Delaware | 82-4228671 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Large accelerated filer ¨ | Accelerated filer ¨ | |||
Non-accelerated filer x | (Do not check if a smaller reporting company) | Smaller reporting company ¨ | ||
Emerging growth company x |
Cautionary Note Regarding Forward-Looking Statements | |
PART I - FINANCIAL INFORMATION | |
Item 1. Financial Statements | |
Condensed Consolidated and Combined Balance Sheets of Charah Solutions, Inc. as of June 30, 2018 and December 31, 2017 | |
Condensed Consolidated and Combined Statements of Income for the Three-months Ended June 30, 2018 (Successor) and 2017 (Successor), for the Six-months ended June 30, 2018 (Successor), and for the Periods from January 13, 2017 to June 30, 2017 (Successor), January 1, 2017 to January 12, 2017 (Predecessor) | |
Condensed Consolidated and Combined Statements of Members’ Equity and Stockholders' Equity for the Periods from December 31, 2016 through January 12, 2017 (Predecessor), January 13, 2017 through June 30, 2017 (Successor), and December 31, 2017 through June 30, 2018 (Successor) | |
Condensed Consolidated and Combined Statements of Cash Flows for the Six-months Ended June 30, 2018 (Successor) and for the periods from January 13, 2017 to June 30, 2017 (Successor) and January 1, 2017 to January 12, 2017 (Predecessor) | |
Notes to Unaudited Condensed Consolidated and Combined Financial Statements | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | |
Item 3. Quantitative and Qualitative Disclosures About Market Risk | |
Item 4. Controls and Procedures | |
PART II - OTHER INFORMATION | |
Item 1. Legal Proceedings | |
Item 1A. Risk Factors | |
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds | |
Item 5. Other Information | |
Item 6. Exhibits | |
SIGNATURES |
• | our business strategy; |
• | our operating cash flows, the availability of capital and our liquidity; |
• | our future revenue, income and operating performance; |
• | our ability to sustain and improve our utilization, revenues and margins; |
• | our ability to maintain acceptable pricing for our services; |
• | our future capital expenditures; |
• | our ability to finance equipment, working capital and capital expenditures; |
• | competition and government regulations; |
• | our ability to obtain permits and governmental approvals; |
• | pending legal or environmental matters or liabilities; |
• | pending litigation involving Allied Power Management, LLC; |
• | environmental hazards; |
• | industrial accidents; |
• | business or asset acquisitions; |
• | general economic conditions; |
• | credit markets; |
• | our ability to successfully develop our research and technology capabilities and implement technological developments and enhancements; |
• | uncertainty regarding our future operating results; and |
• | plans, objectives, expectations and intentions contained in this Quarterly Report that are not historical. |
June 30, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash | $ | 14,998 | $ | 32,264 | |||
Trade accounts receivable | 58,364 | 47,227 | |||||
Receivable from affiliates | 120 | 38 | |||||
Costs and estimated earnings in excess of billings ("CIE") | 30,264 | 7,959 | |||||
Inventory | 20,902 | 1,666 | |||||
Prepaid expenses and other current assets | 6,899 | 4,644 | |||||
Total current assets | 131,547 | 93,798 | |||||
Property and equipment: | |||||||
Plant, machinery and equipment | 68,321 | 42,565 | |||||
Structural fill site improvements | 55,760 | 55,760 | |||||
Vehicles | 15,670 | 16,478 | |||||
Office equipment | 712 | 638 | |||||
Buildings and leasehold improvements | 239 | 240 | |||||
Structural fill sites | 7,110 | 7,110 | |||||
Total property and equipment | 147,812 | 122,791 | |||||
Less accumulated depreciation and amortization | (38,159 | ) | (22,861 | ) | |||
Property and equipment, net | 109,653 | 99,930 | |||||
Other assets: | |||||||
Trade name, net | 34,931 | 34,330 | |||||
Customer relationship, net | 68,513 | 71,032 | |||||
Technology, net | 2,080 | — | |||||
Non-compete and other agreements, net | 1,319 | — | |||||
Other intangible assets, net | 75 | 87 | |||||
Goodwill | 76,431 | 73,468 | |||||
Other assets | 2,030 | — | |||||
Equity method investments | 5,354 | 5,006 | |||||
Total assets | $ | 431,933 | $ | 377,651 | |||
June 30, 2018 | December 31, 2017 | ||||||
Liabilities and members’ equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 24,322 | $ | 15,247 | |||
Billings in excess of costs and estimated earnings ("BIE") | 7,099 | 15,882 | |||||
Notes payable, current maturities | 8,185 | 19,996 | |||||
Accrued payroll and bonuses | 17,982 | 16,036 | |||||
Asset retirement obligation | 1,086 | 1,072 | |||||
Purchase option liability, current portion | 5,061 | 5,061 | |||||
Accrued expenses | 13,070 | 7,959 | |||||
Other liabilities | — | 198 | |||||
Total current liabilities | 76,805 | 81,451 | |||||
Long-term liabilities: | |||||||
Purchase option liability, less current portion | 17,653 | 20,183 | |||||
Contingent earnout liability | 15,000 | — | |||||
Deferred tax liability | 1,919 | — | |||||
Notes payable, less current maturities | 216,588 | 227,698 | |||||
Total liabilities | 327,965 | 329,332 | |||||
Commitments and contingencies (see Note 11) | |||||||
Stockholders’ and members’ equity | |||||||
Retained earnings | 22,341 | 18,316 | |||||
Common Stock - Charah Solutions, Inc.—$0.01 par value; 200,000,000 shares authorized, 29,082,988 shares issued and outstanding | 291 | — | |||||
Additional paid in capital - Charah Solutions, Inc. | 80,450 | — | |||||
Members’ interest—Charah, LLC Series A, no par, 200,000,000 members’ interest authorized (104,109,890 issued and outstanding) as of December 31, 2017. Series B, no par, 100,000,000 members’ interest authorized (35,199,063 issued and outstanding) as of December 31, 2017 | — | 19,718 | |||||
Members’ interest—Allied Power Management, LLC, Series A, no par, 200,000,000 members’ interest authorized (7,210,555 issued and outstanding) as of December 31, 2017. Series B, no par, 100,000,000 members’ interest authorized (2,437,855 issued and outstanding) as of December 31, 2017 | — | 9,687 | |||||
Total stockholders’ and members’ equity | 103,082 | 47,721 | |||||
Non-controlling interest | 886 | 598 | |||||
Total equity | 103,968 | 48,319 | |||||
Total liabilities and equity | $ | 431,933 | $ | 377,651 |
Successor | Predecessor | ||||||||||||||||||
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2018 | Period from January 13, 2017 through June 30, 2017 | Period from January 1, 2017 through January 12, 2017 | |||||||||||||||
Revenue | $ | 195,723 | $ | 74,404 | $ | 351,252 | $ | 133,369 | $ | 9,130 | |||||||||
Cost of sales | 165,174 | 53,910 | 301,605 | 97,146 | 7,301 | ||||||||||||||
Gross profit | 30,549 | 20,494 | 49,647 | 36,223 | 1,829 | ||||||||||||||
General and administrative expenses | 18,937 | 7,463 | 33,319 | 13,979 | 3,170 | ||||||||||||||
Operating income (loss) | 11,612 | 13,031 | 16,328 | 22,244 | (1,341 | ) | |||||||||||||
Interest expense | (5,543 | ) | (1,728 | ) | (9,674 | ) | (2,783 | ) | (4,181 | ) | |||||||||
Income from equity method investment | 699 | 270 | 1,286 | 477 | 48 | ||||||||||||||
Income (loss) before income taxes | 6,768 | 11,573 | 7,940 | 19,938 | (5,474 | ) | |||||||||||||
Income tax expense | 2,906 | — | 2,906 | — | — | ||||||||||||||
Net income (loss) | 3,862 | 11,573 | 5,034 | 19,938 | (5,474 | ) | |||||||||||||
Less income attributable to non-controlling interest | 642 | 802 | 1,009 | 1,072 | 54 | ||||||||||||||
Net income (loss) attributable to Charah Solutions, Inc. | $ | 3,220 | $ | 10,771 | $ | 4,025 | $ | 18,866 | $ | (5,528 | ) | ||||||||
Basic earnings (losses) per share | $ | 0.13 | $ | 0.45 | $ | 0.17 | $ | 0.80 | N/A | ||||||||||
Diluted earnings (losses) per share | $ | 0.13 | $ | 0.44 | $ | 0.16 | $ | 0.77 | N/A | ||||||||||
Pro forma net income (loss) information (see Note 1): | |||||||||||||||||||
Net income (loss) attributable to Charah Solutions, Inc. before provision for income taxes | $ | 6,126 | $ | 10,771 | $ | 6,931 | $ | 18,866 | $ | (5,528 | ) | ||||||||
Pro forma provision for income taxes | 1,517 | 4,093 | 1,720 | 7,169 | (2,101 | ) | |||||||||||||
Pro forma net income (loss) attributable to Charah Solutions, Inc. | $ | 4,609 | $ | 6,678 | $ | 5,211 | $ | 11,697 | $ | (3,427 | ) |
Charah, LLC Members | Non-Controlling Interest | Total | ||||||||||||||||||||||||||||||||
Voting Shares | Non-voting Shares | Retained Earnings (Accumulated Deficit) | Total | |||||||||||||||||||||||||||||||
Number of Shares | Common Stock | Number of Shares | Common Stock | Additional Paid-In Capital | ||||||||||||||||||||||||||||||
Predecessor | ||||||||||||||||||||||||||||||||||
Balance, December 31, 2016 | 18,750 | $ | 24 | 168,750 | $ | 216 | $ | 54 | $ | 20,366 | $ | 20,660 | $ | 686 | $ | 21,346 | ||||||||||||||||||
Net income (loss) | — | — | — | — | — | (5,528 | ) | (5,528 | ) | 54 | (5,474 | ) | ||||||||||||||||||||||
Distributions | — | — | — | — | — | (20,660 | ) | (20,660 | ) | — | (20,660 | ) | ||||||||||||||||||||||
Balance, January 12, 2017 | 18,750 | $ | 24 | 168,750 | $ | 216 | $ | 54 | $ | (5,822 | ) | $ | (5,528 | ) | $ | 740 | $ | (4,788 | ) |
Charah, LLC and Allied Power Management, LLC Combined | Non-Controlling Interest | Total | ||||||||||||||||||||||
Charah, LLC Members’ Interest | Allied Power Management, LLC Members’ Interest | Retained Earnings | Total | |||||||||||||||||||||
Successor | ||||||||||||||||||||||||
Balance, January 13, 2017 | $ | — | $ | — | $ | — | $ | — | $ | 740 | $ | 740 | ||||||||||||
Net income | — | — | 18,866 | 18,866 | 1,072 | 19,938 | ||||||||||||||||||
Issuance of original Series A member interests | 116,418 | — | — | 116,418 | — | 116,418 | ||||||||||||||||||
Issuance of original Series B member interests | 36,643 | — | — | 36,643 | — | 36,643 | ||||||||||||||||||
Share-based compensation - Series C profits interests | 141 | — | — | 141 | — | 141 | ||||||||||||||||||
Distributions | (15,498 | ) | — | — | (15,498 | ) | (840 | ) | (16,338 | ) | ||||||||||||||
Balance, June 30, 2017 | $ | 137,704 | $ | — | $ | 18,866 | $ | 156,570 | $ | 972 | $ | 157,542 |
Charah Solutions, Inc. | |||||||||||||||||||||||||||||||||||
Common Stock (Shares) | Common Stock (Amount) | Additional Paid In Capital | Charah, LLC Members’ Interest | Allied Power Management, LLC Members’ Interest | Retained Earnings | Total | Non-Controlling Interest | Total | |||||||||||||||||||||||||||
Successor | |||||||||||||||||||||||||||||||||||
Balance, December 31, 2017 | — | $ | — | $ | — | $ | 19,718 | $ | 9,687 | $ | 18,316 | $ | 47,721 | $ | 598 | $ | 48,319 | ||||||||||||||||||
Net income | — | — | — | — | — | 4,025 | 4,025 | 1,009 | 5,034 | ||||||||||||||||||||||||||
Share based compensation expense | — | — | — | 214 | — | — | 214 | — | 214 | ||||||||||||||||||||||||||
Distributions | — | — | — | (686 | ) | — | — | (686 | ) | (721 | ) | (1,407 | ) | ||||||||||||||||||||||
Conversion from members' interest to common stock | 23,436,398 | 234 | 28,699 | (19,246 | ) | (9,687 | ) | — | — | — | — | ||||||||||||||||||||||||
Issuance of shares | 5,294,117 | 53 | 59,188 | — | — | — | 59,241 | — | 59,241 | ||||||||||||||||||||||||||
Share based common stock issued | 372,169 | 4 | (4 | ) | — | — | — | — | — | — | |||||||||||||||||||||||||
Shares repurchased | (19,696 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||
Share based compensation expense | — | — | 1,189 | — | — | — | 1,189 | — | 1,189 | ||||||||||||||||||||||||||
Deferred offering costs | — | — | (8,622 | ) | — | — | — | (8,622 | ) | — | (8,622 | ) | |||||||||||||||||||||||
Balance, June 30, 2018 | 29,082,988 | $ | 291 | $ | 80,450 | $ | — | $ | — | $ | 22,341 | $ | 103,082 | $ | 886 | $ | 103,968 |
Successor | Predecessor | ||||||||||
Six Months Ended June 30, 2018 | Period from January 13, 2017 through June 30, 2017 | Period from January 1 2017, through January 12, 2017 | |||||||||
