer, merger or otherwise.
Listing
Knife River Holding Company intends to apply to list its shares of common stock on the NYSE under the symbol “KNF.”
114

TABLE OF CONTENTS

Sale of Unregistered Securities
On [   ], Knife River Holding Company issued [   ] shares of Knife River Holding Company common stock to MDU Resources pursuant to Section 4(2) of the Securities Act. Knife River Holding Company did not register the issuance of the issued shares under the Securities Act because such issuance did not constitute a public offering.
Transfer Agent and Registrar
After the distribution, the transfer agent and registrar for shares of Knife River Holding Company common stock will be Equiniti.
115

TABLE OF CONTENTS

WHERE YOU CAN FIND MORE INFORMATION
Knife River Holding Company has filed a registration statement on Form 10 with the SEC with respect to the shares of Knife River Holding Company common stock being distributed as contemplated by this information statement. This information statement is a part of, and does not contain all of the information set forth in, the registration statement and the exhibits and schedules to the registration statement. For further information with respect to Knife River Holding Company and its common stock, please refer to the registration statement, including its exhibits and schedules. Statements made in this information statement relating to any contract or other document filed as an exhibit to the registration statement include the material terms of such contract or other document. However, such statements are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract or document. You may review a copy of the registration statement, including its exhibits and schedules, on the Internet website maintained by the SEC at www.sec.gov. Information contained on any website referenced in this information statement is not incorporated by reference in this information statement.
As a result of the distribution, Knife River Holding Company will become subject to the information and reporting requirements of the Exchange Act and, in accordance with the Exchange Act, will file periodic reports, proxy statements and other information with the SEC. Knife River Holding Company intends to furnish holders of its common stock with annual reports containing consolidated financial statements prepared in accordance with GAAP and audited and reported on, with an opinion expressed, by an independent registered public accounting firm.
You should rely only on the information contained in this information statement or to which this information statement has referred you. Knife River Holding Company has not authorized any person to provide you with different information or to make any representation not contained in this information statement.
116

TABLE OF CONTENTS

INDEX TO FINANCIAL STATEMENTS

| ​ | ​ | Page
Audited Annual Consolidated Financial Statements: | ​ | ​ |
Report of Independent Registered Public Accounting Firm | ​ | ​ | F-2
Consolidated Statements of Income | ​ | ​ | F-4
Consolidated Statements of Comprehensive Income | ​ | ​ | F-5
Consolidated Balance Sheets | ​ | ​ | F-6
Consolidated Statement of Equity | ​ | ​ | F-7
Consolidated Statements of Cash Flows | ​ | ​ | F-8
Notes to Consolidated Financial Statements | ​ | ​ | F-9

F-1

TABLE OF CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the stockholder and the Board of Directors of Knife River Corporation and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Knife River Corporation and Subsidiaries as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, statements of equity, and cash flows, for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Emphasis of Matter
As described in Note 2, the Company is a wholly owned subsidiary of MDU Resources Group, Inc. As further described in Notes 2 and 19 therein, the Company has significant transactions with related parties. Additionally, the accompanying financial statements have been derived from the consolidated financial statements and accounting records of MDU Resources Group, Inc. The financial statements also include expense allocations for certain functions provided by MDU Resources Group, Inc. The accompanying consolidated financial statements may not necessarily be indicative of the conditions that would have existed or results of its operations if the Company had been operated as an unaffiliated company of MDU Resources Group, Inc. Our opinion is not modified with respect to this matter.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition — Contracting Services Revenue — Refer to Notes 3, 4, and 5 to the financial statements
Critical Audit Matter Description
The Company recognizes contracting services revenue over time using an input method based on the cost-to-cost measure of progress for contracts because it best depicts the transfer of assets to the customer which
F-2

TABLE OF CONTENTS

occurs as the Company incurs costs on the contract. Under the cost-to-cost measure of progress, the costs incurred are compared with total estimated costs of a performance obligation. Revenues are recorded proportionately to the costs incurred. This method depends largely on the ability to make reasonably dependable estimates related to the extent of progress toward completion of the contract, contract revenues, contract costs, and contract profits. The accounting for these contracts involves judgment, particularly as it relates to the process of estimating total costs and profit for the performance obligation. For the year ended December 31, 2021, the Company recognized $1.02 billion of contracting services revenue.
Given the judgments necessary to estimate total costs and profit for the performance obligations used to recognize revenue for contracting services contracts, auditing such estimates required extensive audit effort due to the volume and complexity of contracting services contracts and a high degree of auditor judgment when performing audit procedures and evaluating the results of those procedures.
How the Critical Audit Matter Was Addressed in the Audit
Our audit procedures related to management’s estimates of total costs and profit for the performance obligations used to recognize revenue for contracts included the following, among others:

• | 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.

– | 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 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.

– | 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.

/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
December 14, 2022
We have served as the Company’s auditor since 2002.
F-3

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands, except per share amounts)
Revenue: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Construction materials | ​ | ​ | $— | ​ | ​ | $1,211,459 | ​ | ​ | $1,108,337
Contracting services | ​ | ​ |  | ​ | ​ | 1,017,471 | ​ | ​ | 1,069,665
Total revenue | ​ | ​ | — | ​ | ​ | 2,228,930 | ​ | ​ | 2,178,002
Cost of revenue: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Construction materials | ​ | ​ | — | ​ | ​ | 965,028 | ​ | ​ | 843,127
Contracting services | ​ | ​ | — | ​ | ​ | 916,953 | ​ | ​ | 964,297
Total cost of revenue | ​ | ​ | — | ​ | ​ | 1,881,981 | ​ | ​ | 1,807,424
Gross profit | ​ | ​ | — | ​ | ​ | 346,949 | ​ | ​ | 370,578
Selling, general and administrative expenses | ​ | ​ | — | ​ | ​ | 155,872 | ​ | ​ | 156,080
Operating income | ​ | ​ | — | ​ | ​ | 191,077 | ​ | ​ | 214,498
Interest expense | ​ | ​ | — | ​ | ​ | 19,218 | ​ | ​ | 20,577
Other income | ​ | ​ | — | ​ | ​ | 1,355 | ​ | ​ | 835
Income before income taxes | ​ | ​ | — | ​ | ​ | 173,214 | ​ | ​ | 194,756
Income taxes | ​ | ​ | — | ​ | ​ | 43,459 | ​ | ​ | 47,431
Net income | ​ | ​ | $— | ​ | ​ | $129,755 | ​ | ​ | $147,325
Earnings per share - basic | ​ | ​ | $— | ​ | ​ | $1,621.93 | ​ | ​ | $1,841.56
Weighted average common shares outstanding - basic | ​ | ​ | — | ​ | ​ | 80 | ​ | ​ | 80

The accompanying notes are an integral part of these consolidated financial statements.
F-4

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Net income | ​ | ​ | $— | ​ | ​ | $129,755 | ​ | ​ | $147,325
Other comprehensive income (loss): | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Reclassification adjustment for loss on derivative instruments included in net income, net of tax of $107 and $107 in 2021 and 2020, respectively | ​ | ​ | — | ​ | ​ | 332 | ​ | ​ | 328
Postretirement liability adjustment: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Postretirement liability gains (losses) arising during the period, net of tax of $1,011 and $(683) in 2021 and 2020, respectively | ​ | ​ | — | ​ | ​ | 3,041 | ​ | ​ | (1,898)
Amortization of postretirement liability losses included in net periodic benefit cost, net of tax of $363 and $351 in 2021 and 2020, respectively | ​ | ​ | — | ​ | ​ | 1,090 | ​ | ​ | 1,071
Postretirement liability adjustment | ​ | ​ | — | ​ | ​ | 4,131 | ​ | ​ | (827)
Other comprehensive income (loss) | ​ | ​ | — | ​ | ​ | 4,463 | ​ | ​ | (499)
Comprehensive income attributable to common stockholders | ​ | ​ | $— | ​ | ​ | $134,218 | ​ | ​ | $146,826

The accompanying notes are an integral part of these consolidated financial statements.
F-5

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets

December 31, | ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ | (In thousands, except shares and per share amounts)
Assets | ​ | ​ |  | ​ | ​ |
Current assets: | ​ | ​ |  | ​ | ​ |
Cash and cash equivalents | ​ | ​ | $— | ​ | ​ | $13,848
Receivables, net | ​ | ​ | — | ​ | ​ | 188,649
Costs and estimated earnings in excess of billings on uncompleted contracts | ​ | ​ | — | ​ | ​ | 22,005
Due from related-party | ​ | ​ | — | ​ | ​ | 8,046
Inventories | ​ | ​ | — | ​ | ​ | 291,445
Prepayments and other current assets | ​ | ​ | — | ​ | ​ | 18,637
Total current assets | ​ | ​ | — | ​ | ​ | 542,630
Noncurrent assets: | ​ | ​ |  | ​ | ​ |
Net property, plant and equipment | ​ | ​ | — | ​ | ​ | 1,250,310
Goodwill | ​ | ​ | — | ​ | ​ | 276,426
Other intangible assets, net | ​ | ​ | — | ​ | ​ | 16,228
Operating lease right-of-use assets | ​ | ​ | — | ​ | ​ | 50,128
Investments and Other | ​ | ​ | — | ​ | ​ | 38,476
Due from related-party - noncurrent | ​ | ​ | — | ​ | ​ | 7,626
Total noncurrent assets | ​ | ​ | — | ​ | ​ | 1,639,194
Total assets | ​ | ​ | $— | ​ | ​ | $2,181,824
Liabilities and Stockholder’s Equity | ​ | ​ |  | ​ | ​ |
Current liabilities: | ​ | ​ |  | ​ | ​ |
Long-term debt - current portion | ​ | ​ | $— | ​ | ​ | $233
Related-party notes payable - current portion | ​ | ​ | — | ​ | ​ | 108,000
Accounts payable | ​ | ​ | — | ​ | ​ | 82,598
Billings in excess of costs and estimated earnings on uncompleted contracts | ​ | ​ | — | ​ | ​ | 32,348
Current operating lease liabilities | ​ | ​ | — | ​ | ​ | 14,999
Due to related-party | ​ | ​ | — | ​ | ​ | 18,465
Accrued compensation | ​ | ​ | — | ​ | ​ | 25,731
Other accrued liabilities | ​ | ​ | — | ​ | ​ | 74,827
Total current liabilities | ​ | ​ | — | ​ | ​ | 357,201
Noncurrent liabilities: | ​ | ​ |  | ​ | ​ |
Long-term debt | ​ | ​ | — | ​ | ​ | 703
Related-party notes payable | ​ | ​ | — | ​ | ​ | 575,457
Deferred income taxes | ​ | ​ | — | ​ | ​ | 168,526
Noncurrent operating lease liabilities | ​ | ​ | — | ​ | ​ | 35,129
Other | ​ | ​ | — | ​ | ​ | 91,964
Total liabilities | ​ | ​ | — | ​ | ​ | 1,228,980
Commitments and contingencies | ​ | ​ |  | ​ | ​ |
Stockholder’s equity: | ​ | ​ |  | ​ | ​ |
Common stock, $10 par value; 80,000 shares authorized, issued and outstanding | ​ | ​ | — | ​ | ​ | 800
Other paid-in capital | ​ | ​ | — | ​ | ​ | 549,714
Retained earnings | ​ | ​ | — | ​ | ​ | 430,446
Parent stock held by subsidiary | ​ | ​ | — | ​ | ​ | (3,626)
Accumulated other comprehensive loss | ​ | ​ | — | ​ | ​ | (24,490)
Total stockholder’s equity | ​ | ​ | — | ​ | ​ | 952,844
Total liabilities and stockholder’s equity | ​ | ​ | $— | ​ | ​ | $2,181,824

The accompanying notes are an integral part of these consolidated financial statements.
F-6

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Equity

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 loss | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 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 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Other comprehensive loss | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Net transfers to Parent | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Balance at December 31, 2022 | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |

The accompanying notes are an integral part of these consolidated financial statements.
F-7

