Knife River CorpKNF
Knife River Corp Fair Value Disclosure
Fair Value Measurements
The carrying amounts of our remaining financial instruments included in current assets and current liabilities approximate their fair values.
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 guidance establishes a hierarchy for grouping assets and liabilities, based on the significance of inputs. The estimated fair values of the assets and liabilities measured on a recurring basis are determined using the market approach.
Financial Instruments Measured at Fair Value on a Recurring Basis
We measure our investments in certain fixed-income and equity securities at fair value with changes in fair value recognized in income. We anticipate using these investments, which consist of insurance contracts, to satisfy our obligations under our unfunded, nonqualified defined benefit and defined contribution plans for our executive officers and certain key management employees, and invest in these fixed-income and equity securities for the purpose of earning investment returns and capital appreciation. These investments, which totaled $34.0 million and $28.4 million as of December 31, 2025 and 2024, respectively, are classified as investments on the Consolidated Balance Sheets. The net unrealized gains on these investments for the years ended December 31, 2025, 2024, and 2023 were $2.9 million, $2.9 million, and $1.9 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 Operations.
Our assets measured at fair value on a recurring basis were as follows:
Fair Value Measurements at December 31, 2025, 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, 2025 | |||||||||||
| (In thousands) | ||||||||||||||
Assets: | ||||||||||||||
| Money market funds | $ | — | $ | 2,775 | $ | — | $ | 2,775 | ||||||
Insurance contracts | — | 33,982 | — | 33,982 | ||||||||||
Total assets measured at fair value | $ | — | $ | 36,757 | $ | — | $ | 36,757 | ||||||
Fair Value Measurements at December 31, 2024, 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, 2024 | |||||||||||
| (In thousands) | ||||||||||||||
Assets: | ||||||||||||||
Money market funds | $ | — | $ | 4,082 | $ | — | $ | 4,082 | ||||||
Insurance contracts | — | 28,377 | — | 28,377 | ||||||||||
Total assets measured at fair value | $ | — | $ | 32,459 | $ | — | $ | 32,459 | ||||||
Our 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 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.
We believe 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.
Nonfinancial Instruments Measured at Fair Value on a Nonrecurring Basis
We apply the provisions of the fair value measurement standard to our nonrecurring, non-financial measurements, including long-lived asset impairments. These assets are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances. We review the carrying value of our long-lived assets, excluding goodwill, whenever events or changes in circumstances indicate that such carrying amounts may not be recoverable.
The assets and liabilities of the acquisitions that occurred during 2025 and 2024 were calculated using a market or cost approach. The fair value of some of the assets was determined based on Level 3 inputs including estimated future cash flows, discount rates, growth rates and sales projections, all of which require significant management judgment. For more information on these Level 2 and Level 3 fair value measurements, see Note 3.
Our long-term debt is not measured at fair value on the Consolidated Balance Sheets and the fair value is being provided for disclosure purposes only. The fair value was categorized as Level 2 in the fair value hierarchy and was based on discounted cash flows using current market interest rates. The estimated fair value of our Level 2 long-term debt was as follows:
| December 31, 2025 | December 31, 2024 | ||||||||||
| (In thousands) | |||||||||||
| Carrying amount | $ | 1,181,142 | $ | 689,950 | |||||||
| Fair value | $ | 1,202,247 | $ | 707,853 | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 27, 2024 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.