Cash flows from operating activities: | |||||||||||
Net income (loss) | $ | 5,034 | $ | 19,938 | $ | (5,474 | ) | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | |||||||||||
Depreciation and amortization | 17,135 | 12,799 | 763 | ||||||||
Amortization of debt issuance costs | 784 | 305 | — | ||||||||
Deferred income tax expense | 1,919 | — | — | ||||||||
Loss on sale of assets | 582 | 169 | 123 | ||||||||
Income from equity method investment | (1,286 | ) | (477 | ) | (48 | ) | |||||
Distributions received from equity investment | 938 | 651 | — | ||||||||
Non-cash share-based compensation | 1,403 | 141 | — | ||||||||
Payment related to deferred stock plan | — | (18,888 | ) | — | |||||||
Gain on interest rate swap | (2,228 | ) | — | — | |||||||
Increase (decrease) in cash due to changes in: | |||||||||||
Trade accounts receivable | (5,289 | ) | 9,494 | (3,977 | ) | ||||||
Receivable from affiliates | (82 | ) | (474 | ) | — | ||||||
Costs and estimated earnings in excess of billing | (22,305 | ) | (6,454 | ) | 2,185 | ||||||
Inventory | (825 | ) | (390 | ) | 278 | ||||||
Prepaid expenses and other current assets | (2,126 | ) | (1,604 | ) | 71 | ||||||
Accounts payable | 8,587 | (7,420 | ) | 4,380 | |||||||
Billings in excess of costs and estimated earnings | (8,783 | ) | 3,007 | 6 | |||||||
Accrued payroll and bonuses | 1,946 | (518 | ) | (318 | ) | ||||||
Asset retirement obligation | 14 | 135 | — | ||||||||
Accrued expenses | 2,396 | 3,940 | (2,407 | ) | |||||||
Net cash (used in) provided by operating activities | (2,186 | ) | 14,354 | (4,418 | ) | ||||||
Cash flows from investing activities: | |||||||||||
Proceeds from the sale of equipment | 1,102 | 314 | — | ||||||||
Purchases of property and equipment | (8,233 | ) | (4,438 | ) | — | ||||||
Payments for business acquisitions, net of cash received | (19,983 | ) | — | — | |||||||
Purchase of intangible assets | (31 | ) | — | — | |||||||
Decrease (increase) in restricted cash | — | 2,753 | — | ||||||||
Net cash used in investing activities | (27,145 | ) | (1,371 | ) | — |
Successor | Predecessor | ||||||||||
Six Months Ended June 30, 2018 | Period from January 13, 2017 through June 30, 2017 | Period from January 1 2017, through January 12, 2017 | |||||||||
Cash flows from financing activities: | |||||||||||
Net (payments) proceeds on line of credit | — | (43,801 | ) | 4,605 | |||||||
Proceeds from long-term debt | 8,400 | 145,508 | 298 | ||||||||
Principal payments on long-term debt | (45,547 | ) | (122,299 | ) | (440 | ) | |||||
Payments of offering costs | (8,622 | ) | — | — | |||||||
Proceeds from note payable to related party, net | — | 25,230 | — | ||||||||
Issuance of common stock | 59,241 | — | — | ||||||||
Distributions to non-controlling interest | (721 | ) | (840 | ) | — | ||||||
Distributions to members | (686 | ) | (15,498 | ) | — | ||||||
Net cash provided by (used in) financing activities | 12,065 | (11,700 | ) | 4,463 | |||||||
Net (decrease) increase in cash | (17,266 | ) | 1,283 | 45 | |||||||
Cash, beginning of period | 32,264 | 1,046 | 1,001 | ||||||||
Cash, end of period | $ | 14,998 | $ | 2,329 | $ | 1,046 | |||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid during the year for interest | $ | 11,163 | $ | 3,167 | $ | 104 |
Net working capital | $ | 26,704 | |
Net operating assets/liabilities | 9,679 | ||
Property, plant and equipment | 107,876 | ||
Rail easement | 110 | ||
Purchase option liability | (29,883 | ) | |
Trade name intangible assets | 34,330 | ||
Customer relationship intangible assets | 78,200 | ||
Goodwill | 73,468 | ||
Total purchase price | $ | 300,484 |
Cash acquired | $ | 17 | |
Net working capital, excluding cash | 21,185 | ||
Property, plant and equipment | 5,300 | ||
Trade name intangible assets | 633 | ||
Customer relationship intangible assets | 1,427 | ||
Technology | 2,102 | ||
Non-compete and other agreements | 1,373 | ||
Goodwill | 2,963 | ||
Total purchase price | $ | 35,000 |
Successor | Predecessor | ||||||||||||||||||
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2018 | Period from January 13, 2017 through June 30, 2017 | Period from January 1, 2017 through January 12, 2017 | |||||||||||||||
Pro forma revenue | $ | 195,723 | $ | 92,306 | $ | 368,075 | $ | 167,005 | $ | 11,158 | |||||||||
Pro forma net income (loss) attributable to Charah Solutions, Inc. | 3,381 | 10,595 | 4,811 | 19,096 | (5,447 | ) |
Balance Sheet Data | June 30, 2018 | December 31, 2017 | |||||
Current assets | $ | 2,784 | $ | 1,946 | |||
Noncurrent assets | 764 | 764 | |||||
Total assets | $ | 3,548 | $ | 2,710 | |||
Current liabilities | 432 | 298 | |||||
Equity of Charah | 5,354 | 5,006 | |||||
Equity of joint venture partner | (2,238 | ) | (2,594 | ) | |||
Total liabilities and members' equity | $ | 3,548 | $ | 2,710 |
Successor | Predecessor | ||||||||||||||||||
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2018 | Period from January 13, 2017 through June 30, 2017 | Period from January 1 2017, through January 12, 2017 | |||||||||||||||
Operating Data | |||||||||||||||||||
Revenues | $ | 2,664 | $ | 2,243 | $ | 5,029 | $ | 3,771 | $ | 300 | |||||||||
Net income | $ | 1,397 | $ | 540 | $ | 2,572 | $ | 953 | $ | 96 | |||||||||
The Company’s share of net income | $ | 699 | $ | 270 | $ | 1,286 | $ | 477 | $ | 48 |
Successor | Predecessor | ||||||||||||||||||
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2018 | Period from January 13, 2017 through June 30, 2017 | Period from January 1 2017, through January 12, 2017 | |||||||||||||||
Opening balance | $ | 5,342 | $ | 5,132 | $ | 5,006 | $ | 5,289 | $ | 5,241 | |||||||||
Distributions | (687 | ) | (287 | ) | (938 | ) | (651 | ) | — | ||||||||||
Share of net income | 699 | 270 | 1,286 | 477 | 48 | ||||||||||||||
Closing balance | $ | 5,354 | $ | 5,115 | $ | 5,354 | $ | 5,115 | $ | 5,289 |
June 30, 2018 | |||||||||||
Gross Carrying Amount | Accumulated Amortization | Net | |||||||||
Customer relationships | $ | 78,200 | $ | 11,078 | $ | 67,122 | |||||
Other - Rail easement | 110 | 35 | 75 | ||||||||
Trade name (indefinite lived) | 34,330 | — | 34,330 | ||||||||
Goodwill | 73,468 | — | 73,468 | ||||||||
186,108 | 11,113 | 174,995 | |||||||||
Other - Patents acquired (Note 2) | 2,133 | 53 | 2,080 | ||||||||
Non-compete and other agreements acquired (Note 2) | 1,373 | 54 | 1,319 | ||||||||
Customer relationships acquired (Note 2) | 1,427 | 36 | 1,391 | ||||||||
Trade name acquired (Note 2) | 633 | 32 | 601 | ||||||||
Goodwill acquired (Note 2) | 2,963 | — | 2,963 | ||||||||
Closing balance | $ | 194,637 | $ | 11,288 | $ | 183,349 | |||||
December 31, 2017 | |||||||||||
Gross Carrying Amount | Accumulated Amortization | Net | |||||||||
Customer relationships | $ | 78,200 | $ | 7,168 | $ | 71,032 | |||||
Rail easement | 110 | 23 | 87 | ||||||||
Trade name (indefinite lived) | 34,330 | — | 34,330 | ||||||||
Goodwill | 73,468 | — | 73,468 | ||||||||
Closing balance | $ | 186,108 | $ | 7,191 | $ | 178,917 |
Definite Lived Intangible | Useful Life |
Customer relationships | 10 years |
Patents | 10 years |
Non-compete agreement | 2 years |
Licensing agreements | 15 years |
Trade name | 5 years |
Rail easement | 4.5 years |
June 30, 2018 | December 31, 2017 | ||||||
Various equipment notes entered into in November 2017, payable in monthly installments ranging from $5 to $24 including interest at 5.2%, maturing in December 2022 through December 2023. The notes are secured by equipment with a net book value of $4,658 as of June 30, 2018 (Successor). | $ | 5,427 | $ | 5,910 | |||
Various equipment notes entered into in 2018, payable in monthly installments ranging from $6 to $38 including interest ranging from 5.90% to 6.80%, maturing in March 2023 through May 2025. The notes are secured by equipment with a net book value of $12,305 as of June 30, 2018 (Successor). | 13,167 | — | |||||
In June 2018, the Company entered into a $12,000 convertible non-revolving credit note with a bank. The credit note will convert to a term loan on April 10, 2019, with a maturity date of April 10, 2024. Interest on borrowings prior to the conversion date is calculated using a floating rate equal to 2% in excess of the London Inter-Bank Offered Rate (LIBOR). At the conversion date, interest can be either calculated based on the aforementioned rate or at a fixed rate equal to 2% in excess of the 5-year Swap Rate in effect at the conversion date, based on the Company's preference. There was $3,424 drawn against the credit note as of June 30, 2018 (Successor). | 3,424 | — | |||||
In December 2017, Charah entered into a $10,000 equipment line with a bank, secured by all equipment purchased with the proceeds of the loan. Interest is calculated on any outstanding amounts using a fixed rate of 4.5%. The equipment line converts to a term loan in September 2018, with a maturity date of June 22, 2023. There was $8,118 drawn against the equipment line as of June 30, 2018 (Successor). | 8,118 | 3,244 | |||||
A credit agreement with a bank, entered into during October 2017, providing for a senior secured term loan B facility with an initial commitment of $250,000 (the Term Loan). The interest rates per annum applicable to the loans under the Term Loan are based on a fluctuating rate of interest measured by reference to, at the Company's election, either (1) LIBOR plus a 6.25% borrowing margin, or (2) an alternative base rate plus a 5.25% borrowing margin. The principal amount of the Term Loan will amortize at a rate of 7.5% per annum with all remaining outstanding amounts under the Term Loan due on the Term Loan maturity date. A portion of the IPO proceeds was used to prepay scheduled principal payments which would otherwise have been required through June 2020. The Term Loan has a scheduled maturity date of October 25, 2024. The Term Loan is collateralized by substantially all the assets of the Company. | 205,313 | 250,000 | |||||
Total | 235,449 | 259,154 | |||||
Less debt issuance costs | (10,676 | ) | (11,460 | ) | |||
224,773 | 247,694 | ||||||
Less current maturities | (8,185 | ) | (19,996 | ) | |||
Notes payable due after one year | $ | 216,588 | $ | 227,698 |
June 30, 2018 | December 31, 2017 | ||||||
Costs incurred on uncompleted contracts | $ | 197,033 | $ | 151,963 | |||
Estimated earnings | 70,412 | 53,356 | |||||
Total costs and earnings | 267,445 | 205,319 | |||||
Less billings to date | (244,280 | ) | (213,242 | ) | |||
Costs and estimated earnings in excess of billings | $ | 23,165 | $ | (7,923 | ) |
June 30, 2018 | December 31, 2017 | ||||||
Costs and estimated earnings in excess of billings | $ | 30,264 | $ | 7,959 | |||
Billings in excess of costs and estimated earnings | (7,099 | ) | (15,882 | ) | |||
Net balance in process | $ | 23,165 | $ | (7,923 | ) |
Successor | |||||||||||||||
Three Months Ended June 30, 2018 | ES | M&TS | All Other | Total | |||||||||||
Revenue | $ | 90,113 | $ | 105,610 | $ | — | $ | 195,723 | |||||||
Segment gross profit | 22,096 | 8,453 | — | 30,549 | |||||||||||
Segment depreciation and amortization expense | 5,334 | 1,378 | 1,992 | 8,704 | |||||||||||
Three Months Ended June 30, 2017 | ES | M&TS | All Other | Total | |||||||||||
Revenue | $ | 61,638 | $ | 12,766 | $ | — | $ | 74,404 | |||||||
Segment gross profit | 17,505 | 2,989 | — | 20,494 | |||||||||||
Segment depreciation and amortization expense | 5,983 | 610 | 49 | 6,642 | |||||||||||
Six Months Ended June 30, 2018 | ES | M&TS | All Other | Total | |||||||||||
Revenue | $ | 137,897 | $ | 213,355 | $ | — | $ | 351,252 | |||||||
Segment gross profit | 34,565 | 15,082 | — | 49,647 | |||||||||||
Segment depreciation and amortization expense | 10,744 | 2,407 | 3,984 | 17,135 | |||||||||||
Expenditures for segment assets | 3,445 | 4,788 | — | 8,233 | |||||||||||
Period from January 13, 2017 through June 30, 2017 | ES | M&TS | All Other | Total | |||||||||||
Revenue | $ | 109,495 | $ | 23,874 | $ | — | $ | 133,369 | |||||||