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Operating activities: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Net income | ​ | ​ | $— | ​ | ​ | $129,755 | ​ | ​ | $147,325
Adjustments to reconcile net income to net cash provided by operating activities: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Depreciation, depletion and amortization | ​ | ​ | — | ​ | ​ | 100,974 | ​ | ​ | 89,626
Deferred income taxes | ​ | ​ | — | ​ | ​ | 32,858 | ​ | ​ | 1,753
Provision for credit losses | ​ | ​ | — | ​ | ​ | 48 | ​ | ​ | 1,158
Amortization of debt issuance costs | ​ | ​ | — | ​ | ​ | 402 | ​ | ​ | 403
Employee stock-based compensation costs | ​ | ​ | — | ​ | ​ | 1,852 | ​ | ​ | 1,781
Pension and postretirement benefit plan net periodic benefit cost | ​ | ​ | — | ​ | ​ | 1,091 | ​ | ​ | 1,502
Unrealized gains on investments | ​ | ​ | — | ​ | ​ | (1,632) | ​ | ​ | (2,844)
Gains on sales of assets | ​ | ​ | — | ​ | ​ | (6,638) | ​ | ​ | (6,116)
Equity in earnings of unconsolidated affiliates | ​ | ​ | — | ​ | ​ | (373) | ​ | ​ | 75
Changes in current assets and liabilities, net of acquisitions: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Receivables | ​ | ​ | — | ​ | ​ | 15,357 | ​ | ​ | 7,902
Due from related-party | ​ | ​ | — | ​ | ​ | 2,889 | ​ | ​ | (7,021)
Inventories | ​ | ​ | — | ​ | ​ | (42,441) | ​ | ​ | (11,288)
Other current assets | ​ | ​ | — | ​ | ​ | (4,574) | ​ | ​ | 1,252
Accounts payable | ​ | ​ | — | ​ | ​ | (13,899) | ​ | ​ | (10,662)
Due to related-party | ​ | ​ | — | ​ | ​ | (957) | ​ | ​ | (799)
Other current liabilities | ​ | ​ | — | ​ | ​ | (21,011) | ​ | ​ | 12,855
Pension and postretirement benefit plan contributions | ​ | ​ | — | ​ | ​ | (392) | ​ | ​ | (348)
Other noncurrent changes | ​ | ​ | — | ​ | ​ | (12,069) | ​ | ​ | 5,850
Net cash provided by operating activities | ​ | ​ | — | ​ | ​ | 181,240 | ​ | ​ | 232,404
Investing activities: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Capital expenditures | ​ | ​ | — | ​ | ​ | (174,229) | ​ | ​ | (135,870)
Acquisitions, net of cash acquired | ​ | ​ | — | ​ | ​ | (235,218) | ​ | ​ | (56,681)
Net proceeds from sale or disposition of property and other | ​ | ​ | — | ​ | ​ | 12,017 | ​ | ​ | 8,205
Investments | ​ | ​ | — | ​ | ​ | (837) | ​ | ​ | (1,509)
Net cash used in investing activities | ​ | ​ | — | ​ | ​ | (398,267) | ​ | ​ | (185,855)
Financing activities: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Repayment of long-term debt | ​ | ​ | — | ​ | ​ | (221) | ​ | ​ | (227)
Debt issuance costs | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (28)
Issuance (repayment) of related-party notes, net | ​ | ​ | — | ​ | ​ | 281,983 | ​ | ​ | (2,262)
Net transfers to Parent | ​ | ​ | — | ​ | ​ | (57,959) | ​ | ​ | (45,430)
Net cash provided by (used in) financing activities | ​ | ​ | — | ​ | ​ | 223,803 | ​ | ​ | (47,947)
Increase (decrease) in cash and cash equivalents | ​ | ​ | — | ​ | ​ | 6,776 | ​ | ​ | (1,398)
Cash and cash equivalents - beginning of year | ​ | ​ | — | ​ | ​ | 7,072 | ​ | ​ | 8,470
Cash and cash equivalents - end of year | ​ | ​ | $— | ​ | ​ | $13,848 | ​ | ​ | $7,072

The accompanying notes are an integral part of these consolidated financial statements.
F-8

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Note 1 – Background
On August 4, 2022, MDU Resources Group, Inc. (“MDU Resources”) announced plans to pursue a separation of Knife River Corporation and its subsidiaries (the “Company” or “Knife River”) from MDU Resources. As part of the separation, MDU Resources will transfer Knife River, including its assets and liabilities, to Knife River Holding Company, a newly formed wholly owned subsidiary of MDU Resources, and execute a tax-free spinoff of Knife River Holding Company to stockholders of MDU Resources. The transaction is expected to result in two independent, publicly traded companies: MDU Resources and Knife River Holding Company. Completion of the separation will be subject to, among other things, the effectiveness of a registration statement on Form 10 with the Securities and Exchange Commission, final approval from the board of directors of MDU Resources, receipt of one or more tax opinions, a private letter ruling from the Internal Revenue Service and other customary conditions. MDU Resources may, at any time and for any reason until the proposed transaction is complete, abandon the separation or modify or change its terms. The separation is expected to be complete in 2023, but there can be no assurance regarding the ultimate timing of the separation or that the separation will ultimately occur.
Prior to the separation, the Company was the construction materials and contracting segment of MDU Resources. Its operations are located in the western, central and southern U.S. The Company mines, processes and sells construction aggregates (crushed stone and sand and gravel); produces and sells asphalt mix; and supplies ready-mix concrete. The Company is focused on vertical integration of its contracting services with its construction materials to support the aggregate-based product lines.
Note 2 – Basis of Presentation
Knife River has historically operated as a wholly owned subsidiary of Centennial Energy Holdings, Inc. (“Centennial” or the “Parent”) and an indirect, wholly owned subsidiary of MDU Resources and not as a stand-alone company. The accompanying audited consolidated financial statements and footnotes were prepared on a “carve-out” basis in connection with the expected spinoff, were derived from the consolidated financial statements of MDU Resources as if the Company operated on a stand-alone basis during the periods presented, and were prepared utilizing the legal entity approach in conformity with accounting principles generally accepted in the U.S. (“GAAP”).
All revenues and costs as well as assets and liabilities directly associated with the business activity of the Company are included in the financial statements. The financial statements also include expense allocations for certain functions provided by MDU Resources and Centennial, including, but not limited to certain general corporate expenses related to finance, legal, information technology, human resources, communications, procurement, tax, treasury and insurance. These general corporate expenses are included in the Consolidated Statements of Income within Selling, General and Administrative expenses. The amounts allocated were $[ ], $15.6 million and $14.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. These expenses have been allocated to the Company on the basis of direct usage when identifiable, with the remainder principally allocated on the basis of percent of total capital invested or other allocation methodologies that are considered to be a reasonable reflection of the utilization of the services provided to the benefits received. The allocations may not, however, reflect the expense the Company would have incurred as a stand-alone company for the periods presented. These costs also may not be indicative of the expenses that the Company will incur in the future or would have incurred if the Company had obtained these services from a third party.
Following the spinoff from MDU Resources, the Company may perform certain functions using its own resources or purchased services. For an interim period following the spinoff, however, some of these functions will continue to be provided by MDU Resources under a transition services agreement.
Historically, Knife River has participated in Centennial’s centralized cash management program, including its overall financing arrangements. Knife River has related-party note agreements in place with Centennial for the financing of its capital needs, which are reflected as related-party notes payable on the Consolidated Balance Sheets. Interest expense in the Consolidated Statements of Income reflects the allocation of interest on borrowing and funding associated with the related-party note agreements.
F-9

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
MDU Resources maintains various benefit and stock-based compensation plans at a corporate level while certain defined pension benefit plans are maintained at a subsidiary level. The Company’s employees participate in these programs and the costs associated with its employees are included in the Company’s consolidated financial statements, as well as any net benefit plan assets or obligations.
Management has also evaluated the impact of events occurring after December 31, 2021, up to the date of issuance of these consolidated financial statements.
Principles of consolidation
The consolidated financial statements were prepared in accordance with GAAP and include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions between the businesses comprising the Company have been eliminated in the accompanying consolidated financial statements. Related-party transactions between the Company and MDU Resources or Centennial for general operating activities and intercompany debt have been included in the consolidated financial statements. These related-party transactions have historically been settled in cash and are reflected in the Consolidated Balance Sheets as “Due from related-party” or “Due to related-party” with the aggregate net effect reflected in the Consolidated Statement of Cash Flows within operating activities and “Related-party notes payable” with the aggregate net effect reflected in the Consolidated Statement of Cash Flows within financing activities.
The aggregate net effect of related-party transactions not settled in cash have been reflected in the Consolidated Balance Sheets as the Parent investment within “Other paid-in capital” and in the Consolidated Statements of Cash Flows as “Net transfers to Parent” in the financing activities. See Note 19 for additional information on related-party transactions.
Use of estimates
The preparation of financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the date of the consolidated financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Estimates are used for items such as long-lived assets and goodwill; fair values of acquired assets and liabilities under the acquisition method of accounting; aggregate reserves; property depreciable lives; tax provisions; revenue recognized using the cost-to-cost measure of progress for contracts; expected credit losses; environmental and other loss contingencies; costs on contracting services contracts; actuarially determined benefit costs; asset retirement obligations; lease classification; present value of right-of-use assets and lease liabilities; and the valuation of stock-based compensation. These estimates are based on management’s best knowledge of current events, historical experience, actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As additional information becomes available, or actual amounts are determinable, the recorded estimates are revised. Consequently, operating results can be affected by revisions to prior accounting estimates.
F-10

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Note 3 – Significant Accounting Policies
New accounting standards
The following table provides a brief description of the accounting pronouncements applicable to the Company and the potential impact on its consolidated financial statements and/or disclosures:

Standard | ​ | ​ | Description | ​ | ​ | Effective Date | ​ | ​ | Impact on financial statements/disclosures
Recently adopted accounting standards updates (ASU’s)
ASU 2018-14 - Changes to the Disclosure Requirements for Defined Benefit Plans | ​ | ​ | In August 2018, the Financial Accounting Standards Board (FASB) issued guidance on modifying the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans as part of the disclosure framework project. The guidance removed disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and added disclosure requirements identified as relevant. The guidance added, among other things, the requirement to include an explanation for significant gains and losses related to changes in benefit obligations for the period. The guidance removed, among other things, the disclosure requirement to disclose the amount of net periodic benefit costs to be amortized over the next fiscal year from accumulated other comprehensive income (loss) and the effects a one percentage point change in assumed health care cost trend rates will have on certain benefit components. | ​ | ​ | January 1, 2021 | ​ | ​ | The Company determined the guidance did not materially impact its consolidated financial statement disclosures.
ASU 2019-12 - Simplifying the Accounting for Income Taxes | ​ | ​ | In December 2019, the FASB issued guidance on simplifying the accounting for income taxes by removing certain exceptions in accounting standards codification (ASC) 740 and providing simplification amendments. The guidance removed exceptions on intraperiod tax allocations and reporting and provided simplification on accounting for franchise taxes, tax basis goodwill and tax law changes. | ​ | ​ | January 1, 2021 | ​ | ​ | The Company determined the guidance did not materially impact its results of operations, financial position, cash flows or disclosures.
Recently issued 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 is currently evaluating the impact the guidance will have on its consolidated disclosures for the year ended December 31, 2022.

Cash and cash equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
F-11

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Revenue recognition
Revenue is recognized when a performance obligation is satisfied by transferring control over a product or service to a customer. Revenue is measured based on consideration specified in a contract with a customer and excludes any sales incentives and amounts collected on behalf of third parties. The Company is considered an agent for certain taxes collected from customers. As such, the Company presents revenues net of these taxes at the time of sale to be remitted to governmental authorities, including sales and use taxes.
The Company generates revenue from contracting services and construction materials sales. The Company focuses on the vertical integration of its contracting services with its construction materials to support the aggregate-based product lines. The Company provides contracting services to a customer when a contract has been signed by both the customer and a representative of the Company obligating a service to be provided in exchange for the consideration identified in the contract. The nature of the services provided generally include integrating a set of services and related construction materials into a single project to create a distinct bundle of goods and services, which the Company has determined are single performance obligations. The Company determines the transaction price to include the fixed consideration required pursuant to the original contract price together with any additional consideration, to which the Company expects to be entitled to, associated with executed change orders plus the estimate of variable consideration to which the Company expects to be entitled, subject to the constraint discussed below.
The nature of the Company’s contracts gives rise to several types of variable consideration. Examples of variable consideration include: liquidated damages; performance bonuses or incentives and penalties; claims; unpriced change orders; and index pricing. The variable amounts usually arise upon achievement of certain performance metrics or change in project scope. The Company estimates the amount of revenue to be recognized on variable consideration using one of the two prescribed estimation methods, the expected value method or the most likely amount method, depending on which method best predicts the most likely amount of consideration the Company expects to be entitled to or expects to incur. Assumptions as to the occurrence of future events and the likelihood and amount of variable consideration are made during the contract performance period. Estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on the assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available to management. The Company only includes variable consideration in the estimated transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur or when the uncertainty associated with the variable consideration is resolved. Changes in circumstances could impact management’s estimates made in determining the value of variable consideration recorded. When determining if the variable consideration is constrained, the Company considers if factors exist that could increase the likelihood or the magnitude of a potential reversal of revenue. The Company updates its estimate of the transaction price each reporting period and the effect of variable consideration on the transaction price is recognized as an adjustment to revenue on a cumulative catch-up basis.
Contracting revenue is recognized over time using an input method based on the cost-to-cost measure of progress on a project. This is the preferred method of measuring revenue because the costs incurred have been determined to represent the best indication of the overall progress toward the transfer of such goods or services promised to a customer. Under the cost-to-cost measure of progress, the costs incurred are compared with total estimated costs of a performance obligation. Revenues are recorded proportionately to the costs incurred. The percentage of completion is determined on a performance obligation basis.
The Company also sells construction materials to third parties and internal customers. The contract for material sales is the use of a sales order or an invoice, which includes the pricing and payment terms. All material contracts contain a single performance obligation for the delivery of a single distinct product or a distinct separately identifiable bundle of products and services. Revenue is recognized at a point in time when the performance obligation has been satisfied with the delivery of the products or services. The warranties associated with the sales are those consistent with a standard warranty that the product meets certain specifications for quality or those required by law. For most contracts, amounts billed to customers are due within 30 days of receipt. There are no material obligations for returns, refunds or other similar obligations.
F-12

