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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2025
Share-Based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation Periods Prior to the Separation Prior to the Separation, certain key employees participated in stock-based compensation plans sponsored by MDU Resources. Under these plans, employees were granted time-vested restricted stock units and performance share awards. The shares vest over three years, contingent on continued employment. As previously discussed in Note 2, the outstanding restricted stock units and performance share awards granted to our employees were converted to restricted stock units of Knife River at the time of the Separation. Prior to the Separation, stock-based compensation expense in the Consolidated Statements of Operations is representative of those employees of Knife River. Additionally, stock-based compensation expense was allocated to Knife River for corporate employees of MDU Resources. This stock-based compensation expense was allocated using a proportional cost allocation method and is included as a component of corporate allocations for periods prior to the Separation. The amounts presented for the periods prior to the Separation are not necessarily indicative of future awards and do not necessarily reflect the costs that we would have incurred as an independent company. Periods Post Separation At the time of the Separation, each outstanding MDU Resources’ time-vested restricted stock unit and performance share award held by a Knife River employee was converted into Knife River time-vested restricted stock units. The conversion of the stock and the fair value of the awards was determined using the policies described in Note 2. As a result of the award modification, we incurred $185,000 of incremental stock-based compensation expense, recognizing $44,000, $53,000, and $88,000 during the years ended December 31, 2025, 2024 and 2023, respectively. There was no incremental compensation expense incurred related to the performance share awards. Effective June 1, 2023, we established a stock-based compensation plan under which we are currently authorized to grant 2.5 million restricted stock units and other stock awards. Under our stock-based compensation plan, we have both restricted stock units and performance stock units. The performance stock units are tied to either a company specific performance metric or total stockholder return of the company as compared to its peers. Additional information on the stock units follows. As of December 31, 2025, there were 2.2 million shares available to grant under this plan. Shares are either purchased on the open market or new shares of common stock are issued to satisfy the vesting of stock-based awards. Restricted Stock Units During the year ended December 31, 2025, we granted 53,726 restricted stock units to certain executive officers, employees and members of our board of directors. The restricted stock units generally vest over three years, contingent on continued employment for employees, and over one year for our board of directors. We use the straight-line amortization method to recognize compensation expense related to restricted stock units, which only has a service condition. The fair value of all restricted stock units is based on the market value of our stock on the date of grant. The weighted average grant-date fair value per share for the restricted stock units granted in 2025, 2024 and 2023 was $94.06, $73.02 and $39.57, respectively. The total fair value of restricted stock units that vested during the years ended December 31, 2025, 2024 and 2023, was $7.2 million, $2.5 million and $2.0 million, respectively. Performance Stock Units During the year ended December 31, 2025, we granted 76,658 performance stock units to certain executive officers and employees. The performance stock units vest over three years, contingent on continued employment for employees, and are tied to either a market condition or performance metric. We recognize compensation expense related to performance stock units with performance-based metrics on a straight-line basis over the requisite service period. Under the performance metric for these performance stock units, participants may earn from zero to 200 percent of the apportioned target grant of shares. The performance metric is based on adjusted EBITDA margin growth. The weighted average grant-date fair value per share granted in 2025 and 2024 was $93.24 and $72.14, respectively. Under the market condition for these performance stock units, participants may earn from zero to 200 percent of the apportioned target grant of performance stock units based on our total stockholder return relative to that of the selected peer group. Compensation expense was 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 shares granted were:
|  | 2025 |  | 2024
Weighted average grant date fair value |  | $130.59 |  | $99.83
Weighted average volatility |  | 43.86 | % |  |  |  | 37.83 | % |  |
Weighted average risk-free interest rate |  | 4.01 | % |  |  |  | 4.62 | % |  |
Consolidated Stock-Based Compensation The following table summarizes stock-based compensation expense recorded in selling, general and administrative expense on the Consolidated Statements of Operations:
Years ended December 31, | 2025 |  | 2024 |  | 2023
| (In thousands)
Restricted stock units | $ | 5,715 |  |  | $ | 4,384 |  |  | $ | 2,921 |
Performance stock units | 5,679 |  |  | 2,915 |  |  | — |
Tax benefit associated with stock-based compensation | 2,780 |  |  | 2,933 |  |  | 1,219 |
As of December 31, 2025, total remaining unrecognized compensation expense related to stock-based compensation was approximately $13.0 million (before income taxes), which will be amortized over a weighted average period of 1.6 years. For the year ended December 31, 2025, the following summarizes the activity of the performance stock units and restricted stock units.
|  | Performance Stock Units |  | Restricted Stock Units
|  | Number of Shares |  | Weighted Average Grant-Date Fair Value |  | Number of Shares |  | Weighted Average Grant-Date Fair Value
Nonvested at the beginning of period |  | 101,688 |  |  | $ | 85.99 |  |  | 222,420 |  |  | $ | 49.82 |
Granted |  | 76,658 |  |  | 111.91 |  |  | 53,726 |  |  | 94.06 |
Vested shares |  | — |  |  | — |  |  | (167,863) |  |  | 42.70 |
Nonvested at end of period |  | 178,346 |  |  | $ | 97.13 |  |  | 108,283 |  |  | $ | 82.79 |

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