Segment gross profit | 30,541 | 5,682 | — | 36,223 | |||||||||||
Segment depreciation and amortization expense | 11,570 | 1,134 | 95 | 12,799 | |||||||||||
Expenditures for segment assets | 2,038 | 2,383 | 17 | 4,438 | |||||||||||
Predecessor | |||||||||||||||
Period from January 1, 2017 through January 12, 2017 | ES | M&TS | All Other | Total | |||||||||||
Revenue | $ | 7,451 | $ | 1,679 | $ | — | $ | 9,130 | |||||||
Segment gross profit | 1,412 | 417 | — | 1,829 | |||||||||||
Segment depreciation and amortization expense | 688 | 70 | 5 | 763 | |||||||||||
Expenditures for segment assets | — | — | — | — | |||||||||||
Successor | |||||||||||||||
As of June 30, 2018 | ES | M&TS | All Other | Total | |||||||||||
Segment property and equipment, net | $ | 76,129 | $ | 33,153 | $ | 371 | $ | 109,653 | |||||||
Segment goodwill | 59,809 | 16,622 | — | 76,431 | |||||||||||
As of December 31, 2017 | ES | M&TS | All Other | Total | |||||||||||
Segment property and equipment, net | $ | 75,764 | $ | 23,725 | $ | 441 | $ | 99,930 | |||||||
Segment goodwill | 56,846 | 16,622 | — | 73,468 |
Successor | Predecessor | ||||||||||||||||||
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2018 | Period from January 13, 2017 through June 30, 2017 | Period from January 1, 2017 through January 12, 2017 | |||||||||||||||
Segment gross profit | $ | 30,549 | $ | 20,494 | $ | 49,647 | $ | 36,223 | $ | 1,829 | |||||||||
General and administrative expenses | 18,937 | 7,463 | 33,319 | 13,979 | 3,170 | ||||||||||||||
Interest expense | (5,543 | ) | (1,728 | ) | (9,674 | ) | (2,783 | ) | (4,181 | ) | |||||||||
Income from equity method investment | 699 | 270 | 1,286 | 477 | 48 | ||||||||||||||
Income tax expense | 2,906 | — | 2,906 | — | — | ||||||||||||||
Net income (loss) | $ | 3,862 | $ | 11,573 | $ | 5,034 | $ | 19,938 | $ | (5,474 | ) |
As of June 30, 2018 | As of December 31, 2017 | ||||||
Segment property and equipment, net | $ | 109,653 | $ | 99,930 | |||
Segment goodwill | 76,431 | 73,468 | |||||
Non-segment assets | 245,849 | 204,253 | |||||
Total assets | $ | 431,933 | $ | 377,651 |
Successor | Predecessor | ||||||||||||||||||
Three Months Ended June 30, 2018 | Three Months Ended June 30, 2017 | Six Months Ended June 30, 2018 | Period from January 13, 2017 through June 30, 2017 | Period from January 1, 2017 through January 12, 2017 | |||||||||||||||
Numerator: | |||||||||||||||||||
Net income (loss) attributable to Charah Solutions, Inc. | $ | 3,220 | $ | 10,771 | $ | 4,025 | $ | 18,866 | $ | (5,528 | ) | ||||||||
Denominator (in millions): | |||||||||||||||||||
Weighted average shares outstanding | 24.5 | 23.7 | 24.1 | 23.7 | N/A | ||||||||||||||
Dilutive share-based awards | 0.9 | 0.8 | 0.8 | 0.8 | N/A | ||||||||||||||
Total weighted average shares outstanding, including dilutive shares | 25.4 | 24.5 | 24.9 | 24.5 | N/A | ||||||||||||||
Basic earnings (losses) per share | $ | 0.13 | $ | 0.45 | $ | 0.17 | $ | 0.80 | N/A | ||||||||||
Diluted earnings (losses) per share | $ | 0.13 | $ | 0.44 | $ | 0.16 | $ | 0.77 | N/A |
• | Revenues; |
• | Gross Margin; |
• | Operating Income; |
• | Adjusted EBITDA; and |
• | Adjusted EBITDA Margin. |
Three Months Ended | ||||||||||||||
June 30, | Change | |||||||||||||
2018 | 2017 | $ | % | |||||||||||
(in thousands) | ||||||||||||||
Revenues: | ||||||||||||||
Environmental Solutions | $ | 90,113 | $ | 61,638 | $ | 28,475 | 46.2 | % | ||||||
Maintenance and Technical Services | 105,610 | 12,766 | 92,844 | 727.3 | % | |||||||||
Total revenue | 195,723 | 74,404 | 121,319 | 163.1 | % | |||||||||
Cost of sales | 165,174 | 53,910 | 111,264 | 206.4 | % | |||||||||
Gross Profit: | ||||||||||||||
Environmental Solutions | 22,096 | 17,505 | 4,591 | 26.2 | % | |||||||||
Maintenance and Technical Services | 8,453 | 2,989 | 5,464 | 182.8 | % | |||||||||
Total gross profit | 30,549 | 20,494 | 10,055 | 49.1 | % | |||||||||
General and administrative expenses | 18,937 | 7,463 | 11,474 | 153.7 | % | |||||||||
Operating income (loss) | 11,612 | 13,031 | (1,419 | ) | (10.9 | )% | ||||||||
Interest expense | (5,543 | ) | (1,728 | ) | 3,815 | 220.8 | % | |||||||
Income from equity method investment | 699 | 270 | 429 | 158.9 | % | |||||||||
Income (loss) before taxes | 6,768 | 11,573 | (4,805 | ) | (41.5 | )% | ||||||||
Income tax expense | 2,906 | — | 2,906 | 100.0 | % | |||||||||
Net Income (loss) | 3,862 | 11,573 | (7,711 | ) | (66.6 | )% | ||||||||
Less income attributable to non-controlling interest | (642 | ) | (802 | ) | 160 | (20.0 | )% | |||||||
Net income (loss) attributable to Charah Solutions, Inc. | 3,220 | 10,771 | (7,551 | ) | (70.1 | )% | ||||||||
Adjusted EBITDA(1) | $ | 25,999 | $ | 19,904 | $ | 6,095 | 30.6 | % | ||||||
Adjusted EBITDA margin(1) | 13.3% | 26.8% | (13.5)% | N/A |
(1) | Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. For a definition of Adjusted EBITDA and Adjusted EBITDA margin, as well as a reconciliation to our most directly comparable financial measures calculated and presented in accordance with GAAP, please read “-Non-GAAP Measures” below. |
Successor (1) | Predecessor (2) | Change | ||||||||||||||||
Six Months Ended June 30, 2018 | Period from January 13, 2017 through June 30, 2017 | Period from January 1, 2017 through January 12, 2017 | $ | % | ||||||||||||||
(in thousands) | ||||||||||||||||||
Revenues: | ||||||||||||||||||
Environmental Solutions | $ | 137,897 | $ | 109,495 | $ | 7,451 | $ | 20,951 | 17.9 | % | ||||||||
Maintenance and Technical Services | 213,355 | 23,874 | 1,679 | 187,802 | 735.0 | % | ||||||||||||
Total revenue | 351,252 | 133,369 | 9,130 | 208,753 | 146.5 | % | ||||||||||||
Cost of sales | 301,605 | 97,146 | 7,301 | 197,158 | 188.8 | % | ||||||||||||
Gross Profit: | ||||||||||||||||||
Environmental Solutions | 34,565 | 30,541 | 1,412 | 2,612 | 8.2 | % | ||||||||||||
Maintenance and Technical Services | 15,082 | 5,682 | 417 | 8,983 | 147.3 | % | ||||||||||||
Total gross profit | 49,647 | 36,223 | 1,829 | 11,595 | 30.5 | % | ||||||||||||
General and administrative expenses | 33,319 | 13,979 | 3,170 | 16,170 | 94.3 | % | ||||||||||||
Operating income | 16,328 | 22,244 | (1,341 | ) | (4,575 | ) | (21.9 | )% | ||||||||||
Interest expense | (9,674 | ) | (2,783 | ) | (4,181 | ) | 2,710 | 38.9 | % | |||||||||
Income from equity method investment | 1,286 | 477 | 48 | 761 | 145.0 | % | ||||||||||||
Income (loss) before taxes | 7,940 | 19,938 | (5,474 | ) | (6,524 | ) | (45.1 | )% | ||||||||||
Income tax expense | 2,906 | — | — | 2,906 | 100.0 | % | ||||||||||||
Net income (loss) | 5,034 | 19,938 | (5,474 | ) | (9,430 | ) | (65.2 | )% | ||||||||||
Less income attributable to non-controlling interest | (1,009 | ) | (1,072 | ) | (54 | ) | 117 | (10.4 | )% | |||||||||
Net income (loss) attributable to Charah Solutions, Inc. | $ | 4,025 | $ | 18,866 | $ | (5,528 | ) | $ | (9,313 | ) | (69.8 | )% | ||||||
Adjusted EBITDA(3) | 43,361 | 35,331 | (422 | ) | 8,452 | 24.2 | % | |||||||||||
Adjusted EBITDA margin(3) | 12.3% | 26.5% | (4.6)% | (12.2)% | N/A |
(1) | The successor columns represent the combined financial information of Charah and Allied for the period from January 13, 2017 through June 30, 2017 and the six months ended June 30, 2018 as reflected in our unaudited financial statements included elsewhere in this Quarterly Report. The predecessor and successor columns together represent our accounting Predecessor for purposes of this Quarterly Report. |
(2) | The predecessor column represents the financial information of Charah for the period from January 1, 2017 through January 12, 2017 as reflected in our unaudited financial statements included elsewhere in this Quarterly Report. The predecessor and successor columns together represent our accounting Predecessor for purposes of this Quarterly Report. |
(3) | Adjusted EBITDA and Adjusted EBITDA margin are non-GAAP financial measures. For a definition of Adjusted EBITDA and Adjusted EBITDA margin, as well as a reconciliation to our most directly comparable financial measures calculated and presented in accordance with GAAP, please read “-Non-GAAP Measures” below. |
Successor | Predecessor | |||||||||||||||||
Six Months Ended June 30, 2018 | Period from January 13, 2017 to June 30, 2017 | Period from January 1, 2017 to January 12, 2017 | ||||||||||||||||
Change | ||||||||||||||||||
$ | % | |||||||||||||||||
(in thousands) | ||||||||||||||||||
Cash flows provided by (used in) operating activities | $ | (2,186 | ) | $ | 14,354 | $ | (4,418 | ) | $ | (12,122 | ) | (122.0 | )% | |||||
Cash flows provided by (used in) investing activities | $ | (27,145 | ) | $ | (1,371 | ) | $ | — | $ | (25,774 | ) | 1,879.9 | % | |||||
Cash flows provided by (used in) financing activities | $ | 12,065 | $ | (11,700 | ) | $ | 4,463 | $ | 19,302 | (266.7 | )% | |||||||
Net change in cash | $ | (17,266 | ) | $ | 1,283 | $ | 45 | $ | (18,549 | ) | (1,396.8 | )% |
Successor(1) | Predecessor(2) | ||||||||||||||||||
Six Months Ended June 30, 2018 | Period from January 13, 2017 through June 30, 2017 | Period from January 1, 2017 through January 12, 2017 | |||||||||||||||||
Three Months Ended | |||||||||||||||||||
June 30, | |||||||||||||||||||
2018 | 2017 | ||||||||||||||||||
(in thousands) | |||||||||||||||||||
Net income (loss) attributable to Charah Solutions, Inc. | $ | 3,220 | $ | 10,771 | $ | 4,025 | $ | 18,866 | $ | (5,528 | ) | ||||||||
Interest expense | 5,543 | 1,728 | 9,674 | 2,783 | 4,181 | ||||||||||||||
Income tax expense | 2,906 | — | 2,906 | — | — | ||||||||||||||
Depreciation and amortization | 8,704 | 6,642 | 17,135 | 12,799 | 763 | ||||||||||||||
Elimination of certain non-recurring and non-operating legal costs(3) | 2,489 | 19 | 5,169 | 19 | — | ||||||||||||||
Elimination of certain non-recurring startup costs(4) | 688 | 447 | 1,480 | 447 | — | ||||||||||||||
Equity-based compensation | 1,292 | 85 | 1,403 | 141 | — | ||||||||||||||
Transaction related expenses and other items | 1,157 | 212 | 1,569 | 276 | 162 | ||||||||||||||
Adjusted EBITDA | $ | 25,999 | $ | 19,904 | $ | 43,361 | $ | 35,331 | $ | (422 | ) | ||||||||
Adjusted EBITDA margin(5) | 13.3% | 26.8% | 12.3% | 26.5% | (4.6)% |
(1) | The successor columns represent the combined financial information of Charah and Allied for the period from January 13, 2017 through June 30, 2017 and January 1, 2018 through June 30, 2018 as applicable, as reflected in our financial statements included elsewhere in this Quarterly Report. The predecessor and successor columns together represent our accounting Predecessor for purposes of this Quarterly Report. |
(2) | The predecessor columns represent the financial information of Charah for the period from January 1, 2017 through January 12, 2017 as reflected in our audited financial statements included elsewhere in this Quarterly Report. The predecessor and successor columns together represent our accounting Predecessor for purposes of this Quarterly Report. |
(3) | For the three and six months ended June 30, 2018, represents non-recurring legal expenses associated with the lawsuit filed by APTIM Corp. against Allied in July 2017. As a result, these costs will be non-recurring following the resolution of the APTIM litigation and are not representative of legal costs that we will incur from time to time in the ordinary course of our business. |
(4) | Represents non-recurring start-up costs associated with the startup of Allied and our nuclear services offerings, including the setup of financial operations systems and modules, pre-contract expenses to obtain initial contracts and the hiring of operational staff. Because these costs are associated with the initial setup of the Allied business to initiate the operations involved in our nuclear services offerings, these costs are non-recurring in the normal course of our business. |