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Legal costs
The Company expenses external legal fees as they are incurred.
Business combinations
For all business combinations, the Company preliminarily allocates the purchase price of the acquisitions to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition dates and are considered provisional until final fair values are determined or the measurement period has passed. The Company expects to record adjustments as it accumulates 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. The excess of the purchase price over the aggregate fair values is recorded as goodwill. The Company calculated the fair value of the assets acquired in 2021 and 2020 using a market or cost approach (or a combination of both). Fair values for some of the assets were determined based on Level 3 inputs including estimated future cash flows, discount rates, growth rates, sales projections, retention rates and terminal values, all of which require significant management judgment and are susceptible to change. 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 12 months from the respective acquisition dates. Any subsequent measurement period adjustments are not expected to have a material impact on the Company’s results of operations.
Receivables and allowance for expected credit losses
Receivables consist primarily of trade and contracting services contract receivables from the sale of goods and services net of expected credit losses. The Company’s receivables are all due in 12 months or less. The total balance of receivables past due 90 days or more was $[ ], $10.0 million and $13.2 million at December 31, 2022, 2021 and 2020, respectively. Receivables, net consisted of the following at December 31:

| ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ | (In thousands)
Trade receivables | ​ | ​ | $— | ​ | ​ | $98,114
Contracting services contract receivables | ​ | ​ |  | ​ | ​ | 70,768
Retention receivables | ​ | ​ | — | ​ | ​ | 25,173
Receivables, gross | ​ | ​ | — | ​ | ​ | 194,055
Less expected credit loss | ​ | ​ | — | ​ | ​ | 5,406
Receivables, net | ​ | ​ | $— | ​ | ​ | $188,649

The Company’s expected credit losses are determined through a review using historical credit loss experience, changes in asset specific characteristics, current conditions and reasonable and supportable future forecasts, among other specific account data, and is performed at least quarterly. The Company develops and documents its methodology to determine its allowance for expected credit losses. Risk characteristics used by the Company may include customer mix, knowledge of customers and general economic conditions of the various local economies, among others. Specific account balances are written off when management determines the amounts to be uncollectible. Management has reviewed the balance reserved through the allowance for expected credit losses and believes it is reasonable.
Details of the Company’s expected credit losses were as follows:

| ​ | ​ | 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

F-13

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020

| ​ | ​ | Pacific | ​ | ​ | Northwest | ​ | ​ | Mountain | ​ | ​ | North Central | ​ | ​ | Other | ​ | ​ | Total
| ​ | ​ | (In thousands)
Current expected credit loss provision | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ | —
Less write-offs charged against the allowance | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ | —
At December 31, 2022 | ​ | ​ | $ | ​ | ​ | $ | ​ | ​ | $ | ​ | ​ | $ | ​ | ​ | $ | ​ | ​ | $

Inventories
Inventories are valued at the lower of cost or net realizable value using the average cost method. Inventories include production costs incurred as part of the Company's aggregate mining activities. These inventoriable production costs include all mining and processing costs associated with the production of aggregates. Stripping costs incurred during the production phase, which represent costs of removing overburden and waste materials to access mineral deposits, are a component of inventoriable production costs.
Inventories at December 31 consisted of:

| ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ | (In thousands)
Finished products | ​ | ​ | $— | ​ | ​ | $195,616
Raw materials | ​ | ​ | — | ​ | ​ | 68,504
Supplies and parts | ​ | ​ | — | ​ | ​ | 27,325
Total | ​ | ​ | $— | ​ | ​ | $291,445

Property, plant and equipment
Additions to property, plant and equipment are recorded at cost. Gains or losses resulting from the retirement or disposal of assets are recognized as a component of operating income. Generally, property, plant and equipment are depreciated on a straight-line basis over the average useful lives of the assets with the exception of large marine equipment, which is computed using units-of-production. Aggregate mining development costs are capitalized and classified as land improvements and depreciated over the lower of the estimated life of the reserves or the life of the associated improvement. The Company begins capitalizing development costs at a point when reserves are determined to be proven or probable and economically mineable. Capitalization of these costs ceases when production commences. The cost of acquiring reserves in connection with a business combination are valued at fair value. Aggregate reserves, from both owned and leased mining sites, are a component within property, plant and equipment and are depleted using the units-of-production method. The Company uses proven and probable aggregate reserves as the denominator in its units-of production calculation. Exploration costs are expensed as incurred in cost of revenue and production costs are either expensed or capitalized to inventory.
Impairment of long-lived assets excluding goodwill
The Company reviews the carrying values of its long-lived assets, including mining and related assets, whenever events or changes in circumstances indicate that such carrying values may not be recoverable. The Company tests long-lived assets for impairment at a level significantly lower than that of goodwill impairment testing. Long-lived assets or groups of assets are evaluated for impairment at the lowest level of largely independent identifiable cash flows at an individual operation or group of operations collectively serving a local market. The determination of whether an impairment has occurred is based on an estimate of undiscounted future cash flows attributable to the assets, compared to the carrying value of the assets. If impairment has occurred, the amount of the impairment recognized is determined by estimating the fair value of the assets and recording a loss if the carrying value is greater than the fair value.
No impairment losses were recorded in 2021 or 2020. Unforeseen events and changes in circumstances could require the recognition of impairment losses at some future date.
F-14

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net tangible and intangible assets acquired in a business combination. Goodwill is required to be tested for impairment annually, which the Company completes in the fourth quarter, or more frequently if events or changes in circumstances indicate that goodwill may be impaired.
The Company has determined that the reporting units for its goodwill impairment test are its operating segments as they constitute a business for which discrete financial information is available and for which segment management regularly reviews the operating results. For more information on the Company’s operating segments, see Note 16. Goodwill impairment, if any, is measured by comparing the fair value of the Company to its carrying value. If the fair value of a reporting unit exceeds its carrying value, the goodwill of the reporting unit is not impaired. If the carrying value of a reporting unit exceeds its fair value, the Company must record an impairment loss for the amount that the carrying value of the reporting unit, including goodwill, exceeds the fair value of the reporting unit. For the years ended December 31, 2021 and 2020, there were no impairment losses recorded. The Company performed its annual goodwill impairment test in the fourth quarter of 2021 and determined the fair value of each of Knife River’s reporting units substantially exceeded the carrying value at October 31, 2021.
The Company uses a weighted average combination of both an income approach and a market approach to estimate the fair value of its reporting units for its goodwill impairment analysis. Determining the fair value of a reporting unit requires judgment and the use of significant estimates, which include assumptions about Knife River’s future revenue, profitability and cash flows, amount and timing of estimated capital expenditures, inflation rates, weighted average cost of capital, operational plans, and current and future economic conditions, among others. Knife River believes that the estimates and assumptions used in its impairment assessments are reasonable and based on available market information.
Investments
The Company’s investments include the cash surrender value of life insurance policies and insurance contracts. The Company measures its investment in the insurance contracts at fair value with any unrealized gains and losses recorded on the Consolidated Statements of Income.
Leases
Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The Company recognizes leases with an original lease term of 12 months or less in income on a straight-line basis over the term of the lease and does not recognize a corresponding right-of-use asset or lease liability. The Company determines the lease term based on the non-cancelable and cancelable periods in each contract. The non-cancelable period consists of the term of the contract that is legally enforceable and cannot be canceled by either party without incurring a significant penalty. The cancelable period is determined by various factors that are based on who has the right to cancel a contract. If only the lessor has the right to cancel the contract, the Company will assume the contract will continue. If the lessee is the only party that has the right to cancel the contract, the Company looks to asset, entity and market-based factors. If both the lessor and the lessee have the right to cancel the contract, the Company assumes the contract will not continue.
The discount rate used to calculate the present value of the lease liabilities is based upon the implied rate within each contract. If the rate is unknown or cannot be determined, the Company uses an incremental borrowing rate, which is determined by the length of the contract, asset class and Company’s borrowing rates, as of the commencement date of the contract.
Asset retirement obligations
The Company records the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability is initially recorded, the Company capitalizes a cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the Company either settles the obligation for the recorded amount or incurs a gain or loss.
F-15

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Stock-based compensation
Eligible Knife River employees have traditionally participated in MDU Resource’s stock-based compensation plans and will continue to do so until the spinoff is complete. Knife River will record compensation expense on awards granted to its employees, as well as recording an allocation of stock-based compensation expense associated with MDU Resources shared employees.
Compensation awards are accounted for on the estimated fair values at the grant date and compensation expense is recognized over the vesting period. The Company uses the straight-line amortization method to recognize compensation expense related to restricted stock, which only has a service condition. This method recognizes stock compensation expense on a straight-line basis over the requisite service period for the entire award. The Company recognizes compensation expense related to performance awards that vest based on performance metrics and service conditions on a straight-line basis over the service period. Inception-to-date expense is adjusted based upon the determination of the potential achievement of the performance target at each reporting date. The Company recognizes compensation expense related to performance awards with market-based performance metrics on a straight-line basis over the requisite service period.
The Company records the compensation expense for performance share awards using an estimated forfeiture rate. The estimated forfeiture rate is calculated based on an average of actual historical forfeitures. The Company also performs an analysis of any known factors at the time of the calculation to identify any necessary adjustments to the average historical forfeiture rate. At the time actual forfeitures become more than estimated forfeitures, the Company records compensation expense using actual forfeitures.
Income taxes
MDU Resources and its subsidiaries file consolidated federal income tax returns and combined and separate state income tax returns. Pursuant to the tax sharing agreement that exists between MDU Resources and its subsidiaries, federal income taxes paid by MDU Resources, as parent of the consolidated group, are allocated to the individual subsidiaries based on separate company computations of tax. MDU Resources makes a similar allocation for state income taxes paid in connection with combined state filings.
The Company provides deferred federal and state income taxes on all temporary differences between the book and tax basis of the Company’s assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company records uncertain tax positions in accordance with accounting guidance on accounting for income taxes on the basis of a two-step process in which (1) the Company determines whether it is more-likely-than-not that the tax position will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of the tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. Tax positions that do not meet the more-likely-than-not criteria are reflected as a tax liability. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income taxes.
Note 4 – Disaggregation of Revenue
In the following table, revenue is disaggregated by category for each reportable segment. The Company believes this level of disaggregation best depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. For more information on the Company’s reportable segments, see Note 16.

Year ended December 31, 2022 | ​ | ​ | Pacific | ​ | ​ | Northwest | ​ | ​ | Mountain | ​ | ​ | North Central | ​ | ​ | All Other | ​ | ​ | Total
| ​ | ​ | (In thousands)
Aggregates | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Asphalt | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Ready-mix concrete | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —

F-16

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020

Year ended December 31, 2022 | ​ | ​ | Pacific | ​ | ​ | Northwest | ​ | ​ | Mountain | ​ | ​ | North Central | ​ | ​ | All Other | ​ | ​ | Total
| ​ | ​ | (In thousands)
Contracting services public-sector | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Contracting services private-sector | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Other | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Internal sales | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Revenues from contracts with customers | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—

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

Presented in the previous tables are the sales of materials to both third parties and internal customers. Due to consolidation requirements, the internal sales revenues must be eliminated against the construction materials product used in the contracting services to arrive at the external operating revenues.
Note 5 – Uncompleted Contracts
Costs, estimated earnings, and billings on uncompleted contracts at December 31 are summarized as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ | (In thousands)
Costs incurred on uncompleted contracts | ​ | ​ | $— | ​ | ​ | $1,190,922
Estimated earnings | ​ | ​ | — | ​ | ​ | 158,836
| ​ | ​ | — | ​ | ​ | 1,349,758
Less billings to date | ​ | ​ | — | ​ | ​ | (1,360,101)
Net contract liability | ​ | ​ | $— | ​ | ​ | $(10,343)

The timing of revenue recognition may differ from the timing of invoicing to customers. The timing of invoicing to customers does not necessarily correlate with the timing of revenues being recognized under the cost-to-cost method of accounting. Contracts from contracting services are billed as work progresses in
F-17

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
accordance with agreed upon contractual terms. Generally, billing to the customer occurs contemporaneous to revenue recognition. A variance in timing of the billings may result in a contract asset or a contract liability. A contract asset occurs when revenues are recognized under the cost-to-cost measure of progress, which exceeds amounts billed on uncompleted contracts. Such amounts will be billed as standard contract terms allow, usually based on various measures of performance or achievement. A contract liability occurs when there are billings in excess of revenues recognized under the cost-to-cost measure of progress on uncompleted contracts. Contract liabilities decrease as revenue is recognized from the satisfaction of the related performance obligation.
Such amounts are included in the accompanying Consolidated Balance Sheets at December 31 under the following captions:

| ​ | ​ | 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 | ​ | ​ |

The Company recognized $[ ], $33.1 million and $39.0 million in revenue for the years ended December 31, 2022, 2021 and 2020, respectively, which was previously included in contract liabilities at December 31, 2021, 2020 and 2019, respectively.
The Company recognized a net increase in revenues of approximately $[ ], $25.6 million and $16.0 million for the years ended December 31, 2022, 2021 and 2020, respectively, from performance obligations satisfied in prior periods.
Remaining performance obligations
The remaining performance obligations, also referred to as backlog, include unrecognized revenues that the Company reasonably expects to be realized. These unrecognized revenues can include: projects that have a written award, a letter of intent, a notice to proceed, an agreed upon work order to perform work on mutually accepted terms and conditions and change orders or claims to the extent management believes additional contract revenues will be earned and are deemed probable of collection. The majority of the Company’s contracts for contracting services have an original duration of less than one year.
At December 31, 2021, the Company’s remaining performance obligations were $707.7 million. The Company expects to recognize the following revenue amounts in future periods related to these remaining performance obligations: $665.0 million within the next 12 months; $38.4 million within the next 13 to 24 months; and $4.3 million thereafter.
Note 6 – Business Combinations
The following acquisitions were accounted for as business combinations in accordance with ASC 805 – Business Combinations. The results of the acquired businesses have been included in the Company’s Consolidated Financial Statements beginning on the acquisition date. 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 the Company’s financial position or results of operations.
The 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.
F-18

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
The following is a listing of the acquisitions made during 2021 and 2020:

• | Baker Rock Resources and Oregon Mainline Paving, two premier construction materials companies located around the Portland, Oregon metro area, acquired by the Northwest segment in November 2021. At December 31, 2021, the purchase price allocation was preliminary and will be finalized within 12 months of the acquisition date.