(5) | Adjusted EBITDA margin is a non-GAAP measure that represents the ratio of Adjusted EBITDA to total revenues. We use Adjusted EBITDA margin to measure the success of our businesses in managing our cost base and improving profitability. |
Exhibit Number | Description | |
Master Reorganization Agreement (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8‑K (File No. 001‑38523) filed with the Commission on June 19, 2018). | ||
Amended and Restated Certificate of Incorporation of Charah Solutions, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8‑K (File No. 001‑38523) filed with the Commission on June 22, 2018). | ||
Amended and Restated Bylaws of Charah Solutions, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8‑K (File No. 001‑38523) filed with the Commission on June 22, 2018). | ||
Registration Rights Agreement (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8‑K (File No. 001‑38523) filed with the Commission on June 22, 2018). | ||
Stockholders’ Agreement (incorporated by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8‑K (File No. 001‑38523) filed with the Commission on June 22, 2018). | ||
Charah Solutions, Inc. 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 4.4 to the Registrant’s Form S‑8 Registration Statement (File No. 333-225717) filed with the Commission on June 19, 2018). | ||
Second Amendment to ABL Credit Agreement, dated April 27, 2018, by and among Charah, LLC, Allied Power Management, LLC and Allied Power Services, LLC, as borrowers, Charah Sole Member LLC and Allied Power Sole Member, LLC, as guarantors, the lenders party thereto from time to time, and Regions Bank, as administrative agent, collateral agent, swingline lender and letter of credit issuer (incorporated by reference to Exhibit 10.5 to the Registrant’s Form S-1 (File No. 333-225051) filed with the Commission on May 18, 2018). | ||
First Amendment to Term Loan Credit Agreement, dated April 27, 2018, by and among Charah, LLC and Allied Power Management, LLC, as borrowers, Charah Sole Member, LLC and Allied Power Sole Member, LLC, as guarantors, the lenders party thereto from time to time, and Credit Suisse AG, Cayman Islands Branch, as administrative agent and collateral agent (incorporated by reference to Exhibit 10.7 to the Registrant’s Form S-1 (File No. 333-225051) filed with the Commission on May 18, 2018). | ||
Second Amendment to Employment Agreement, dated June 1, 2018, with Charles E. Price (incorporated by reference to Exhibit 10.11 to the Registrant’s Form S‑1 Registration Statement (File No. 333‑225051) filed with the Commission on June 4, 2018). | ||
Amendment to Employment Agreement, dated June 1, 2018, with Bruce Kramer (incorporated by reference to Exhibit 10.12 to the Registrant’s Form S‑1/A Registration Statement (File No. 333‑225051) filed with the Commission on June 4, 2018). | ||
Employment Agreement, dated July 12, 2017, with Dorsey Ron McCall (incorporated by reference to Exhibit 10.10 to the Registrant’s Form S‑1 Registration Statement (File No. 333‑225051) filed with the Commission on May 18, 2018). | ||
Amendment to Employment Agreement, dated June 5, 2018, with Dorsey Ron McCall (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38523) filed with the Commission on June 19, 2018). | ||
Form of Restricted Stock Agreement under the Charah Solutions, Inc. 2018 Omnibus Incentive Plan (Time Based) (incorporated by reference to Exhibit 4.5 to the Registrant’s Form S‑8 Registration Statement (File No. 333‑225717) filed with the Commission on June 19, 2018). | ||
Form of Restricted Stock Agreement under the Charah Solutions, Inc. 2018 Omnibus Incentive Plan (Time and Performance Based) (incorporated by reference to Exhibit 4.6 to the Registrant’s Form S‑8 Registration Statement (File No. 333‑225717) filed with the Commission on June 19, 2018). | ||
Indemnification Agreement (Bruce Kramer) (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K (File No. 001-38523) filed with the Commission on June 22, 2018). | ||
Indemnification Agreement (Charles E. Price) (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-38523) filed with the Commission on June 22, 2018). | ||
Indemnification Agreement (Scott Sewell) (incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K (File No. 001-38523) filed with the Commission on June 22, 2018). |
Indemnification Agreement (Dorsey Ron McCall) (incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K (File No. 001-38523) filed with the Commission on June 22, 2018). | ||
Indemnification Agreement (Mark Spender) (incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K (File No. 001-38523) filed with the Commission on June 22, 2018). | ||
Indemnification Agreement (Stephen Tritch) (incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K (File No. 001-38523) filed with the Commission on June 22, 2018). | ||
Indemnification Agreement (Claire Babineaux-Fontenot) (incorporated by reference to Exhibit 10.7 to the Registrant’s Current Report on Form 8-K (File No. 001-38523) filed with the Commission on June 22, 2018). | ||
Indemnification Agreement (Brian Ferraioli) (incorporated by reference to Exhibit 10.8 to the Registrant’s Current Report on Form 8-K (File No. 001-38523) filed with the Commission on June 22, 2018). | ||
Indemnification Agreement (Robert Flexon) (incorporated by reference to Exhibit 10.9 to the Registrant’s Current Report on Form 8-K (File No. 001-38523) filed with the Commission on June 22, 2018). | ||
Indemnification Agreement (Jack Blossman) (incorporated by reference to Exhibit 10.10 to the Registrant’s Current Report on Form 8-K (File No. 001-38523) filed with the Commission on June 22, 2018). | ||
Certification of Chief Executive Officer Pursuant to Rule 13a‑14(a)/15d‑14(a) of the Securities Exchange Act of 1934 | ||
Certification of Chief Financial Officer Pursuant to Rule 13a‑14(a)/15d‑14(a) of the Securities Exchange Act of 1934 | ||
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
*101.CAL | XBRL Calculation Linkbase Document | |
*101.DEF | XBRL Definition Linkbase Document | |
*101.INS | XBRL Instance Document | |
*101.LAB | XBRL Labels Linkbase Document | |
*101.PRE | XBRL Presentation Linkbase Document | |
*101.SCH | XBRL Schema Document |
Charah Solutions, Inc. | ||
August 14, 2018 | By: | /s/ Charles E. Price |
Name: | Charles E. Price | |
Title: | President, Chief Executive Officer and Director | |
(Principal Executive Officer) | ||
August 14, 2018 | By: | /s/ Bruce Kramer |
Name: | Bruce Kramer | |
Title: | Chief Financial Officer, Treasurer and Secretary | |
(Principal Financial Officer) | ||
1. | I have reviewed this quarterly report on Form 10-Q of Charah Solutions, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Charles E. Price | |
Charles E. Price | |
President, Chief Executive Officer and Director | |
(Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Charah Solutions, Inc. |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the period presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b. | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
c. | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
/s/ Bruce Kramer | |
Bruce Kramer | |
Chief Financial Officer, Treasurer and Secretary | |
(Principal Financial Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) of 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Charles E. Price | |
Charles E. Price | |
President, Chief Executive Officer and Director | |
(Principal Executive Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) of 15(d) of the Securities Exchange Act of 1934, as amended; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Bruce Kramer | |
Bruce Kramer | |
Chief Financial Officer, Treasurer and Secretary | |
(Principal Financial Officer) |
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Aug. 14, 2018 |
|
Document And Entity Information [Abstract] | ||
Entity Registrant Name | Charah Solutions, Inc. | |
Entity Central Index Key | 0001730346 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2018 | |
Document Fiscal Year Focus | 2018 | |
Document Fiscal Period Focus | Q2 | |
Amendment Flag | false | |
Entity Common Stock, Shares Outstanding | 29,082,988 |
Condensed Consolidated & Combined Statements of Stockholders' and Members' Equity (Unaudited) - USD ($) $ in Thousands |
Total |
Common Stock |
Additional Paid In Capital |
Retained Earnings |
Parent |
Non-Controlling Interest |
Series A |
Series A
Parent
|
Series B |
Series B
Parent
|
Series C |
Series C
Parent
|
Charah, LLC Members’ Interest |
Charah, LLC Members’ Interest
Common Stock
|
Charah, LLC Members’ Interest
Retained Earnings
|
Charah, LLC Members’ Interest
Parent
|
Charah, LLC Members’ Interest
Non-voting Shares
Common Stock
|
Charah, LLC Members’ Interest
Non-voting Shares
Additional Paid In Capital
|
Charah, LLC Members’ Interest
Series A
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Charah, LLC Members’ Interest
Series B
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Charah, LLC Members’ Interest
Series C
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Allied Power Management, LLC Members’ Interest |
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Balance beginning of period, Members' Equity (Predecessor) at Dec. 31, 2016 | $ 21,346 | $ 686 | $ 24 | $ 20,366 | $ 20,660 | $ 216 | $ 54 | |||||||||||||||
Balance beginning of period (shares) (Predecessor) at Dec. 31, 2016 | 18,750 | 168,750 | ||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||||
Net income (loss) | Predecessor | (5,474) | 54 | (5,528) | (5,528) | ||||||||||||||||||
Distributions | Predecessor | (20,660) | 0 | (20,660) | (20,660) | ||||||||||||||||||
Balance end of period, Members' Equity (Predecessor) at Jan. 12, 2017 | (4,788) | 740 | $ 24 | $ (5,822) | $ (5,528) | $ 216 | $ 54 | |||||||||||||||
Balance end of period, Members' Equity at Jan. 12, 2017 | 740 | $ 0 | $ 0 | 740 | $ 0 | $ 0 | ||||||||||||||||
Balance end of period (shares) (Predecessor) at Jan. 12, 2017 | 18,750 | 168,750 | ||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||||
Net income (loss) | 19,938 | 18,866 | 18,866 | 1,072 | ||||||||||||||||||
Issuance of original member interests | $ 116,418 | $ 116,418 | $ 36,643 | $ 36,643 | $ 116,418 | $ 36,643 | ||||||||||||||||
Distributions | (16,338) | (15,498) | (840) | (15,498) | ||||||||||||||||||
Share based compensation expense | $ 141 | $ 141 | $ 141 | |||||||||||||||||||
Balance end of period, Members' Equity at Jun. 30, 2017 | 157,542 | 18,866 | 156,570 | 972 | 137,704 | 0 | ||||||||||||||||
Balance beginning of period, Stockholders' Equity at Dec. 31, 2017 | $ 48,319 | $ 0 | $ 0 | 18,316 | 47,721 | 598 | 19,718 | 9,687 | ||||||||||||||
Balance beginning of period (shares) at Dec. 31, 2017 | 0 | 0 | ||||||||||||||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||||||||||||
Net income (loss) | $ 5,034 | 4,025 | 4,025 | 1,009 | ||||||||||||||||||
Share based compensation expense | 214 | 214 | 214 | |||||||||||||||||||
Distributions | (1,407) | (686) | (721) | (686) | ||||||||||||||||||
Conversion from members' interest to common stock (in shares) | 23,436,398 | |||||||||||||||||||||
Conversion from members' interest to common stock | 0 | $ 234 | 28,699 | (19,246) | (9,687) | |||||||||||||||||
Issuance of shares (in shares) | 5,294,117 | |||||||||||||||||||||
Issuance of shares | 59,241 | $ 53 | 59,188 | 59,241 | ||||||||||||||||||
Share based common stock issued (in shares) | 372,169 | |||||||||||||||||||||
Share based common stock issued | 0 | $ 4 | (4) | |||||||||||||||||||
Shares repurchased (in shares) | (19,696) | |||||||||||||||||||||
Shares repurchased | 0 | $ 0 | 0 | 0 | ||||||||||||||||||
Share based compensation expense | 1,189 | 1,189 | 1,189 | |||||||||||||||||||
Deferred offering costs | (8,622) | (8,622) | (8,622) | |||||||||||||||||||
Balance end of period, Stockholders' Equity at Jun. 30, 2018 | $ 103,968 | $ 291 | $ 80,450 | $ 22,341 | $ 103,082 | $ 886 | $ 0 | $ 0 | ||||||||||||||
Balance end of period (shares) at Jun. 30, 2018 | 29,082,988 | 29,082,988 |
Nature of Business and Basis of Presentation |
6 Months Ended |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Basis of Presentation | Nature of Business and Basis of Presentation Organization Charah Solutions, Inc. (“Charah Solutions” or the “Company”) was formed as a Delaware corporation in January 2018 and did not conduct any material business operations prior to the transactions described below other than certain activities related to the initial public offering (the “IPO”). The Company completed its IPO on June 18, 2018. Charah Solutions is a holding company, the sole material assets of which consist of membership interests in Charah Management LLC, a Delaware limited liability company (“Charah Management”), and Allied Power Holdings, LLC, a Delaware limited liability company (“Allied Power Holdings”). Through the Company’s ownership of Charah Management and Allied Power Holdings, the Company owns the outstanding equity interests in Charah, LLC, a Delaware limited liability company (“Charah”), and Allied Power Management, LLC, a Delaware limited liability company (“Allied”), the subsidiaries through which Charah Solutions operates its businesses. The historical financial data presented herein as of June 30, 2018 and for periods after the June 18, 2018 corporate reorganization is that of Charah and Allied on a consolidated basis, and on a combined basis for periods prior to the June 18, 2018 corporate reorganization described below. Allied was formed in May 2017 and did not commence operations until July 2017. Corporate Reorganization On June 18, 2018, pursuant to the terms of the reorganization transactions completed in connection with the IPO, (a) (i) Charah Holdings LP, a Delaware limited partnership (“Charah Holdings”) owned by Bernhard Capital Partners Management, LP and certain related affiliates (“BCP”), contributed all of its interests in Charah Management and Allied Power Holdings to the Company in exchange for 17,514,745 shares of common stock, (ii) CEP Holdings, Inc., a Delaware corporation owned by Charles Price and certain affiliates (“CEP Holdings”), contributed all of its interests in Charah Management and Allied Power Holdings to the Company in exchange for 4,605,465 shares of common stock, (iii) Charah Management Holdings LLC, a Delaware limited liability company (“Charah Management Holdings”), contributed all of its interests in Charah Management and Allied Power Holdings to the Company in exchange for 907,113 shares of common stock and (iv) Allied Management Holdings, LLC, a Delaware limited liability company (“Allied Management Holdings”), contributed all of its interests in Charah Management and Allied Power Holdings to the Company in exchange for 409,075 shares of common stock, (b) each of Charah Management Holdings and Allied Management Holdings distributed the shares of common stock received by them pursuant to clause (a) to their respective members in accordance with the respective terms of their limited liability company agreements and (c) Charah Holdings distributed a portion of the shares of common stock it received in clause (a) above to certain direct and indirect blocker entities which ultimately merged into the Company, with the Company surviving, and affiliates of BCP received shares of common stock as consideration in the mergers. Description of Business Operations The Company provides mission-critical environmental and maintenance services to the power generation industry, enabling our customers to address challenges related to the remediation of ash ponds and landfills at open and closed power plant sites while continuously operating and providing necessary electric power to communities nationwide. Services offered include a suite of coal ash management and recycling, environmental remediation and outage maintenance services. The Company also designs and implements solutions for complex environmental projects (such as coal ash pond closures) and facilitates coal ash recycling through byproduct sales and other beneficial use services. The Company has corporate offices in Kentucky, North Carolina, and Louisiana, and principally operates in the eastern and mid central United States. The condensed consolidated and combined financial statements include the assets, liabilities, members’ equity, and results of operations of the Company and its consolidated subsidiaries. References to “Predecessor” in the financial statements refer to Charah. Charah is the predecessor for accounting purposes of Charah Solutions, which as described above, was formed in connection with the IPO. Under the Jumpstart Our Business Startups Act (the "JOBS Act"), the Company meets the definition of an “emerging growth company,” which allows the Company to have an extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. The Company intends to take advantage of all of the reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act until the Company is no longer an emerging growth company. In April 2017, the SEC adopted new rules that included an inflation-adjusted threshold in the definition of an emerging growth company. Under the new inflation-adjusted threshold, we would cease to be an emerging growth company on the last day of the fiscal year in which our annual gross revenues exceed $1.07 billion. This is an increase of $70 million from the previous $1 billion threshold. Basis for Presentation The Company’s fiscal year ends December 31. The accompanying unaudited condensed consolidated and combined financial statements include the accounts of the Company and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated and combined financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, which consist of normal recurring adjustments. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. These unaudited condensed consolidated and combined financial statements should be read in conjunction with the annual audited combined financial statements and notes included in our final prospectus filed on June 15, 2018. Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The core principle of ASU 2014-09 is to recognize revenues when a customer obtains control of a good or service, in an amount that reflects the consideration to which an entity is expected to be entitled for those goods or services. The standard will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 by one year. The updated standard will be effective for the year ending December 31, 2019, with early adoption permitted. The Company has not yet selected a transition method and is currently evaluating the effect that the new standard will have on the financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), requiring all leases to be recognized on the balance sheet as a right-of-use asset and a lease liability, unless the lease is a short-term lease (generally a lease with a term of twelve months or less). At the commencement date of the lease, the Company will recognize: 1) a lease liability for the Company’s obligation to make payments under the lease agreement, measured on a discounted basis; and 2) a right-of-use asset that represents the Company's right to use, or control the use of, the specified asset for the lease term. Upon adopting the ASU, the Company will be required to recognize and measure their leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 will be effective for the Company for the year ending December 31, 2020, with early adoption permitted. The Company is currently evaluating the effect that the new standard will have on the consolidated and combined financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. This update addresses specific cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and proceeds from the settlement of insurance claims. The guidance is effective for fiscal years beginning after December 15, 2018. The Company is currently evaluating the effect that the new standard will have on the consolidated and combined financial statements. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230). This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Upon adopting the ASU, amounts generally described as restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be effective for the Company beginning after December 15, 2018 with regard to fiscal years and beginning after December 15, 2019 with regard to interim periods within fiscal years, with early adoption permitted. The Company is currently evaluating the effect that the new standard will have on the condensed consolidated and combined financial statements. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 requires entities to use a screen test to determine when an integrated set of assets and activities is not a business or if the integrated set of assets and activities needs to be further evaluated against the framework. The Company adopted the new standard effective January 1, 2018 on a prospective basis. The new standard did not have a material impact on our condensed consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the measurement of goodwill impairment by eliminating the requirement that an entity compute the implied fair value of goodwill based on the fair values of its assets and liabilities to measure impairment. Instead, goodwill impairment will be measured as the difference between the fair value of the reporting unit and the carrying value of the reporting unit. The ASU also clarifies the treatment of the income tax effect of tax deductible goodwill when measuring goodwill impairment loss. The Company will be required to adopt ASU 2017-04 as of January 1, 2020. ASU 2017-04 must be applied prospectively with early adoption permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated and combined financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. The Company adopted the new standard effective January 1, 2018 on a prospective basis. The new standard did not have a material impact on our condensed consolidated and combined financial statements. Unaudited Pro Forma Income Information The unaudited pro forma income information gives effect to the corporate reorganization that occurred in connection with the closing of the IPO and the resulting legal entity of Charah Solutions, which is incorporated as a “C” Corporation. Prior to the corporate reorganization, the holding companies for Charah and Allied were limited liability companies and generally not subject to income taxes. The pro forma net income, therefore, includes an adjustment for income tax expense as if the holding companies for Charah and Allied had been “C” Corporations for all periods presented at an assumed combined federal, state and local effective income tax rate of 38% for the year ended December 31, 2017 and 25% for the periods from January 1, 2018 and April 1, 2018, through June 17, 2018, plus the actual tax expense for the period from June 18, 2018 through June 30, 2018. These rates approximate the calculated statutory tax rate for each period. The tax rate in the preceding sentence for the year ended December 31, 2017 does not reflect the impact of U.S. tax reform, which reduces the federal U.S. statutory tax rate from 35% to 21% effective in 2018. The tax rate mentioned for the three and six months ended June 30, 2018 reflects the impact of U.S. tax reform. |
Business Combination |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combination | Business Combination On January 13, 2017, Charah Management completed a transaction with BCP, a previously unrelated third party pursuant to which BCP acquired a 76% equity position in Charah Management. The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. The purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair value at the date of acquisition, as summarized below. By the application of “push-down” accounting, Charah’s assets and liabilities were accordingly adjusted to fair value.