• | Mt. Hood Rock, a construction aggregates business in Oregon, acquired by the Northwest segment in April 2021. At December 31, 2021, the purchase price allocation was preliminary and will be finalized within 12 months of the acquisition date.

• | The assets of McMurry Ready-Mix Co., an aggregates and concrete supplier in Wyoming, acquired by the Mountain segment in December 2020. In the third quarter of 2021, the Company finalized the provisional accounting and recorded an immaterial measurement period adjustment.

• | The assets of Oldcastle Infrastructure Spokane, a prestressed-concrete business in Washington, acquired by the Northwest segment in February 2020. As of December 31, 2020, the purchase price adjustments had been settled with no material adjustments to the provisional accounting.

The total purchase price for acquisitions that occurred in 2021 was $236.1 million, subject to certain adjustments, with cash acquired totaling $900,000. The purchase price includes consideration paid of $235.2 million. The amounts allocated to the aggregated assets acquired and liabilities assumed during 2021 were as follows: $17.0 million to current assets; $179.8 million to property, plant and equipment; $50.6 million to goodwill; $2.2 million to other intangible assets; $8.7 million to current liabilities; $2.5 million to noncurrent liabilities and $3.2 million to deferred tax liabilities. The intangible assets include non-compete agreements, customer relationships and trade names. The intangible assets fair value is based on various income approach methods, including, multi-period excess earnings, relief-from-royalty and the with and without method. The amortizable intangible assets are being amortized using a straight-line method over a weighted average remaining period of approximately 5.5 years. The Company issued debt to finance these acquisitions.
The total purchase price for acquisitions that occurred in 2020 was $56.7 million, subject to certain adjustments. The amounts allocated to the aggregated assets acquired and liabilities assumed during 2020 were as follows: $17.0 million to current assets; $26.0 million to property, plant and equipment; $8.8 million to goodwill; $8.6 million to other intangible assets; $2.3 million to current liabilities and $1.4 million to noncurrent liabilities - other. The intangible assets include non-compete agreements, customer relationships and backlog. The intangible assets fair value is based on various income approach methods, including, multi-period excess earnings and the with and without method. The amortizable intangible assets are being amortized using a straight-line method over a weighted average remaining period of approximately 8.5 years. The Company issued debt to finance these acquisitions.
Costs incurred for acquisitions are included in selling, general and administrative expenses on the Consolidated Statements of Income and were not material for the years ended December 31, 2021 and 2020.
Note 7 – Property, Plant and Equipment
Property, plant and equipment at December 31 was as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | Weighted Average Depreciable Life in Years
| ​ | ​ | (In thousands) | ​ | ​ |
Land | ​ | ​ | $— | ​ | ​ | $149,066 | ​ | ​ | —
Aggregate reserves | ​ | ​ | — | ​ | ​ | 584,683 | ​ | ​ | *
Buildings and improvements | ​ | ​ | — | ​ | ​ | 149,262 | ​ | ​ | 21
Machinery, vehicles and equipment | ​ | ​ | — | ​ | ​ | 1,414,260 | ​ | ​ | 12
Construction in progress | ​ | ​ | — | ​ | ​ | 50,426 | ​ | ​ | —

F-19

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | Weighted Average Depreciable Life in Years
| ​ | ​ | (In thousands) | ​ | ​ |
Less: accumulated depreciation and depletion | ​ | ​ | — | ​ | ​ | 1,097,387 | ​ | ​ |
Net property, plant and equipment | ​ | ​ | $— | ​ | ​ | $1,250,310 | ​ | ​ |

* | Depleted using the units-of-production method based on proven and probable aggregate reserves.

Total depreciation and depletion expense was $[  ], $93.9 million and $82.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Note 8 – Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill were as follows:

| ​ | ​ | Balance at January 1, 2022 | ​ | ​ | Goodwill Acquired During the Year | ​ | ​ | Measurement Period Adjustments | ​ | ​ | Balance at December 31, 2022
| ​ | ​ | (In thousands)
Pacific | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Northwest | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Mountain | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
North Central | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
All other | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Total | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—

| ​ | ​ | 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

Other amortizable intangible assets at December 31 were as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ | (In thousands)
Customer relationships | ​ | ​ | $— | ​ | ​ | $18,540
Less accumulated amortization | ​ | ​ | — | ​ | ​ | 5,633
| ​ | ​ | — | ​ | ​ | 12,907
Noncompete agreements | ​ | ​ | — | ​ | ​ | 4,039
Less accumulated amortization | ​ | ​ | — | ​ | ​ | 2,471
| ​ | ​ | — | ​ | ​ | 1,568
Other | ​ | ​ | — | ​ | ​ | 9,579
Less accumulated amortization | ​ | ​ | — | ​ | ​ | 7,826
| ​ | ​ | — | ​ | ​ | 1,753
Total | ​ | ​ | $— | ​ | ​ | $16,228

The previous tables include goodwill and intangible assets associated with the business combinations completed during 2021. For more information related to these business combinations, see Note 6.
F-20

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Amortization expense for amortizable intangible assets for the years ended December 31, 2022, 2021 and 2020 was $[ ], $2.6 million and $3.3 million, respectively. The amounts of estimated amortization expense for identifiable intangible assets is $2.7 million in 2022, $2.5 million in 2023, $2.4 million in 2024, $2.2 million in 2025, $1.7 million in 2026, and $4.7 million thereafter.
Note 9 – Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The fair value ASC establishes a hierarchy for grouping assets and liabilities, based on the significance of inputs. The estimated fair values of the Company’s assets and liabilities measured on a recurring basis are determined using the market approach.
The Company measures its investments in certain fixed-income and equity securities at fair value with changes in fair value recognized in income. The Company anticipates using these investments, which consist of insurance contracts, to satisfy its obligations as a participant in MDU Resources’ unfunded, nonqualified defined benefit plans for the Company’s executive officers and certain key management employees, and invests in these fixed-income and equity securities for the purpose of earning investment returns and capital appreciation. These investments, which totaled $[  ], $21.6 million and $19.5 million as of December 31, 2022, 2021 and 2020, respectively, are classified as investments on the Consolidated Balance Sheets. The net unrealized gains on these investments for the years ended December 31, 2022, 2021 and 2020, were $[  ], $1.4 million and $2.5 million, respectively. The change in fair value, which is considered part of the cost of the plan, is classified in other income on the Consolidated Statements of Income.
The Company’s Level 2 money market funds are valued at the net asset value of shares held at the end of the period, based on published market quotations on active markets, or using other known sources including pricing from outside sources. The estimated fair value of the Company’s Level 2 insurance contracts are based on contractual cash surrender values that are determined primarily by investments in managed separate accounts of the insurer. These amounts approximate fair value. The managed separate accounts are valued based on other observable inputs or corroborated market data.
Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value.
The Company’s assets measured at fair value on a recurring basis were as follows:

| ​ | ​ | 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 | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Insurance contracts* | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Total assets measured at fair value | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—

* | The insurance contracts invest approximately [   ] percent in fixed-income investments, [   ] percent in common stock of large-cap companies, [   ] percent in common stock of mid-cap companies, [   ] percent in common stock of small-cap companies, [   ] percent in target date investments and [   ] percent in cash equivalents.

F-21

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020

| ​ | ​ | 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.

Note 10 – Leases
Most of the leases the Company enters into are for equipment, buildings and vehicles as part of their ongoing operations. The Company determines if an arrangement contains a lease at inception of a contract and accounts for all leases in accordance with ASC 842 - Leases.
The recognition of leases requires the Company to make estimates and assumptions that affect the lease classification and the assets and liabilities recorded. The accuracy of lease assets and liabilities reported on the Consolidated Financial Statements depends on, among other things, management’s estimates of interest rates used to discount the lease assets and liabilities to their present value, as well as the lease terms based on the unique facts and circumstances of each lease.
Lessee accounting
The leases the Company has entered into as part of its ongoing operations are considered operating leases and are recognized on the Consolidated Balance Sheets as operating lease right-of-use assets, current operating lease liabilities and noncurrent operating lease liabilities. The corresponding lease costs are included in cost of revenue and selling, general and administrative expenses on the Consolidated Statements of Income.
Generally, the leases for vehicles and equipment have a term of five years or less and buildings have a longer term of up to 35 years or more. To date, the Company does not have any residual value guarantee amounts probable of being owed to a lessor, financing leases or material agreements with related parties.
The following tables provide information on the Company’s operating leases at and for the years ended December 31:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Lease costs: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Operating lease cost | ​ | ​ | $— | ​ | ​ | $21,914 | ​ | ​ | $25,303
Variable lease cost | ​ | ​ | — | ​ | ​ | 84 | ​ | ​ | 150
Short-term lease cost | ​ | ​ | — | ​ | ​ | 53,016 | ​ | ​ | 59,233
Total lease costs | ​ | ​ | $— | ​ | ​ | $75,014 | ​ | ​ | $84,686

F-22

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (Dollars in thousands)
Weighted average remaining lease term | ​ | ​ |  | ​ | ​ | 1.63 years | ​ | ​ | 1.76 years
Weighted average discount rate | ​ | ​ |  | ​ | ​ | 3.63% | ​ | ​ | 3.93%
Cash paid for amounts included in the measurement of lease liabilities | ​ | ​ |  | ​ | ​ | $21,914 | ​ | ​ | $25,303

The reconciliation of future undiscounted cash flows to operating lease liabilities presented on the Consolidated Balance Sheet at December 31, 2021 was as follows:

| ​ | ​ | (In thousands)
2022 | ​ | ​ | $16,078
2023 | ​ | ​ | 11,253
2024 | ​ | ​ | 8,361
2025 | ​ | ​ | 5,665
2026 | ​ | ​ | 2,792
Thereafter | ​ | ​ | 13,519
Total | ​ | ​ | 57,668
Less discount | ​ | ​ | 7,540
Total operating lease liabilities | ​ | ​ | $50,128

Note 11 – Asset Retirement Obligations
The Company records obligations related to the reclamation of certain aggregate properties and certain other obligations associated with leased and owned properties. A reconciliation of the Company’s liability, which the current portion of $6.1 million is included in other accrued liabilities and the noncurrent amount of $27.3 million is included in other liabilities on the Consolidated Balance Sheets, for the years ended December 31 was as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ | (In thousands)
Balance at beginning of year | ​ | ​ | $— | ​ | ​ | $30,932
Liabilities incurred | ​ | ​ | — | ​ | ​ | 1,655
Liabilities acquired | ​ | ​ | — | ​ | ​ | 1,805
Liabilities settled | ​ | ​ | — | ​ | ​ | (2,613)
Accretion expense | ​ | ​ | — | ​ | ​ | 1,627
Balance at end of year | ​ | ​ | $— | ​ | ​ | $33,406

Note 12 – Stock-Based Compensation
Until the spinoff is complete, key employees of Knife River will continue to participate in the stock-based compensation plans authorized and managed by MDU Resources. Knife River uses the straight-line amortization method to recognize compensation expense related to restricted stock, which only has a service condition. Knife River recognizes compensation expense related to performance awards with market-based performance metrics on a straight-line basis over the requisite service period. Total stock-based compensation expense (after tax) for participants of the Company was $[ ], $1.4 million and $1.3 million in 2022, 2021 and 2020, respectively. As of December 31, 2021, total remaining unrecognized compensation expense related to stock-based compensation for the Company was approximately $1.4 million (before income taxes), which will be amortized over a weighted average period of 1.7 years.
Restricted stock awards
In February 2021, key employees of the Company were granted restricted stock awards under MDU Resources’ long-term performance-based incentive plan. The shares vest over three years, contingent on
F-23

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
continued employment. Compensation expense is recognized over the vesting period. At December 31, 2021, the number of outstanding shares granted was 11,550 with a weighted average grant-date fair value of $27.35 per share.
Performance share awards
Since 2003, key employees of the Company have been granted performance share awards each year under MDU Resources’ long-term performance-based incentive plan authorized by MDU Resources’ compensation committee. The compensation committee has the authority to select the recipients of awards, determine the type and size of awards, and establish certain terms and conditions of award grants. Share awards are generally earned over a three-year vesting period and tied to specific financial metrics. Upon vesting, participants receive dividends that accumulate during the vesting period.
Target grants of performance shares outstanding at December 31, 2021 for the Company were as follows:

Grant Date | ​ | ​ | Performance Period | ​ | ​ | Target Grant of Shares
February 2020 | ​ | ​ | 2020-2022 | ​ | ​ | 34,595
February 2021 | ​ | ​ | 2021-2023 | ​ | ​ | 34,655

Under the market condition for these performance share awards, participants may earn from zero to 200 percent of the apportioned target grant of shares based on the MDU Resources’ total stockholder return relative to that of the selected peer group. Compensation expense is based on the grant-date fair value as determined by Monte Carlo simulation. The blended volatility term structure ranges are comprised of 50 percent historical volatility and 50 percent implied volatility. Risk-free interest rates were based on U.S. Treasury security rates in effect as of the grant date. Assumptions used for grants applicable to the market condition for certain performance shares issued in 2022, 2021 and 2020 were:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
Weighted average grant-date fair value | ​ | ​ | $ — | ​ | ​ | $37.96 | ​ | ​ | $40.75
Blended volatility range | ​ | ​ | — | ​ | ​ | 35.37% - 46.35% | ​ | ​ | 15.30% - 15.97%
Risk-free interest rate range | ​ | ​ | — | ​ | ​ | .02% - .20% | ​ | ​ | 1.45% - 1.62%
Weighted average discounted dividends per share | ​ | ​ | $ — | ​ | ​ | $3.16 | ​ | ​ | $2.91

Under the performance conditions for these performance share awards, participants may earn from zero to 200 percent of the apportioned target grant of shares. The performance conditions are based on MDU Resources’ compound annual growth rate in earnings from continuing operations before interest, taxes, depreciation, depletion and amortization and the Company’s compound annual growth rate in earnings from continuing operations. The weighted average grant-date fair value per share for the performance shares applicable to these performance conditions issued in 2022, 2021 and 2020 was $[ ], $27.35 and $31.63, respectively.
The fair value of the performance shares that vested during the years ended December 31, 2022, 2021 and 2020, was $[   ], $1.7 million and $1.3 million, respectively.
A summary of the status of the performance share awards for the year ended December 31, 2021, was as follows:

| ​ | ​ | Number of Shares | ​ | ​ | Weighted Average Grant-Date Fair Value
Nonvested at beginning of period | ​ | ​ | 75,513 | ​ | ​ | $33.19
Granted | ​ | ​ | 34,655 | ​ | ​ | $32.66
Additional performance shares earned | ​ | ​ | 14,564 | ​ | ​ | $22.68
Less: | ​ | ​ |  | ​ | ​ |
Vested | ​ | ​ | 55,482 | ​ | ​ | $28.57
Nonvested at end of period | ​ | ​ | 69,250 | ​ | ​ | $34.40

F-24

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Note 13 – Accumulated Other Comprehensive Loss
The Company’s accumulated other comprehensive loss is comprised of losses on derivative instruments qualifying as hedges and postretirement liability adjustments.
The after-tax changes in the components of accumulated other comprehensive loss were as follows:

| ​ | ​ | Net Unrealized Loss on Derivative Instruments Qualifying as Hedges | ​ | ​ | Post- retirement Liability Adjustment | ​ | ​ | Total Accumulated Other Comprehensive Loss
| ​ | ​ | (In thousands)
At December 31, 2019 | ​ | ​ | $(1,078) | ​ | ​ | $(27,376) | ​ | ​ | $(28,454)
Other comprehensive loss before reclassifications | ​ | ​ | — | ​ | ​ | (1,898) | ​ | ​ | (1,898)
Amounts reclassified from accumulated other comprehensive loss | ​ | ​ | 328 | ​ | ​ | 1,071 | ​ | ​ | 1,399
Net current-period other comprehensive income (loss) | ​ | ​ | 328 | ​ | ​ | (827) | ​ | ​ | (499)
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 | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Amounts reclassified from accumulated other comprehensive loss | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Net current-period other comprehensive income | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
At December 31, 2022 | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—

The following amounts were reclassified out of accumulated other comprehensive loss into net income. The amounts presented in parentheses indicate a decrease to net income on the Consolidated Statements of Income. The reclassifications for the years ended December 31 were as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | Location on Consolidated Statements of Income
| ​ | ​ | (In thousands)
Reclassification adjustment for loss on derivative instruments included in net income | ​ | ​ | $— | ​ | ​ | $439 | ​ | ​ | $435 | ​ | ​ | Interest expense
| ​ | ​ | — | ​ | ​ | (107) | ​ | ​ | (107) | ​ | ​ | Income taxes
| ​ | ​ | — | ​ | ​ | 332 | ​ | ​ | 328 | ​ | ​ |
Amortization of postretirement liability losses included in net periodic benefit cost | ​ | ​ | — | ​ | ​ | 1,453 | ​ | ​ | 1,422 | ​ | ​ | Other income
| ​ | ​ | — | ​ | ​ | (363) | ​ | ​ | (351) | ​ | ​ | Income taxes
| ​ | ​ | — | ​ | ​ | 1,090 | ​ | ​ | 1,071 | ​ | ​ |
Total reclassifications | ​ | ​ | $— | ​ | ​ | $1,422 | ​ | ​ | $1,399 | ​ | ​ |

F-25

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Note 14 – Income Taxes
Income tax expense on the Consolidated Statements of Income for the years ended December 31 was as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Current: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Federal | ​ | ​ | $— | ​ | ​ | $4,270 | ​ | ​ | $32,682
State | ​ | ​ | — | ​ | ​ | 6,331 | ​ | ​ | 12,996
| ​ | ​ | — | ​ | ​ | 10,601 | ​ | ​ | 45,678
Deferred: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Income taxes: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Federal | ​ | ​ | — | ​ | ​ | 26,793 | ​ | ​ | 2,972
State | ​ | ​ | — | ​ | ​ | 6,065 | ​ | ​ | (1,219)
| ​ | ​ | — | ​ | ​ | 32,858 | ​ | ​ | 1,753
Total income tax expense | ​ | ​ | $— | ​ | ​ | $43,459 | ​ | ​ | $47,431

Components of deferred tax assets and deferred tax liabilities at December 31 were as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ | (In thousands)
Deferred tax assets: | ​ | ​ |  | ​ | ​ |
Accrued pension costs | ​ | ​ | $— | ​ | ​ | $15,011
Operating lease liabilities | ​ | ​ | — | ​ | ​ | 12,966
Asset retirement obligations | ​ | ​ | — | ​ | ​ | 8,696
Deferred compensation/compensation related | ​ | ​ | — | ​ | ​ | 14,654
Net operating loss/credit carryforward | ​ | ​ | — | ​ | ​ | 11,329
Capitalized inventory overheads | ​ | ​ | — | ​ | ​ | 4,683
Payroll tax deferral | ​ | ​ | — | ​ | ​ | 2,329
Other | ​ | ​ | — | ​ | ​ | 8,032
Total deferred tax assets | ​ | ​ | — | ​ | ​ | 77,700
Deferred tax liabilities: | ​ | ​ |  | ​ | ​ |
Basis differences on property, plant and equipment | ​ | ​ | — | ​ | ​ | 199,928
Operating lease right-of-use-assets | ​ | ​ | — | ​ | ​ | 12,966
Intangible assets | ​ | ​ | — | ​ | ​ | 9,760
Other | ​ | ​ | — | ​ | ​ | 12,243
Total deferred tax liabilities | ​ | ​ | — | ​ | ​ | 234,897
Valuation allowance | ​ | ​ | — | ​ | ​ | 11,329
Net deferred income tax liability | ​ | ​ | $— | ​ | ​ | $(168,526)

As of December 31, 2022, 2021 and 2020, the Company had various state income tax net operating loss carryforwards of $[ ], $148.9 million and $137.1 million, respectively, and federal and state income tax credit carryforwards, excluding alternative minimum tax credit carryforwards, of $[ ], $591,000 and $719,000, respectively. The state income tax credit carryforwards are due to expire in 2024. Changes in tax regulations or assumptions regarding current and future taxable income could require additional valuation allowances in the future.
F-26

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
The following table reconciles the change in the net deferred income tax liability from December 31, 2021, to December 31, 2022, to deferred income tax expense:

| ​ | ​ | 2022 | ​ | ​ | 2022
| ​ | ​ | (In thousands)
Change in net deferred income tax liability from the preceding table | ​ | ​ | $— | ​ | ​ | $37,516
Deferred income taxes established due to an acquisition | ​ | ​ | — | ​ | ​ | (3,177)
Deferred taxes associated with other comprehensive loss | ​ | ​ | — | ​ | ​ | (1,481)
Deferred income tax expense for the period | ​ | ​ | $— | ​ | ​ | $32,858

Total income tax expense differs from the amount computed by applying the statutory federal income tax rate to income before taxes. The reasons for this difference were as follows:

Years ended December 31, | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | Amount | ​ | ​ | % | ​ | ​ | Amount | ​ | ​ | % | ​ | ​ | Amount | ​ | ​ | %
| ​ | ​ | (Dollars in thousands)
Computed tax at federal statutory rate | ​ | ​ | $— | ​ | ​ |  | ​ | ​ | $36,375 | ​ | ​ | 21.0 | ​ | ​ | $40,899 | ​ | ​ | 21.0
Increases (reductions) resulting from: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
State income taxes, net of federal income tax | ​ | ​ | — | ​ | ​ |  | ​ | ​ | 9,429 | ​ | ​ | 5.4 | ​ | ​ | 10,450 | ​ | ​ | 5.4
Depletion allowance | ​ | ​ | — | ​ | ​ |  | ​ | ​ | (1,893) | ​ | ​ | (1.1) | ​ | ​ | (1,756) | ​ | ​ | (.9)
Deductible K-Plan dividends | ​ | ​ | — | ​ | ​ |  | ​ | ​ | (392) | ​ | ​ | (.2) | ​ | ​ | (372) | ​ | ​ | (.2)
Resolution of tax matters and uncertain tax positions | ​ | ​ | — | ​ | ​ |  | ​ | ​ | (64) | ​ | ​ | — | ​ | ​ | (1,375) | ​ | ​ | (.7)
Other | ​ | ​ | — | ​ | ​ |  | ​ | ​ | 4 | ​ | ​ | — | ​ | ​ | (415) | ​ | ​ | (.2)
Total income tax expense | ​ | ​ | $— | ​ | ​ |  | ​ | ​ | $43,459 | ​ | ​ | 25.1 | ​ | ​ | $47,431 | ​ | ​ | 24.4

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and local jurisdictions. The Company is no longer subject to U.S. federal or non-U.S. income tax examinations by tax authorities for years ending prior to 2018. With few exceptions, as of December 31, 2021, the Company is no longer subject to state and local income tax examinations by tax authorities for years ending prior to 2018.
For the years ended December 31, 2021 and 2020, total reserves for uncertain tax positions were not material. The Company recognizes interest and penalties accrued relative to unrecognized tax benefits in income tax expense.
Note 15 – Cash Flow Information
Cash expenditures for interest and income taxes for the years ended December 31 were as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Interest | ​ | ​ | $— | ​ | ​ | $19,121 | ​ | ​ | $14,805
Income taxes paid, net | ​ | ​ | $— | ​ | ​ | $34,784 | ​ | ​ | $41,050

Noncash investing and financing transactions at December 31 were as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Property, plant and equipment additions in accounts payable | ​ | ​ | $— | ​ | ​ | $15,840 | ​ | ​ | $7,762
Right-of-use assets obtained in exchange for new operating lease liabilities | ​ | ​ | — | ​ | ​ | $11,497 | ​ | ​ | $22,428
Capital contribution from Parent in the form of common stock | ​ | ​ | — | ​ | ​ | $1,852 | ​ | ​ | $1,781
Debt assumed in connection with a business combination | ​ | ​ | $— | ​ | ​ | $10 | ​ | ​ | $—

F-27

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Note 16 – Business Segment Data
The Company’s reportable segments are those that are based on the Company’s method of internal reporting and management of the business. The Company focuses on the vertical integration of its products and services by offering customers a single-source for construction materials and related contracting services. The Company operates in 14 states across the U.S. Its operating segments include: Pacific, Northwest, Mountain, North Central, South and Energy Services. The operating segments are organized by geographic region in the United States due to the cyclical nature of the construction work performed. The Company’s reportable segments are Pacific, Northwest, Mountain and North Central. The South and Energy Services operating segments do not meet the criteria to be reportable segments and, as such, are combined with its corporate services in All Other. Each segment is led by a segment manager that reports to the Company’s president who is also the Company’s chief operating decision maker. The Company’s chief operating decision maker evaluates the performance of the segments and allocates resources to them based on earnings before interest, taxes, depreciation, depletion and amortization.
All of the segments mine, process, and sell construction aggregates (crushed stone and sand and gravel); produce and sell asphalt; and produce and sell ready-mix concrete as well as vertically integrating its contracting services to support the aggregate based product lines including heavy-civil construction, asphalt and concrete paving, and site development and grading. Although not common to all locations, Other includes the sale of cement, production and distribution of modified liquid asphalt, merchandise and other building materials and related services.
The information below follows the same accounting policies as described in Note 3. Information on the Company’s segments as of December 31 and for the years then ended was as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
External operating revenues: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Pacific | ​ | ​ | $— | ​ | ​ | $427,229 | ​ | ​ | $454,318
Northwest | ​ | ​ | — | ​ | ​ | 474,941 | ​ | ​ | 413,723
Mountain | ​ | ​ | — | ​ | ​ | 479,543 | ​ | ​ | 450,852
North Central | ​ | ​ | — | ​ | ​ | 561,661 | ​ | ​ | 567,473
All Other | ​ | ​ | — | ​ | ​ | 285,556 | ​ | ​ | 291,636
Total external operating revenues | ​ | ​ | $— | ​ | ​ | $2,228,930 | ​ | ​ | $2,178,002
Intersegment operating revenues: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Pacific | ​ | ​ | $— | ​ | ​ | $55 | ​ | ​ | $148
Northwest | ​ | ​ | — | ​ | ​ | 3,102 | ​ | ​ | 2,414
Mountain | ​ | ​ | — | ​ | ​ | 26 | ​ | ​ | 18
North Central | ​ | ​ | — | ​ | ​ | 122 | ​ | ​ | 3,358
All Other | ​ | ​ | — | ​ | ​ | 31,827 | ​ | ​ | 34,236
Total intersegment operating revenues | ​ | ​ | $— | ​ | ​ | $​35,132 | ​ | ​ | $​40,174
EBITDA: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Pacific | ​ | ​ | $— | ​ | ​ | $67,124 | ​ | ​ | $79,136
Northwest | ​ | ​ | — | ​ | ​ | 80,624 | ​ | ​ | 74,360
Mountain | ​ | ​ | — | ​ | ​ | 65,017 | ​ | ​ | 52,407
North Central | ​ | ​ | — | ​ | ​ | 72,301 | ​ | ​ | 71,723
All Other | ​ | ​ | — | ​ | ​ | 8,340 | ​ | ​ | 27,333
Total segment EBITDA | ​ | ​ | $— | ​ | ​ | $293,406 | ​ | ​ | $304,959