On March 30, 2018, Charah Management completed a transaction with SCB Materials International, Inc. and affiliated entities ("SCB"), a previously unrelated third party, pursuant to which Charah acquired certain assets and liabilities of SCB for a purchase price of $35,000 with $20,000 paid at closing, and $15,000 to be paid over time in conjunction with certain performance metrics. The contract also contained various mechanisms for a working capital true-up, which the Company is currently reviewing. The Company does not believe that any potential changes coming from this review will have a material impact on the consolidated and combined financial statements. The acquisition was accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. As of June 30, 2018, the allocation of purchase price for the acquisition is preliminary (as summarized below); fair value estimates of identifiable assets acquired and liabilities assumed are based on management’s estimates, judgments and assumptions and are subject to change until finalized. Goodwill will be allocated to the Environmental Solutions segment. The total amount of goodwill that is expected to be deductible for tax purposes is $4,143. The allocation of the purchase price was adjusted in the quarter ended June 30, 2018, resulting in an increase of $562 to net working capital acquired, excluding cash and an increase of $807 to the fair value of property, plant and equipment. The fair value of intangible assets was reduced by $14 for trade name, $286 for customer relationships, $75 for non-compete and other agreements, and $815 for other intangible assets. The equity method investment was considered to have no fair value, resulting in a reduction of $611 (see also Note 3). Goodwill increased by $432. The adjustments to the allocation of the purchase price increased depreciation expense by $21 and decreased amortization expense by $29 for the quarter ended June 30, 2018.
No revenue or earnings from the acquired business described above is included in the Statements of Income for the 2017 periods. The actual revenue from the acquired business included in the Statements of Income for the three and six months ended June 30, 2018 was approximately $16,573 for both periods. The actual earnings from the acquired business included in the Statements of Income for the three and six months ended June 30, 2018 was approximately $954 for both periods. The following unaudited information presents the pro forma consolidated revenue and net income for the periods indicated as if the acquisition had been included in the consolidated results of operations beginning January 1, 2017.
The above unaudited pro forma results have been calculated by combining the historical results of the Company and the acquired business as if the acquisition had occurred as of the beginning of the fiscal year prior to the acquisition date, and then adjusting the income tax provisions as if they had been calculated on the resulting, combined results. The pro forma results include estimates for additional depreciation related to the fair value of property, plant and equipment and intangible asset amortization and therefore will change when the final asset values and useful lives have been determined. The pro forma results reflect elimination of $573 of direct acquisition costs that were incurred in the six months ended June 30, 2018 (since for purposes of the pro forma presentation they have been reflected in 2017 instead of in 2018). For all periods presented, historical depreciation and amortization expense of the acquired business was adjusted to reflect the acquisition date fair value amounts of the related tangible and intangible assets. No other material pro forma adjustments were deemed necessary, either to conform the acquisition to the Company’s accounting policies or for any other situation. The pro forma information is not necessarily indicative of the results that would have been achieved had the transactions occurred on the date indicated or that may be achieved in the future. |
Equity Method Investments |
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Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments | Equity Method Investments Charah has an investment in a company that provides ash management and remarketing services to the electric utility industry. Charah accounts for its investment under the equity method of accounting because Charah has significant influence over the financial and operating policies of the company. Charah had a receivable due from the equity method investment of $126 and $61 at June 30, 2018 and December 31, 2017, respectively. Summarized balance sheet information of our equity method investment entity as of:
Summarized financial performance of our equity method investment entity is as follows:
The following table reflects our proportional ownership activity in our investment account:
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Intangible Assets |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Intangible Assets | Intangible Assets The Company’s intangible assets consist of the following as:
Definite Lived Intangible Assets As of June 30, 2018, and December 31, 2017, definite lived intangible assets include customer relationships, patents, non-compete and licensing agreements, trade name, and a rail easement. These assets are amortized on a straight-line basis over their estimated useful lives as shown in the table below. Amortization expense was $2,136, $1,961, $4,097, $3,269 and $0 during the three months ended June 30, 2018 (Successor), the three months ended June 30, 2017 (Successor), the six months ended June 30, 2018 (Successor), the period from January 13, 2017 through June 30, 2017 (Successor) and the period from January 1, 2017 through January 12, 2017 (Predecessor), respectively.
Goodwill and Indefinite Lived Intangible Assets Goodwill represents the excess of the cost of an acquisition price over the fair value of acquired net assets, and such amounts are reported separately as goodwill on our condensed consolidated and combined balance sheets. Indefinite lived intangible assets are not amortized, but instead are tested for impairment annually or on an interim basis if events or circumstances indicate that the fair value of the asset has decreased below its carrying value. We perform our impairment test effective October 31st of each year. Each quarter we evaluate if there are any indicators of impairment, and we determined there were no indicators of impairment at June 30, 2018 and 2017. |
Credit Agreement |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Credit Agreement | Credit Agreement The Company has a credit agreement with a bank providing for a revolving credit facility (the "Credit Facility") with a principal amount of up to $45,000. The interest rates per annum applicable to the loans under the Credit Facility are based on a fluctuating rate of interest measured by reference to, at the Company's election, either (1) an adjusted LIBOR plus a 2.00% borrowing margin, or (2) an alternative base rate plus a 1.00% borrowing margin. Customary fees are payable in respect of the Credit Facility and include (1) commitment fees in an annual amount equal to 0.50% of the daily unused portions of the Credit Facility, and (2) a 2.00% fee on outstanding letters of credit. The Credit Facility has a maturity date of October 25, 2022. There are no amounts drawn on the revolving credit facility as of June 30, 2018 and December 31, 2017, respectively, and $12,500 in letters of credit outstanding as of June 30, 2018. Notes Payable The following table summarizes the major components of debt at each balance sheet date and provides maturities and interest rate ranges for each major category as of June 30, 2018:
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Notes Payable |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable | Credit Agreement The Company has a credit agreement with a bank providing for a revolving credit facility (the "Credit Facility") with a principal amount of up to $45,000. The interest rates per annum applicable to the loans under the Credit Facility are based on a fluctuating rate of interest measured by reference to, at the Company's election, either (1) an adjusted LIBOR plus a 2.00% borrowing margin, or (2) an alternative base rate plus a 1.00% borrowing margin. Customary fees are payable in respect of the Credit Facility and include (1) commitment fees in an annual amount equal to 0.50% of the daily unused portions of the Credit Facility, and (2) a 2.00% fee on outstanding letters of credit. The Credit Facility has a maturity date of October 25, 2022. There are no amounts drawn on the revolving credit facility as of June 30, 2018 and December 31, 2017, respectively, and $12,500 in letters of credit outstanding as of June 30, 2018. Notes Payable The following table summarizes the major components of debt at each balance sheet date and provides maturities and interest rate ranges for each major category as of June 30, 2018:
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Interest Rate Swap |
6 Months Ended |
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Jun. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Interest Rate Swap | Interest Rate Swap In order to manage interest rate risk in a cost-efficient manner, the Company entered into an interest rate swap during 2017 whereby the Company agreed to exchange with the counterparty, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to a notional amount. The interest rate swap is not designated for hedge accounting. The change in fair values of the interest rate swap are immediately recognized in earnings, within interest expense. As of both June 30, 2018 and December 31, 2017, the notional amount of the interest rate swap was $150,000. A fair value asset of $2,030 was recorded in the condensed consolidated and balance sheet within other assets, as of June 30, 2018 (Successor) and a fair value liability of $198 was recorded in the balance sheet within other liabilities as of December 31, 2017 (Successor). The total amount of gain subtracted from interest expense for the three months ended June 30, 2018 (Successor), the three months ended June 30, 2017 (Successor), the six months ended June 30, 2018 (Successor), the period from January 13, 2017 through June 30, 2017 (Successor), and the period from January 1, 2017 through January 12, 2017 (Predecessor) was $604, $0, $2,228, $0 and $0 respectively. |
Costs and Estimated Earnings on Uncompleted Contracts |
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Revenue Recognition and Deferred Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Costs and Estimated Earnings on Uncompleted Contracts | Costs and Estimated Earnings on Uncompleted Contracts Costs and estimated earnings on uncompleted contracts as of:
The net balance in process is classified on the condensed consolidated and combined balance sheets as of:
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Distributions to Stockholder |
6 Months Ended |
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Jun. 30, 2018 | |
Equity [Abstract] | |
Distributions to Stockholder | Distributions to Stockholders and Members Prior to the Company's June 18, 2018 corporate reorganization, the Company made certain distributions to stockholders and members to cover their tax liabilities. During the three months ended June 30, 2018 (Successor), the three months ended June 30, 2017 (Successor), the six months ended June 30, 2018, the period from January 13, 2017 through June 30, 2017 (Successor), and the period from January 1, 2017 through January 12, 2017 (Predecessor), the Company made distributions of $686, $0, $686, $15,498 and $20,660, respectively, a portion of which was used to pay for income taxes. |
Stock/Unit Based Compensation |
6 Months Ended |
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Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock/Unit Based Compensation | Stock/Unit Based Compensation The Charah Management LLC Limited Liability Agreement provided for the issuance of up to 1,000 Series C interests ("Charah Series C Profits Interests"). In 2017 Charah Management adopted the Charah Series C Profits Interest Plan and issued 650 of such units to employees. Charah Series C Profits Interests participated in distributions to Charah members based on specified rates of return being realized to the Charah Series A and Charah Series B membership interest. The Charah Series C Profits Interest Plan is no longer in place following our corporate reorganization and related IPO. Charah Series C Profits Interests vested ratably in each of the first five anniversaries of their grant date with vesting accelerated upon a change of control. 540 Charah Series C Profits Interests were unvested at June 18, 2018 and were canceled as a result of the corporate reorganization that occurred upon the closing of the IPO (see further discussed below). The Charah Series C Profits Interests were valued based upon a contingent claims analysis to allocate the total implied equity value as of the valuation date amongst the various equity securities classes, with breakpoints estimated considering relative seniority, liquidation preferences, and conversion features. An assumed volatility of 30% based upon a comparable public company analysis was used in the determination of fair value. The weighted–average grant date fair value of the Charah Series C Profits Interest granted during 2017 was $3 per unit, resulting in $2,100 of total compensation costs which was expected to vest over 5 years. There was $1,679 of unrecognized compensation as of June 30, 2018. During the three months ended June 30, 2018 and 2017, $103 and $85, respectively, of compensation expense was recognized related to the Charah Series C Profits interests. During the six months ended June 30, 2018 (Successor), the period from January 13, 2017 through June 30, 2017 (Successor) and the period from January 1, 2017 through January 12, 2017 (Predecessor) compensation expense of $214, $141 and $0, respectively, was recognized related to the Charah Series C Profits Interests. The Allied Power Management LLC Limited Liability Agreement provided for the issuance of up to 1,000 Allied Series C profits interests (“Allied Series C Profits Interests”). In 2017 Allied adopted the Allied Series C Profits Interest Plan and issued 550 of such units to employees. The Allied Series C Profits Interest Plan is no longer in place following our corporate reorganization and related IPO. Allied Series C Profits Interests participated in distributions to Allied members based upon specified rates of return being realized to the Allied Series A and Allied Series B membership interest. Allied Series C Profits Interests vested immediately upon grant. The Allied Series C Profits Interests were valued based upon a contingent claims analysis to allocate the total implied equity value as of the valuation date amongst the various equity securities classes, with breakpoints estimated considering relative seniority, liquidation preferences, and conversion features. An assumed volatility of 32.5% based upon a comparable public company analysis was used in the determination of fair value. The average grant date fair value of the Allied Series C Profits Interest granted during 2017 was $0 dollars per unit. There was $0 of unrecognized compensation as of June 30, 2018. No compensation expense was recognized during the three and six months ended June 30, 2018 (Successor), the three months ended June 30, 2017 (Successor), the period from January 13, 2017 through June 30, 2017 (Successor), and the period from January 1, 2017 through January 12, 2017 (Predecessor) related to Allied Series C Profits Interests. In conjunction with the funding of the investment in Allied Power Holdings in July 2017, select individuals, including members of the management team at Allied, were given the opportunity to invest, via an aggregator entity, Allied Management Holdings, alongside, and on the same basis as, the existing investment group. In exchange for their investment, common equity interests (Series B) in both Allied Power Holdings and Charah Management were issued. For those members of management, 1.9 million Charah Management LLC Series B Membership Interests and 0.1 million Allied Power Management LLC Series B Membership Interests were granted as a deemed contribution and a portion was invested via a cash contribution. All rights under these membership interests were fully vested at the time of the grant. There was $2,080 of compensation expense recorded in 2017 related to these Series B membership interest grants. No compensation expense was recognized during the three months ended June 30, 2018 (Successor), the period from January 13, 2017 through March 31, 2017 (Successor), and the period from January 1, 2017 through January 12, 2017 (Predecessor). In connection with the corporate reorganization that occurred upon the closing of the IPO, the holders of Charah Series C Profits Interests and Allied Series C Profits Interests received 1,215,956 shares of common stock (the “Management Reorganization Consideration”) in exchange for the contribution to the Company of their Charah Series C Profits Interests and Allied Series C Profits Interests, of which 911,963 shares are subject to time based vesting conditions, as well as performance vesting conditions, based on specified EBITDA targets and achievement of certain safety metrics, which will be determined at a future date. In addition, 272,708 shares of common stock were issued under the 2018 Omnibus Incentive Plan (see further discussion below), of which 204,532 shares are subject to the same time-based vesting conditions and performance vesting conditions as the shares issued in accordance with the Management Reorganization Consideration. The fair value of the awards was calculated initially as $12 per share, and will be updated thereafter for changes at each reporting period until the performance targets are approved by the board of directors. The fair value of the awards is recognized over the required service period for each grant. Upon the closing of the IPO, the board of directors of the Company adopted the 2018 Omnibus Incentive Plan (the “2018 Plan”), pursuant to which employees, consultants and directors of the Company and its affiliates, including named executive officers, are eligible to receive awards. The 2018 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, bonus stock, dividend equivalents, other stock-based awards, substitute awards, annual incentive awards and performance awards intended to align the interests of participants with those of Company stockholders. The Company has reserved 3,006,582 shares of common stock for issuance under the 2018 Plan, and all future equity awards described above will be issued pursuant to the 2018 Plan. The Company issued 44,198 shares under the 2018 Plan that vest over one year. The fair value of the awards was calculated as $12 per share, which will be recognized over the one-year vesting period. During the three months ended June 30, 2018, $1,189 of compensation expense was recognized related to the shares issued in accordance with the Management Reorganization Consideration and the 2018 Plan. As of June 30, 2018, there was approximately $4,958 of total compensation expense, subject to changes in fair value as the performance targets are approved by the board of directors, related to unvested awards not yet recognized, which will be recognized in future periods in accordance with applicable vesting terms. |
Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies The Company from time to time, in the ordinary course of business, is named as a defendant in various lawsuits. In management’s opinion, the gross liability from such lawsuits is not considered to be material to the Company's condensed consolidated and combined financial condition or results of operations. We cannot predict the outcome of such lawsuits or the amount of time and expense that will be required to resolve such lawsuits. If such litigation were to be determined adversely to our interests, or if we were forced to settle any matter for a significant amount, such resolution or settlement could have a negative effect on our business, results of operations and financial condition. |
Business Segment and Related Information |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Segment and Related Information | Business Segment and Related Information The Company has identified the following reportable segments, Environmental Solutions and Maintenance & Technical Services, as each met the quantitative threshold of generating revenues equal to or greater than 10 percent of the combined revenue of all operating segments. Management evaluates the performance of each segment based on segment gross profit, which is calculated as revenues less cost of sales. For the three months ended June 30, 2018 (Successor), the three months ended June 30, 2017 (Successor), the six months ended June 30, 2018 (Successor), the period from January 13, 2017 through June 30, 2017 (Successor) and the period January 1, 2017 through January 12, 2017 (Predecessor), there are no intersegment revenues or other intersegment transactions. Segment assets are also evaluated by management based on each segment’s investment in property and equipment. Assets (other than property and equipment and goodwill) are not allocated to segments. Summarized financial information with respect to the reportable segments is as follows:
The following is a reconciliation of segment gross profit to net income:
The following is a reconciliation of segment assets to total assets:
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Income Taxes |
6 Months Ended |
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Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company is a "C" Corporation under the Internal Revenue Code of 1986, as amended, and, as a result, will be subject to U.S. federal, state and local income taxes. The Company's subsidiaries previously operated as partnerships for income tax purposes. Prior to the contribution of assets and liabilities to the Company on June 18, 2018, the subsidiaries passed through their taxable income to their owners for U.S federal and other state and local income tax purposes and thus the subsidiaries were not subject to U.S. federal income taxes or other state or local income taxes, except for franchise tax at the state level. Accordingly, the financial data attributable prior to the contribution on June 18, 2018 contains no provision for U.S. federal income taxes or income taxes in any state or locality other than franchise taxes. The Company has determined its opening balance for deferred income tax assets and liabilities to be a net deferred tax liability of $2,481 based on the future tax effects of temporary differences between the financial statement value and tax basis of assets and liabilities contributed to the Company upon conversion as a taxable corporation on June 18, 2018. In accordance with ASC 740, the tax effects have been recorded as a separate item of income tax expense. In order to determine the tax provision related to operating income at the end of each interim period, the Company estimates the annual effective tax rate and applies that to its pre-tax earnings. The Company's pre-tax earnings for the period ended June 30, 2018 included only 13 days of operating income subject to corporate income taxes for which the Company is liable. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and judgments including, but not limited to, the expected operating income for the year, estimated permanent differences between book and tax amounts, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur and additional information is obtained. The Company’s effective tax rate, excluding discrete items, for the 13 days ended June 30, 2018 of 23.7% differs from the statutory rate of 21% for Federal income tax and 5.3% for the estimated state rate. This is primarily due to income allocable to a non-controlling interest related to a consolidated partnership investment. The Company’s income tax returns for the year ended December 31, 2018 will be its initial tax returns filed with the U.S. federal, state and local governments. The examination of prior period tax returns filed for partnerships contributed to the Company in the reorganization could impact the Company’s tax expense and tax balance sheet accounts. The Company acquired a foreign subsidiary at formation and the subsidiary is subject to examination for prior calendar years, however, the Company is not aware of any potential adjustments for prior years and any such adjustment should not be material to the financial statements. |
Earnings (Losses) Per Share |
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Earnings (Losses) Per Share | Earnings (Losses) Per Share Basic earnings (losses) per share is computed by dividing net income (loss) attributable to Charah Solutions shareholders by the weighted average number of shares outstanding during the period. Diluted earnings (losses) per share reflects all potential dilutive ordinary shares outstanding during the period and is computed by dividing net income (loss) available to Charah Solutions, Inc shareholders by the weighted average number of shares outstanding during the period increased by the number of additional shares that would have been outstanding as dilutive securities. For the periods prior to the IPO, the average number of ordinary shares outstanding used to calculate basic and diluted earnings (losses) per share was based on the ordinary shares that were outstanding at the time of the IPO. Basic and diluted earnings (losses) per share is determined using the following information:
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Nature of Business and Basis of Presentation (Policies) |
6 Months Ended |
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Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis for Presentation The Company’s fiscal year ends December 31. The accompanying unaudited condensed consolidated and combined financial statements include the accounts of the Company and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated and combined financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission ("SEC") for quarterly reports on Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, which consist of normal recurring adjustments. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The core principle of ASU 2014-09 is to recognize revenues when a customer obtains control of a good or service, in an amount that reflects the consideration to which an entity is expected to be entitled for those goods or services. The standard will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a full retrospective or retrospective with cumulative effect transition method. In August 2015, the FASB issued ASU 2015-14, which deferred the effective date of ASU 2014-09 by one year. The updated standard will be effective for the year ending December 31, 2019, with early adoption permitted. The Company has not yet selected a transition method and is currently evaluating the effect that the new standard will have on the financial statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), requiring all leases to be recognized on the balance sheet as a right-of-use asset and a lease liability, unless the lease is a short-term lease (generally a lease with a term of twelve months or less). At the commencement date of the lease, the Company will recognize: 1) a lease liability for the Company’s obligation to make payments under the lease agreement, measured on a discounted basis; and 2) a right-of-use asset that represents the Company's right to use, or control the use of, the specified asset for the lease term. Upon adopting the ASU, the Company will be required to recognize and measure their leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 will be effective for the Company for the year ending December 31, 2020, with early adoption permitted. The Company is currently evaluating the effect that the new standard will have on the consolidated and combined financial statements. In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments. This update addresses specific cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and proceeds from the settlement of insurance claims. The guidance is effective for fiscal years beginning after December 15, 2018. The Company is currently evaluating the effect that the new standard will have on the consolidated and combined financial statements. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230). This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Upon adopting the ASU, amounts generally described as restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be effective for the Company beginning after December 15, 2018 with regard to fiscal years and beginning after December 15, 2019 with regard to interim periods within fiscal years, with early adoption permitted. The Company is currently evaluating the effect that the new standard will have on the condensed consolidated and combined financial statements. In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 requires entities to use a screen test to determine when an integrated set of assets and activities is not a business or if the integrated set of assets and activities needs to be further evaluated against the framework. The Company adopted the new standard effective January 1, 2018 on a prospective basis. The new standard did not have a material impact on our condensed consolidated financial statements. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU simplifies the measurement of goodwill impairment by eliminating the requirement that an entity compute the implied fair value of goodwill based on the fair values of its assets and liabilities to measure impairment. Instead, goodwill impairment will be measured as the difference between the fair value of the reporting unit and the carrying value of the reporting unit. The ASU also clarifies the treatment of the income tax effect of tax deductible goodwill when measuring goodwill impairment loss. The Company will be required to adopt ASU 2017-04 as of January 1, 2020. ASU 2017-04 must be applied prospectively with early adoption permitted. The Company is currently evaluating the impact of the adoption of this guidance on its consolidated and combined financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718. The Company adopted the new standard effective January 1, 2018 on a prospective basis. The new standard did not have a material impact on our condensed consolidated and combined financial statements. |
Business Combination (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed |
By the application of “push-down” accounting, Charah’s assets and liabilities were accordingly adjusted to fair value.