F-28

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Capital expenditures: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Pacific | ​ | ​ | $— | ​ | ​ | $26,675 | ​ | ​ | $22,108
Northwest | ​ | ​ | — | ​ | ​ | 278,946 | ​ | ​ | 45,963
Mountain | ​ | ​ | — | ​ | ​ | 47,648 | ​ | ​ | 59,156
North Central | ​ | ​ | — | ​ | ​ | 28,838 | ​ | ​ | 17,307
All Other | ​ | ​ | — | ​ | ​ | 35,417 | ​ | ​ | 47,101
Total capital expenditures* | ​ | ​ | $— | ​ | ​ | $417,524 | ​ | ​ | $191,635
Assets: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Pacific | ​ | ​ | $— | ​ | ​ | $414,103 | ​ | ​ | $​403,023
Northwest | ​ | ​ | — | ​ | ​ | 714,098 | ​ | ​ | 452,126
Mountain | ​ | ​ | — | ​ | ​ | 278,608 | ​ | ​ | 248,216
North Central | ​ | ​ | — | ​ | ​ | 414,619 | ​ | ​ | 408,571
All Other | ​ | ​ | — | ​ | ​ | 360,396 | ​ | ​ | 311,571
Total assets | ​ | ​ | $— | ​ | ​ | $2,181,824 | ​ | ​ | $1,823,507
Property, plant and equipment: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Pacific | ​ | ​ | $— | ​ | ​ | $505,103 | ​ | ​ | $486,401
Northwest | ​ | ​ | — | ​ | ​ | 759,482 | ​ | ​ | 553,632
Mountain | ​ | ​ | — | ​ | ​ | 369,732 | ​ | ​ | 328,037
North Central | ​ | ​ | — | ​ | ​ | 419,075 | ​ | ​ | 396,427
All Other | ​ | ​ | — | ​ | ​ | 294,304 | ​ | ​ | 263,978
Less accumulated depreciation and depletion | ​ | ​ | — | ​ | ​ | 1,097,387 | ​ | ​ | 1,038,730
Net property, plant and equipment | ​ | ​ | $— | ​ | ​ | $1,250,309 | ​ | ​ | $989,745

* | Capital expenditures for 2022, 2021 and 2020 include noncash transactions for capital expenditure-related accounts payable totaling $[   ], $(8.1) million and $900,000, respectively.

A reconciliation of reportable segment operating revenues to consolidated operating revenues is as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Total reportable segment operating revenues | ​ | ​ | $— | ​ | ​ | $1,946,679 | ​ | ​ | $1,892,304
Other revenue | ​ | ​ |  | ​ | ​ | 317,383 | ​ | ​ | 325,872
Elimination of intersegment operating revenues | ​ | ​ | — | ​ | ​ | (35,132) | ​ | ​ | (40,174)
Total consolidated operating revenues | ​ | ​ | $— | ​ | ​ | $2,228,930 | ​ | ​ | $2,178,002

A reconciliation of reportable segment assets to consolidated assets is as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Total assets for reportable segments | ​ | ​ | $— | ​ | ​ | $1,821,428 | ​ | ​ | $​1,511,936
Other assets | ​ | ​ |  | ​ | ​ | 3,529,536 | ​ | ​ | 2,854,648
Elimination of intercompany receivables | ​ | ​ | — | ​ | ​ | (3,169,140) | ​ | ​ | (2,543,077)
Total consolidated assets | ​ | ​ | $— | ​ | ​ | $2,181,824 | ​ | ​ | $1,823,507

F-29

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
A reconciliation of segment EBITDA to consolidated income before income taxes is as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Total segment EBITDA | ​ | ​ | $— | ​ | ​ | $293,406 | ​ | ​ | $304,959
Depreciation, depletion and amortization | ​ | ​ |  | ​ | ​ | 100,974 | ​ | ​ | 89,626
Interest | ​ | ​ | — | ​ | ​ | 19,218 | ​ | ​ | 20,577
Income before income taxes | ​ | ​ | $— | ​ | ​ | $173,214 | ​ | ​ | $194,756

Note 17 – Employee Benefit Plans
Pension and other postretirement benefit plans
The Company participates in self-sponsored qualified defined benefit plans which are accounted for as single-employer plans and are reflected in the Company’s consolidated financial statements. Prior to 2010, the pension plan benefits and accruals for the nonunion plan were frozen and on June 30, 2015, the remaining union plan was frozen. These employees were eligible to receive additional defined contribution plan benefits. In October 2018, the Company transferred the liability of certain participants in the nonunion defined benefit pension plan, who are currently receiving benefits, to an annuity company. The transfer of the benefit payments for these participants reduced the Company’s liability and future premiums.
The postretirement benefit plan in which the Company participates relates to a multiple-employer plan sponsored by MDU Resources. The plan maintains separate accounting records for each plan, including separate actuarial valuations, therefore accounting for the plan as single-employer plans within the Company’s consolidated financial statements. Effective January 1, 2015, eligibility to receive retiree medical benefits was modified at certain of the Company’s businesses. Employees who had attained age 55 with 10 years of continuous service by December 31, 2010, will be provided the current retiree medical insurance benefits or can elect the new benefit, if desired, regardless of when they retire. All other current employees must meet the new eligibility criteria of age 55 and 10 years of continuous service at the time they retire. These employees will be eligible for a specified company funded Retiree Reimbursement Account. Employees hired after December 31, 2014, will not be eligible for retiree medical benefits.
In 2012, the Company modified health care coverage for certain retirees. Effective January 1, 2013, post-65 coverage was replaced by a fixed-dollar subsidy for retirees and spouses to be used to purchase individual insurance through an exchange.
The Company uses a measurement date of December 31 for all of its pension and postretirement benefit plans.
Changes in benefit obligation and plan assets and amounts recognized in the Consolidated Balance Sheets at December 31 were as follows:

| ​ | ​ | Pension Benefits | ​ | ​ | Other Postretirement Benefits
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ |  | ​ | ​ | (In thousands) | ​ | ​ |
Change in benefit obligation: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Benefit obligation at beginning of year | ​ | ​ | $— | ​ | ​ | $46,783 | ​ | ​ | $— | ​ | ​ | $21,790
Service cost | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 567
Interest cost | ​ | ​ | — | ​ | ​ | 1,053 | ​ | ​ | — | ​ | ​ | 492
Plan participants’ contributions | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 3
Actuarial (gain) loss | ​ | ​ | — | ​ | ​ | (832) | ​ | ​ | — | ​ | ​ | (2,769)
Benefits paid | ​ | ​ | — | ​ | ​ | (2,641) | ​ | ​ | — | ​ | ​ | (603)
Benefit obligation at end of year | ​ | ​ | $— | ​ | ​ | $44,363 | ​ | ​ | $— | ​ | ​ | $19,480

F-30

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020

| ​ | ​ | Pension Benefits | ​ | ​ | Other Postretirement Benefits
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ |  | ​ | ​ | (In thousands) | ​ | ​ |
Change in net plan assets: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Fair value of plan assets at beginning of year | ​ | ​ | $— | ​ | ​ | $40,710 | ​ | ​ | $— | ​ | ​ | $505
Actual return on plan assets | ​ | ​ | — | ​ | ​ | 1,276 | ​ | ​ | — | ​ | ​ | 17
Employer contribution | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 392
Plan participants’ contributions | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 3
Benefits paid | ​ | ​ | — | ​ | ​ | (2,641) | ​ | ​ | — | ​ | ​ | (603)
Fair value of net plan assets at end of year | ​ | ​ | $— | ​ | ​ | $39,345 | ​ | ​ | $— | ​ | ​ | $314
Funded status – under | ​ | ​ | $— | ​ | ​ | $(5,018) | ​ | ​ | $— | ​ | ​ | $(19,166)
Amounts recognized in the Consolidated Balance Sheets at December 31: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Other accrued liabilities (current) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 544
Noncurrent liabilities – other | ​ | ​ | — | ​ | ​ | 5,018 | ​ | ​ | — | ​ | ​ | 18,622
Benefit obligation liabilities – net amount recognized | ​ | ​ | $— | ​ | ​ | $(5,018) | ​ | ​ | $— | ​ | ​ | $(19,166)
Amounts recognized in accumulated other comprehensive loss consist of: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Actuarial loss | ​ | ​ | — | ​ | ​ | 18,788 | ​ | ​ | — | ​ | ​ | 3,128
Prior service credit | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (189)
Total | ​ | ​ | $— | ​ | ​ | $18,788 | ​ | ​ | $— | ​ | ​ | $2,939

Employer contributions and benefits paid in the preceding table include only those amounts contributed directly to, or paid directly from, plan assets.
In 2022, the actuarial [ ] recognized in the benefit obligation was primarily the result of a [ ]. In 2021, the actuarial gain recognized in the benefit obligation was primarily the result of an increase in the discount rate. For more information on the discount rates, see the table below. Unrecognized pension actuarial losses in excess of 10 percent of the greater of the projected benefit obligation or the market-related value of assets are amortized over the average life expectancy of plan participants for frozen plans. The market-related value of assets is determined using a five-year average of assets.
The pension plans all have accumulated benefit obligations in excess of plan assets. The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for these plans at December 31 were as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ | (In thousands)
Projected benefit obligation | ​ | ​ | $— | ​ | ​ | $44,363
Accumulated benefit obligation | ​ | ​ | $— | ​ | ​ | $44,363
Fair value of plan assets | ​ | ​ | $— | ​ | ​ | $39,345

F-31

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
The components of net periodic benefit cost (credit), other than the service cost component, are included in other income on the Consolidated Statements of Income. Prior service credit is amortized on a straight-line basis over the average remaining service period of active participants. These components related to the Company’s pension and other postretirement benefit plans for the years ended December 31 were as follows:

| ​ | ​ | Pension Benefits | ​ | ​ | Other Postretirement Benefits
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Components of net periodic benefit cost (credit): | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Service cost | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $567 | ​ | ​ | $554
Interest cost | ​ | ​ | — | ​ | ​ | 1,053 | ​ | ​ | 1,291 | ​ | ​ | — | ​ | ​ | 492 | ​ | ​ | 650
Expected return on assets | ​ | ​ | — | ​ | ​ | (2,028) | ​ | ​ | (2,065) | ​ | ​ | — | ​ | ​ | (19) | ​ | ​ | (17)
Amortization of prior service credit | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | (79) | ​ | ​ | (79)
Recognized net actuarial loss | ​ | ​ | — | ​ | ​ | 971 | ​ | ​ | 862 | ​ | ​ | — | ​ | ​ | 135 | ​ | ​ | 306
Net periodic benefit cost (credit) | ​ | ​ | $— | ​ | ​ | $(4) | ​ | ​ | $88 | ​ | ​ | $— | ​ | ​ | $1,096 | ​ | ​ | $1,414
Other changes in plan assets and benefit obligations recognized in accumulated other comprehensive loss: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Net (gain) loss | ​ | ​ | — | ​ | ​ | (162) | ​ | ​ | 794 | ​ | ​ | — | ​ | ​ | (2,763) | ​ | ​ | (181)
Amortization of actuarial loss | ​ | ​ | — | ​ | ​ | (1,108) | ​ | ​ | (985) | ​ | ​ | — | ​ | ​ | (135) | ​ | ​ | (306)
Amortization of prior service credit | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | 90 | ​ | ​ | 90
Total recognized in accumulated other comprehensive loss | ​ | ​ | $— | ​ | ​ | $(1,270) | ​ | ​ | $(191) | ​ | ​ | $— | ​ | ​ | $(2,808) | ​ | ​ | $(397)
Total recognized in net periodic benefit cost (credit) and accumulated other comprehensive loss | ​ | ​ | $— | ​ | ​ | $(1,274) | ​ | ​ | $(103) | ​ | ​ | $— | ​ | ​ | $(1,712) | ​ | ​ | $1,017

Weighted average assumptions used to determine benefit obligations at December 31 were as follows:

| ​ | ​ | Pension Benefits | ​ | ​ | Other Postretirement Benefits
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
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%

Weighted average assumptions used to determine net periodic benefit cost (credit) for the years ended December 31 were as follows:

| ​ | ​ | Pension Benefits | ​ | ​ | Other Postretirement Benefits
| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020 | ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
Discount rate | ​ | ​ | — | ​ | ​ | 2.29% | ​ | ​ | 2.95% | ​ | ​ | — | ​ | ​ | 2.38% | ​ | ​ | 3.07%
Expected return on plan assets | ​ | ​ | — | ​ | ​ | 6.00% | ​ | ​ | 6.25% | ​ | ​ | — | ​ | ​ | 5.50% | ​ | ​ | 5.75%
Rate of compensation increase | ​ | ​ | — | ​ | ​ | N/A | ​ | ​ | N/A | ​ | ​ | — | ​ | ​ | 3.00% | ​ | ​ | 3.00%

The expected rate of return on pension plan assets is based on a targeted asset allocation range determined by the funded ratio of the plan. As of December 31, 2021, the expected rate of return on pension plan assets is based on the targeted asset allocation range of 35 percent to 45 percent equity securities and 55 percent to 65 percent fixed-income securities and the expected rate of return from these asset categories. The expected rate of return on other postretirement plan assets is based on the targeted asset allocation range of 10 percent equity securities and 90 percent fixed-income securities and the expected rate of return from these asset categories. The expected return on plan assets for other postretirement benefits reflects insurance-related investment costs.
F-32

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Health care rate assumptions for the Company’s other postretirement benefit plans as of December 31 were as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
Health care trend rate assumed for next year | ​ | ​ | — | ​ | ​ | 7.00% | ​ | ​ | 7.00%
Health care cost trend rate – ultimate | ​ | ​ | — | ​ | ​ | 4.50% | ​ | ​ | 4.50%
Year in which ultimate trend rate achieved | ​ | ​ | — | ​ | ​ | 2031 | ​ | ​ | 2031

The Company’s other postretirement benefit plans include health care and life insurance benefits for certain retirees. The plans underlying these benefits may require contributions by the retiree depending on such retiree’s age and years of service at retirement or the date of retirement. The Company contributes a flat dollar amount to the monthly premiums, which is updated annually on January 1.
The Company does not expect to contribute to its defined benefit pension plans in 2022 due to an additional $2.7 million contributed to the plans in 2019 creating prefunding credits to be used in future years. The Company expects to contribute approximately $600,000 to its postretirement benefit plans in 2022.
The following benefit payments, which reflect future service, as appropriate, and expected Medicare Part D subsidies at December 31, 2021, are as follows:

Years | ​ | ​ | Pension Benefits | ​ | ​ | Other Postretirement Benefits | ​ | ​ | Expected Medicare Part D Subsidy
| ​ | ​ | (In thousands)
2022 | ​ | ​ | $2,861 | ​ | ​ | $732 | ​ | ​ | $8
2023 | ​ | ​ | 2,851 | ​ | ​ | 899 | ​ | ​ | 7
2024 | ​ | ​ | 2,815 | ​ | ​ | 1,030 | ​ | ​ | 7
2025 | ​ | ​ | 2,780 | ​ | ​ | 1,111 | ​ | ​ | 7
2026 | ​ | ​ | 2,738 | ​ | ​ | 1,227 | ​ | ​ | 6
2027-2031 | ​ | ​ | 12,666 | ​ | ​ | 1,722 | ​ | ​ | 23

Outside investment managers manage the Company’s pension and postretirement assets. The Company’s investment policy with respect to pension and other postretirement assets is to make investments solely in the interest of the participants and beneficiaries of the plans and for the exclusive purpose of providing benefits accrued and defraying the reasonable expenses of administration. The Company strives to maintain investment diversification to assist in minimizing the risk of large losses. The Company’s policy guidelines allow for investment of funds in cash equivalents, fixed-income securities and equity securities. The guidelines prohibit investment in commodities and futures contracts, equity private placement, employer securities, leveraged or derivative securities, options, direct real estate investments, precious metals, venture capital and limited partnerships. The guidelines also prohibit short selling and margin transactions. The Company’s practice is to periodically review and rebalance asset categories based on its targeted asset allocation percentage policy.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The fair value ASC establishes a hierarchy for grouping assets and liabilities, based on the significance of inputs. The estimated fair values of the Company’s pension plans’ assets are determined using the market approach.
The carrying value of the pension plans’ Level 2 cash equivalents approximates fair value and is determined using observable inputs in active markets or the net asset value of shares held at year end, which is determined using other observable inputs, including pricing from outside sources.
The estimated fair value of the pension plans’ Level 1 and Level 2 equity securities are based on the closing price reported on the active market on which the individual securities are traded or other known sources, including pricing from outside sources. The estimated fair value of the pension plans’ Level 1 and Level 2 collective and mutual funds are based on the net asset value of shares held at year end, based on either published market quotations on active markets or other known sources, including pricing from outside sources. The
F-33

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
estimated fair value of the pension plans’ Level 2 corporate and municipal bonds is determined using other observable inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers, future cash flows and other reference data. The estimated fair value of the pension plans’ Level 1 U.S. Government securities are valued based on quoted prices on an active market. The estimated fair value of the pension plans’ Level 2 U.S. Government securities are valued mainly using other observable inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers, to be announced prices, future cash flows and other reference data. The estimated fair value of the pension plans’ Level 2 pooled separate accounts are determined using observable inputs in active markets or the net asset value of shares held at year end, or other observable inputs. Some of these securities are valued using pricing from outside sources.
All investments measured at net asset value in the tables that follow are invested in commingled funds, separate accounts or common collective trusts which do not have publicly quoted prices. The fair value of the commingled funds, separate accounts and common collective trusts are determined based on the net asset value of the underlying investments. The fair value of the underlying investments held by the commingled funds, separate accounts and common collective trusts is generally based on quoted prices in active markets.
Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value.
The fair value of the Company’s pension plans’ assets (excluding cash) by class were as follows:

| ​ | ​ | 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 | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Equity securities: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
U.S. companies | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
International companies | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Collective and mutual funds(a) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Corporate bonds | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Municipal bonds | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
U.S. Government securities | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Pooled separate accounts(b) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Investments measured at net asset value(c) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Total assets measured at fair value | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—

(a) | Collective and mutual funds invest approximately [   ] percent in corporate bonds, [   ] percent in common stock of international companies, [   ] percent in common stock of large-cap U.S. companies, [   ] percent in U.S. Government securities and [   ] 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, 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 statement of financial condition.

F-34

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020

| ​ | ​ | 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, 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 statement of financial condition.

The estimated fair values of the Company’s other postretirement benefit plans’ assets are determined using the market approach.
The estimated fair value of the other postretirement benefit plans’ Level 2 cash equivalents is valued at the net asset value of shares held at year end, based on published market quotations on active markets, or using other known sources including pricing from outside sources. The estimated fair value of the other postretirement benefit plans’ Level 1 and Level 2 equity securities is based on the closing price reported on the active market on which the individual securities are traded or other known sources including pricing from outside sources. The estimated fair value of the other postretirement benefit plans’ Level 2 insurance contract is based on contractual cash surrender values that are determined primarily by investments in managed separate accounts of the insurer. These amounts approximate fair value. The managed separate accounts are valued based on other observable inputs or corroborated market data.
Though the Company believes the methods used to estimate fair value are consistent with those used by other market participants, the use of other methods or assumptions could result in a different estimate of fair value.
F-35

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
The fair value of the Company’s other postretirement benefit plans’ assets (excluding cash) by asset class were as follows:

| ​ | ​ | 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 | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—
Equity securities: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
U.S. companies | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Insurance contract(a) | ​ | ​ | — | ​ | ​ | — | ​ | ​ | — | ​ | ​ | —
Total assets measured at fair value | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $— | ​ | ​ | $—

(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.

| ​ | ​ | 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.

Nonqualified benefit plans
The unfunded, nonqualified defined benefit plans in which the Company participates relate to multiple-employer plans sponsored by MDU Resources. The plans maintain separate accounting records for each plan and accounts for the plans as single-employer plans within the Company’s consolidated financial statements. Participants of the Company include executive officers and certain key management employees. The plan generally provides for defined benefit payments at age 65 following the employee’s retirement or, upon death, to their beneficiaries for a 15-year period. In February 2016, MDU Resources froze the unfunded, nonqualified defined benefit plans to new participants and eliminated benefit increases. Vesting for participants not fully vested was retained.
F-36

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
The projected benefit obligation and accumulated benefit obligation for the Company’s participants in these plans on December 31 were as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ | (In thousands)
Projected benefit obligation | ​ | ​ | $— | ​ | ​ | $20,086
Accumulated benefit obligation | ​ | ​ | $— | ​ | ​ | $20,086

The components of net periodic benefit cost are included in other income on the Consolidated Statements of Income. These components related to the Company’s participation in the nonqualified defined benefit plans for the years ended December 31 were as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021 | ​ | ​ | 2020
| ​ | ​ | (In thousands)
Components of net periodic benefit cost: | ​ | ​ |  | ​ | ​ |  | ​ | ​ |
Interest cost | ​ | ​ | $— | ​ | ​ | $407 | ​ | ​ | $556
Recognized net actuarial loss | ​ | ​ |  | ​ | ​ | 223 | ​ | ​ | 160
Net periodic benefit cost | ​ | ​ | $— | ​ | ​ | $630 | ​ | ​ | $716

Weighted average assumptions used at December 31 were as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021
Benefit obligation discount rate | ​ | ​ | — | ​ | ​ | 2.38%
Benefit obligation rate of compensation increase | ​ | ​ | — | ​ | ​ | N/A
Net periodic benefit cost discount rate | ​ | ​ | — | ​ | ​ | 1.95%
Net periodic benefit cost rate of compensation increase | ​ | ​ | — | ​ | ​ | N/a

The amount of future benefit payments for the unfunded, nonqualified defined benefit plans at December 31, 2021 are expected to aggregate as follows:

| ​ | ​ | 2022 | ​ | ​ | 2023 | ​ | ​ | 2024 | ​ | ​ | 2025 | ​ | ​ | 2026 | ​ | ​ | 2027-2031
| ​ | ​ | (In thousands)
Nonqualified benefits | ​ | ​ | $1,620 | ​ | ​ | $1,639 | ​ | ​ | $1,667 | ​ | ​ | $1,772 | ​ | ​ | $1,807 | ​ | ​ | $7,202

In 2012, MDU Resources established a nonqualified defined contribution plan for certain key management employees. In 2020, the plan was frozen to new participants and no new Company contributions will be made to the plan after December 31, 2020. Vesting for participants not fully vested was retained. A new nonqualified defined contribution plan was adopted in 2020 by MDU Resources, effective January 1, 2021, to replace the plan originally established in 2012 with similar provisions. Expenses incurred by the Company under these plans for 2022, 2021 and 2020 were $[ ], $900,000 and $300,000, respectively.
The amount of investments that the Company anticipates using to satisfy obligations under these plans at December 31 was as follows:

| ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ | (In thousands)
Investments | ​ | ​ |  | ​ | ​ |
Insurance contract* | ​ | ​ | $— | ​ | ​ | $21,629
Life insurance** | ​ | ​ |  | ​ | ​ | 7,567
Other | ​ | ​ |  | ​ | ​ | 3,044
Total investments | ​ | ​ | $— | ​ | ​ | $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).

F-37

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Defined contribution plans
MDU Resources sponsors a defined contribution plan in which the Company participates. The costs incurred by the Company under this plan for eligible employees were $[   ], $26.6 million and $28.0 million in 2022, 2021 and 2020, respectively.
Multiemployer plans
The Company contributes to a number of MEPPs under the terms of collective-bargaining agreements that cover its union-represented employees. The risks of participating in these multiemployer plans are different from single-employer plans in the following aspects:

• | 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

The Company’s participation in these plans is outlined in the following table. Unless otherwise noted, the most recent Pension Protection Act zone status available in 2022, 2021 and 2020 is for the plan’s year-end at December 31, 2021, December 31, 2020, and December 31, 2019, respectively. The zone status is based on information that the Company received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are between 65 percent and 80 percent funded, and plans in the green zone are at least 80 percent funded.

| ​ | ​ | 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 | ​ | ​ | Implemented | ​ | ​ | $— | ​ | ​ | $2,495 | ​ | ​ | $2,680 | ​ | ​ | No | ​ | ​ | 6/15/2022- 6/30/2023
Western Conference of Teamsters Pension Plan | ​ | ​ | 916145047-001 | ​ | ​ |  | ​ | ​ | Green | ​ | ​ | No | ​ | ​ | — | ​ | ​ | 3,006 | ​ | ​ | 3,025 | ​ | ​ | No | ​ | ​ | 12/31/2023- 12/31/2025
Other funds | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ | — | ​ | ​ | 6,969 | ​ | ​ | 7,065 | ​ | ​ |  | ​ | ​ |
Total contributions | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ |  | ​ | ​ | $— | ​ | ​ | $12,470 | ​ | ​ | $12,770 | ​ | ​ |  | ​ | ​ |

The Company was listed in the plans’ Forms 5500 as providing more than 5 percent of the total contributions for the following plans and plan years:

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 | ​ | ​ | 2020 and 2019
Southwest Marine Pension Trust | ​ | ​ | 2020 and 2019

The Company also contributes to a number of multiemployer other postretirement plans under the terms of collective-bargaining agreements that cover its union-represented employees. These plans provide benefits such as health insurance, disability insurance and life insurance to retired union employees. Many of the multiemployer other postretirement plans are combined with active multiemployer health and welfare plans. The Company’s total contributions to its multiemployer other postretirement plans, which also includes contributions to active multiemployer health and welfare plans, were $[   ], $3.2 million and $3.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.
F-38