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Business Acquisition, Pro Forma Information | The following unaudited information presents the pro forma consolidated revenue and net income for the periods indicated as if the acquisition had been included in the consolidated results of operations beginning January 1, 2017.
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Equity Method Investments (Tables) |
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Jun. 30, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments and Joint Ventures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity Method Investments | Summarized balance sheet information of our equity method investment entity as of:
Summarized financial performance of our equity method investment entity is as follows:
The following table reflects our proportional ownership activity in our investment account:
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Intangible Assets (Tables) |
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination | The Company’s intangible assets consist of the following as:
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Schedule of Intangible Assets and Goodwill | The Company’s intangible assets consist of the following as:
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Schedule Of Finite Lived Intangible Assets, Estimated Useful Life | As of June 30, 2018, and December 31, 2017, definite lived intangible assets include customer relationships, patents, non-compete and licensing agreements, trade name, and a rail easement. These assets are amortized on a straight-line basis over their estimated useful lives as shown in the table below. Amortization expense was $2,136, $1,961, $4,097, $3,269 and $0 during the three months ended June 30, 2018 (Successor), the three months ended June 30, 2017 (Successor), the six months ended June 30, 2018 (Successor), the period from January 13, 2017 through June 30, 2017 (Successor) and the period from January 1, 2017 through January 12, 2017 (Predecessor), respectively.
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Notes Payable (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | The following table summarizes the major components of debt at each balance sheet date and provides maturities and interest rate ranges for each major category as of June 30, 2018:
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Costs and Estimated Earnings on Uncompleted Contracts (Tables) |
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Revenue Recognition and Deferred Revenue [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Costs in Excess of Billings and Billings in Excess of Costs | Costs and estimated earnings on uncompleted contracts as of:
The net balance in process is classified on the condensed consolidated and combined balance sheets as of:
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Business Segment and Related Information (Tables) |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | Summarized financial information with respect to the reportable segments is as follows:
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Reconciliation of Revenue from Segments to Consolidated | The following is a reconciliation of segment gross profit to net income:
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Reconciliation of Assets from Segment to Consolidated | The following is a reconciliation of segment assets to total assets:
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Earnings (Losses) Per Share (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | Basic and diluted earnings (losses) per share is determined using the following information:
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Business Combination - Charah Management (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
Jan. 13, 2017 |
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Business Acquisition [Line Items] | |||
Goodwill | $ 76,431 | $ 73,468 | |
Charah Management LLC | |||
Business Acquisition [Line Items] | |||
Net working capital | $ 26,704 | ||
Net operating assets/liabilities | 9,679 | ||
Property, plant and equipment | 107,876 | ||
Purchase option liability | (29,883) | ||
Goodwill | 73,468 | ||
Total purchase price | $ 300,484 | ||
Bernhard Capital Partners Management, LP (BCP) | Charah Management LLC | |||
Business Acquisition [Line Items] | |||
Equity method investment, ownership percentage | 76.00% | ||
Rail easement | Charah Management LLC | |||
Business Acquisition [Line Items] | |||
Intangible assets | $ 110 | ||
Trade name intangible assets | Charah Management LLC | |||
Business Acquisition [Line Items] | |||
Intangible assets | 34,330 | ||
Customer relationships | Charah Management LLC | |||
Business Acquisition [Line Items] | |||
Intangible assets | $ 78,200 |
Business Combination - Pro Forma (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
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Jan. 12, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
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Business Acquisition [Line Items] | |||||
Actual revenue from the acquired business | $ 16,573 | $ 16,573 | |||
Actual earnings from the acquired business | 954 | 954 | |||
Pro forma revenue | 195,723 | $ 92,306 | 368,075 | $ 167,005 | |
Pro forma net income (loss) attributable to Charah Solutions, Inc. | 3,381 | $ 10,595 | 4,811 | $ 19,096 | |
Direct acquisition costs | $ 573 | $ 573 | |||
Predecessor | |||||
Business Acquisition [Line Items] | |||||
Pro forma revenue | $ 11,158 | ||||
Pro forma net income (loss) attributable to Charah Solutions, Inc. | $ (5,447) |
Equity Method Investments - Ownership (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jan. 12, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Equity Method Investment, Proportional Ownership Activity [Roll Forward] | |||||
Opening balance | $ 5,342 | $ 5,132 | $ 5,006 | $ 5,289 | |
Distributions | (687) | (287) | (938) | (651) | |
Share of net income | 699 | 270 | 1,286 | 477 | |
Closing balance | $ 5,289 | $ 5,354 | $ 5,115 | $ 5,354 | 5,115 |
Predecessor | |||||
Equity Method Investment, Proportional Ownership Activity [Roll Forward] | |||||
Opening balance | 5,241 | $ 5,289 | |||
Distributions | 0 | ||||
Share of net income | 48 | ||||
Closing balance | $ 5,289 |
Credit Agreement (Details) - USD ($) |
6 Months Ended | |
---|---|---|
Jun. 30, 2018 |
Dec. 31, 2017 |
|
Debt Instrument [Line Items] | ||
Long-term debt | $ 224,773,000 | $ 247,694,000 |
Revolving Credit Facility | Line of Credit | Revolving Credit Facility due October 25, 2022 | ||
Debt Instrument [Line Items] | ||
Initial commitment | $ 45,000,000 | |
Unused capacity, commitment fee percentage | 0.50% | |
Long-term debt | $ 0 | $ 0 |
Revolving Credit Facility | Line of Credit | Revolving Credit Facility due October 25, 2022 | LIBOR | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 2.00% | |
Revolving Credit Facility | Line of Credit | Revolving Credit Facility due October 25, 2022 | Base Rate | ||
Debt Instrument [Line Items] | ||
Basis spread on variable rate | 1.00% | |
Letter of Credit | Line of Credit | Revolving Credit Facility due October 25, 2022 | ||
Debt Instrument [Line Items] | ||
Commitment fee percentage | 2.00% | |
Long-term debt | $ 12,500,000 |
Interest Rate Swap (Details) - Interest Rate Swap - Not Designated as Hedging Instrument - USD ($) |
3 Months Ended | 6 Months Ended | ||||
---|---|---|---|---|---|---|
Jan. 12, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Dec. 31, 2017 |
|
Derivatives, Fair Value [Line Items] | ||||||
Derivative, notional amount | $ 150,000,000 | $ 150,000,000 | $ 150,000,000 | |||
Gain on derivative | 604,000 | $ 0 | 2,228,000 | $ 0 | ||
Other Assets | ||||||
Derivatives, Fair Value [Line Items] | ||||||
Derivative asset, fair value | $ 2,030,000 | $ 2,030,000 | ||||
Other Liabilities | ||||||
Derivatives, Fair Value [Line Items] | ||||||
Derivative liability, fair value | $ 198,000 | |||||
Predecessor | ||||||
Derivatives, Fair Value [Line Items] | ||||||
Gain on derivative | $ 0 |
Costs and Estimated Earnings on Uncompleted Contracts - Activity (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Revenue Recognition and Deferred Revenue [Abstract] | ||
Costs incurred on uncompleted contracts | $ 197,033 | $ 151,963 |
Estimated earnings | 70,412 | 53,356 |
Total costs and earnings | 267,445 | 205,319 |
Less billings to date | (244,280) | (213,242) |
Costs and estimated earnings in excess of billings | $ 23,165 | $ (7,923) |
Costs and Estimated Earnings on Uncompleted Contracts - Balance Sheet Classification (Details) - USD ($) $ in Thousands |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Revenue Recognition and Deferred Revenue [Abstract] | ||
Costs and estimated earnings in excess of billings | $ 30,264 | $ 7,959 |
Billings in excess of costs and estimated earnings | (7,099) | (15,882) |
Costs and estimated earnings in excess of billings | $ 23,165 | $ (7,923) |
Distributions to Stockholder (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jan. 12, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Equity [Abstract] | |||||
Cash distributions paid | $ 20,660 | $ 686 | $ 0 | $ 686 | $ 15,498 |
Business Segment and Related Information - Reconciliation of Segment Assets to Total Assets (Details) - USD ($) |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Segment property and equipment, net | $ 109,653,000 | $ 99,930,000 |
Goodwill | 76,431,000 | 73,468,000 |
Assets | 431,933,000 | 377,651,000 |
Operating Segments | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Segment property and equipment, net | 109,653,000 | 99,930,000 |
Goodwill | 76,431,000 | 73,468,000 |
Non-segment | ||
Segment Reporting, Asset Reconciling Item [Line Items] | ||
Segment property and equipment, net | 371,000 | 441,000 |
Goodwill | 0 | 0 |
Non-segment assets | $ 245,849,000 | $ 204,253,000 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | |
---|---|---|---|
Jun. 30, 2018 |
Jun. 30, 2018 |
Jun. 18, 2018 |
|
Income Tax Disclosure [Abstract] | |||
Net deferred tax liability | $ 2,481 | ||
Effective income tax rate | 23.70% | 25.00% | |
Effective income tax rate, state rate | 5.30% |
Earnings (Losses) Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands, shares in Millions |
3 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|
Jan. 12, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
Jun. 30, 2018 |
Jun. 30, 2017 |
|
Numerator: | |||||
Net income (loss) attributable to Charah Solutions, Inc. | $ 3,220 | $ 10,771 | $ 4,025 | $ 18,866 | |
Denominator (in millions): | |||||
Weighted average shares outstanding (in shares) | 24.5 | 23.7 | 24.1 | 23.7 | |
Dilutive share-based awards (in shares) | 0.9 | 0.8 | 0.8 | 0.8 | |
Total weighted average shares outstanding, including dilutive shares (in shares) | 25.4 | 24.5 | 24.9 | 24.5 | |
Basic earnings (losses) per share (in dollars per share) | $ 0.13 | $ 0.45 | $ 0.17 | $ 0.80 | |
Diluted earnings (losses) per share (in dollars per share) | $ 0.13 | $ 0.44 | $ 0.16 | $ 0.77 | |
Predecessor | |||||
Numerator: | |||||
Net income (loss) attributable to Charah Solutions, Inc. | $ (5,528) |
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