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Note 18 – Commitments and Contingencies
The Company is party to claims and lawsuits arising out of its business and that of its consolidated subsidiaries, which may include, but are not limited to, matters involving property damage, personal injury, and environmental, contractual and statutory obligations. The Company accrues a liability for those contingencies when the incurrence of a loss is probable and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Company does not accrue liabilities when the likelihood that the liability has been incurred is probable but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote. For contingencies where an unfavorable outcome is probable or reasonably possible and which are material, the Company discloses the nature of the contingency and, in some circumstances, an estimate of the possible loss. Accruals are based on the best information available, but in certain situations management is unable to estimate an amount or range of a reasonably possible loss, including, but not limited to, when: (1) the damages are unsubstantiated or indeterminate, (2) the proceedings are in the early stages, (3) numerous parties are involved, or (4) the matter involves novel or unsettled legal theories.
At December 31, 2022, 2021 and 2020, the Company accrued liabilities which have not been discounted of $[ ], $6.3 million and $9.5 million, respectively. At December 31, 2022, 2021 and 2020, the Company also recorded corresponding insurance receivables of $[ ], $6.2 million and $9.4 million, respectively, related to the accrued liabilities. The accruals are for contingencies, including litigation and environmental matters. This includes amounts that have been accrued for matters discussed in Environmental matters within this note. The Company will continue to monitor each matter and adjust accruals as might be warranted based on new information and further developments. Management believes that the outcomes with respect to probable and reasonably possible losses in excess of the amounts accrued, net of insurance recoveries, while uncertain, either cannot be estimated or will not have a material effect upon the Company’s financial position, results of operations or cash flows. Unless otherwise required by GAAP, legal costs are expensed as they are incurred.
Environmental matters
Portland Harbor Site In December 2000, Knife River Corporation - Northwest (“Knife River - Northwest”) was named by the Environmental Protection Agency (“EPA”) as a Potentially Responsible Party (“PRP”) in connection with the cleanup of the riverbed site adjacent to a commercial property site acquired by Knife River - Northwest from Georgia-Pacific West, Inc. along the Willamette River. The riverbed site is part of the Portland, Oregon, Harbor Superfund Site where the EPA wants responsible parties to share in the costs of cleanup. The EPA entered into a consent order with certain other PRPs referred to as the Lower Willamette Group for a remedial investigation and feasibility study. The Lower Willamette Group has indicated that it has incurred over $115 million in investigation related costs. Knife River - Northwest has joined with approximately 100 other PRPs, including the Lower Willamette Group members, in a voluntary process to establish an allocation of costs for the site. Costs to be allocated would include costs incurred by the Lower Willamette Group as well as costs to implement and fund remediation of the site.
In January 2017, the EPA issued a Record of Decision adopting a selected remedy which is expected to take 13 years to complete with a then estimated present value of approximately $1 billion. Corrective action will not be taken until remedial design/remedial action plans are approved by the EPA. In 2020, the EPA encouraged certain PRPs to enter into consent agreements to perform remedial design covering the entire site and proposed dividing the site into multiple subareas for remedial design. Certain PRPs executed consent agreements for remedial design work and certain others were issued unilateral administrative orders to perform design work. Knife River - Northwest is not subject to either a voluntary agreement or unilateral order to perform remedial design work. In February 2021, the EPA announced that 100 percent of the site’s area requiring active cleanup are in the remedial design process. Site-wide remediation activities are not expected to commence for a number of years.
F-39

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Knife River - Northwest was also notified that the Portland Harbor Natural Resource Trustee Council intends to perform an injury assessment to natural resources resulting from the release of hazardous substances at the site. It is not possible to estimate the costs of natural resource damages until an assessment is completed and allocations are undertaken.
At this time, Knife River - Northwest does not believe it is a responsible party and has notified Georgia-Pacific West, Inc. that it intends to seek indemnity for liabilities incurred in relation to the above matters pursuant to the terms of their sale agreement.
The Company believes it is not probable that it will incur any material environmental remediation costs or damages in relation to the above referenced matter.
Purchase commitments
The Company has entered into various commitments, largely purchased cement, limestone oil, liquid asphalt, fuel and minimum royalties. The commitment terms vary in length, up to 17 years. The commitments under these contracts as of December 31, 2021, were:

| ​ | ​ | 2022 | ​ | ​ | 2023 | ​ | ​ | 2024 | ​ | ​ | 2025 | ​ | ​ | 2026 | ​ | ​ | Thereafter
| ​ | ​ | (In thousands)
Purchase commitments | ​ | ​ | $86,875 | ​ | ​ | $1,817 | ​ | ​ | $1,607 | ​ | ​ | $1,196 | ​ | ​ | $1,119 | ​ | ​ | $6,228

These commitments were not reflected in the Company’s consolidated financial statements. Amounts purchased under various commitments for the years ended December 31, 2022, 2021 and 2020 were $[   ], $137.4 million and $150.0 million, respectively.
Guarantees
Certain subsidiaries of the Company have outstanding guarantees to third parties that guarantee their performance. These guarantees are related to contracts for contracting services, insurance deductibles and loss limits, and certain other guarantees. At December 31, 2021, the fixed maximum amounts guaranteed under these agreements aggregated $9.0 million, which has no scheduled maturity date. There were no amounts outstanding under the previously mentioned guarantees at December 31, 2021. In the event of default under these guarantee obligations, the subsidiary issuing the guarantee for that particular obligation would be required to make payments under its guarantee.
Certain subsidiaries of the Company have outstanding letters of credit to third parties related to insurance policies and other agreements. At December 31, 2021, the fixed maximum amounts guaranteed under these letters of credit aggregated $928,000. The amounts of scheduled expiration of the maximum amounts guaranteed under these letters of credit aggregate to $439,000 in 2022 and $489,000 in 2023. There were no amounts outstanding under the previously mentioned letters of credit at December 31, 2021. In the event of default under these letter of credit obligations, the subsidiary guaranteeing the letter of credit would be obligated for reimbursement of payments made under the letter of credit.
In addition, the Parent has issued guarantees to third parties related to the routine purchase of materials for which no fixed maximum amounts have been specified. These guarantees have no scheduled maturity date. These guarantees include the performance of the Parent’s subsidiaries. If a subsidiary, including the Company, were to default under the obligations of the agreement, the Parent would be required to make payments under the guarantee. There were no amounts outstanding as of December 31, 2021.
In the normal course of business, the Company has surety bonds related to contracts for contracting services and reclamation obligations of its subsidiaries. In the event a subsidiary of the Company does not fulfill a bonded obligation, the Company would be responsible to the surety bond company for completion of the bonded contract or obligation. A large portion of the surety bonds is expected to expire within the next 12 months; however, the Company will likely continue to enter into surety bonds for its subsidiaries in the future. At December 31, 2021, approximately $578.5 million of surety bonds were outstanding, which were not reflected on the Consolidated Balance Sheet.
F-40

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Note 19 – Related-Party Transactions
Allocation of corporate expenses
Centennial and MDU Resources provide expense allocations for corporate services provided to the Company, including costs related to senior management, legal, human resources, finance and accounting, treasury, information technology, and other shared services. Some of these services will continue to be provided by the Parent and MDU Resources on a temporary basis after the separation is completed under a transition services agreement. For the years ended December 31, 2021 and 2020, the Company was allocated $15.6 million and $14.2 million, respectively, for these corporate services. These expenses have been allocated to the Company on the basis of direct usage when identifiable, with the remainder allocated on the basis of percent of total capital invested, the percent of total average commercial paper borrowings at Centennial or other allocation methodologies that are considered to be a reasonable reflection of the utilization of the services provided to the benefits received, including the following: Number of employees paid and stated as cost per check; number of employees served; weighted factor of travel, managed units, national account spending, equipment and fleet acquisitions; purchase order dollars spent and purchase order line count; number of payments, vouchers or unclaimed property reports; labor hours; time tracked; and projected workload.
Management believes these cost allocations are a reasonable reflection of the utilization of services provided to, or the benefit derived by, the Company during the periods presented. The allocations may not, however, be indicative of the actual expenses that would have been incurred had the Company operated as a stand-alone public company. Actual costs that would have been incurred if the Company had been a stand-alone public company would depend on a number of factors, including the chosen organizational structure, whether functions were outsourced or performed by Company employees, and strategic decisions made in areas such as selling and marketing, information technology and infrastructure. See Note 2 for further information.
Cash management and financing
Centennial has a central cash management and financing program in which the Company participates. Through the use of these programs, the Parent is able to more effectively direct and manage the daily cash requirements and financing needs for each wholly owned subsidiary through the consolidation of all cash activity at the Parent level. As cash is received and disbursed by the Parent, it is accounted for by the Company through related-party receivables and payables. The Company has related-party note agreements in place with the Parent for the financing of its capital needs. Centennial has committed to continue funding the Company through the central cash management and financing program to allow the Company to meet its obligations as they become due for at least one year and a day following the date that the consolidated financial statements are issued. As discussed in Note 1, MDU Resources announced plans to pursue a separation of the Company from MDU Resources. Upon separation, the Company plans to rely on its own credit. Interest expense in the Consolidated Statements of Income reflects the allocation of interest on borrowing and funding related to these note agreements. The Company’s cash that was not included in the central cash management program is classified as cash and cash equivalents on the Balance Sheet. See Note 2 for further information.
F-41

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
Related-party notes payable
Centennial enters into long-term borrowing arrangements for the benefit of certain subsidiaries of the Company. The Company has access to borrowings by participation in Centennial's commercial paper program, as well as a centralized cash management program at Centennial. These borrowings have been included in both current and noncurrent liabilities in related-party notes payable in the consolidated balance sheets. Intercompany long-term borrowing arrangements at December 31 was as follows:

| ​ | ​ | Weighted average interest rate at December 31, 2021 | ​ | ​ | 2022 | ​ | ​ | 2021
| ​ | ​ |  | ​ | ​ | (In thousands)
Parent Company senior notes on dates ranging from December 20, 2022 to April 4, 2034 | ​ | ​ | 4.67% | ​ | ​ | $— | ​ | ​ | $368,000
Borrowing arrangements under Parent Company commercial paper program, supported by the Parent Company’s credit agreements | ​ | ​ | 0.37% | ​ | ​ | — | ​ | ​ | 315,457
Total long-term debt | ​ | ​ |  | ​ | ​ | — | ​ | ​ | 683,457
Less: current maturities | ​ | ​ |  | ​ | ​ | — | ​ | ​ | 108,000
Net long-term debt | ​ | ​ |  | ​ | ​ | $— | ​ | ​ | $575,457

The amounts of scheduled long-term debt maturities for the five years and thereafter following December 31, 2021, aggregate $108.0 million in 2022; $30.0 million in 2023; $315.5 million in 2024; $10.0 million in 2025; $0 in 2026; and $220.0 million thereafter.
Certain debt instruments of Centennial, including those discussed below, contain restrictive covenants and cross-default provisions. In order to borrow under the respective credit agreements Centennial and its subsidiaries must be in compliance with the applicable covenants and certain other conditions. In the event Centennial and its subsidiaries do not comply with the applicable covenants and other conditions, alternative sources of funding may need to be pursued.
Centennial's revolving credit agreement contains customary covenants and provisions, including a covenant of Centennial not to permit, as of the end of any fiscal quarter, the ratio of total consolidated debt to total consolidated capitalization to be greater than 65 percent. Other covenants include restricted payments, restrictions on the sale of certain assets, limitations on subsidiary indebtedness, minimum consolidated net worth, limitations on priority debt and the making of certain loans and investments.
Certain of Centennial's financing agreements contain cross-default provisions. These provisions state that if Centennial or any subsidiary of Centennial fails to make any payment with respect to any indebtedness or contingent obligation, in excess of a specified amount, under any agreement that causes such indebtedness to be due prior to its stated maturity or the contingent obligation to become payable, the applicable agreements will be in default.
Related-party transactions
The Company provides contracting services to MDU Resources and affiliated companies. The amount charged for these services was $[   ], $624,000 and $417,000 in 2022, 2021 and 2020, respectively. Related-party transactions that are expected to be settled in cash have been included as related-party receivables or payables in the Consolidated Balance Sheets. Related-party transactions that are not expected to be settled in cash have been included within Other paid-in capital in the Consolidated Balance Sheets. See Note 2 for further information.
Note 20 – Subsequent Event
On March 18, 2022, Centennial entered into a $100.0 million term loan agreement with a SOFR-based variable interest rate and a maturity date of March 17, 2023. The agreement contains customary covenants and provisions, including a covenant of Centennial not to permit, at any time, the ratio of total debt to total
F-42

TABLE OF CONTENTS

KNIFE RIVER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2021 and 2020
capitalization to be greater than 65 percent. The covenants also include certain restrictions on the sale of certain assets, loans and investments. Centennial has entered into a note payable agreement with Knife River for the transfer of these funds to Knife River.
On March 23, 2022, Centennial issued $150.0 million of senior notes under a note purchase agreement with maturity dates ranging from March 23, 2032 to March 23, 2034, at a weighted average interest rate of 3.71 percent. The agreement contains customary covenants and provisions, including a covenant of Centennial not to permit, at any time, the ratio of total debt to total capitalization to be greater than 60 percent. Centennial has entered into a note payable agreement with Knife River for the transfer of these funds to Knife River.
F-43