(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||||||||
OTC Markets* | ||||||||||||||
OTC Markets* |
Large accelerated filer ¨ | Accelerated filer ¨ | |||||||||||||
Smaller reporting company | ||||||||||||||
Emerging growth company |
Page | |||||
March 31, 2023 | December 31, 2022 | ||||||||||
Assets | |||||||||||
Current assets: | |||||||||||
Cash | $ | $ | |||||||||
Restricted cash | |||||||||||
Trade accounts receivable, net | |||||||||||
Contract assets | |||||||||||
Inventory | |||||||||||
Prepaid expenses and other current assets | |||||||||||
Total current assets | |||||||||||
Real estate, property and equipment, net | |||||||||||
Operating right-of-use assets | |||||||||||
Goodwill | |||||||||||
Other assets | |||||||||||
Total assets | $ | $ | |||||||||
Liabilities, mezzanine equity and stockholders’ equity | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | |||||||||||
Contract liabilities | |||||||||||
Finance lease obligations, current portion | |||||||||||
Operating lease obligations, current portion | |||||||||||
Notes payable, current maturities | |||||||||||
Asset-based lending credit agreement | |||||||||||
Asset retirement obligations, current portion | |||||||||||
Accrued liabilities | |||||||||||
Other current liabilities | |||||||||||
Total current liabilities | |||||||||||
Deferred tax liabilities | |||||||||||
Contingent payments for acquisitions | |||||||||||
Asset retirement obligations | |||||||||||
Finance lease obligations, less current portion | |||||||||||
Operating lease obligations, less current portion | |||||||||||
Notes payable, less current maturities | |||||||||||
Deferred gain and other liabilities | |||||||||||
Total liabilities | |||||||||||
Commitments and contingencies (see Note 15) | |||||||||||
Mezzanine equity | |||||||||||
Series A Preferred Stock — $ | |||||||||||
Series B Preferred Stock — $ | |||||||||||
Stockholders’ equity | |||||||||||
Retained losses | ( | ( | |||||||||
Common Stock — $ | |||||||||||
Additional paid-in capital | |||||||||||
Total stockholders’ equity | ( | ( | |||||||||
Total liabilities, mezzanine equity and stockholders’ equity | $ | $ |
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
Construction and service revenue | $ | $ | |||||||||
Raw material sales | |||||||||||
Total revenues | |||||||||||
Construction and service cost of sales | ( | ( | |||||||||
Raw material cost of sales | ( | ( | |||||||||
Total cost of sales | ( | ( | |||||||||
Gross profit (loss) | ( | ||||||||||
General and administrative expenses | ( | ( | |||||||||
Gains on sales of real estate, property and equipment, net | |||||||||||
(Loss) gain on ARO settlement | ( | ||||||||||
Other operating expenses from ERT services | ( | ( | |||||||||
Operating loss | ( | ( | |||||||||
Interest expense, net | ( | ( | |||||||||
Loss before income taxes | ( | ( | |||||||||
Income tax expense | ( | ( | |||||||||
Net loss | ( | ( | |||||||||
Less (loss) attributable to non-controlling interest | ( | ||||||||||
Net loss attributable to Charah Solutions, Inc. | ( | ( | |||||||||
Deemed and imputed dividends on Series A Preferred Stock | ( | ( | |||||||||
Series A Preferred Stock dividends | ( | ( | |||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | |||||||
Net loss attributable to common stockholders per common share: | |||||||||||
Basic | $ | ( | $ | ( | |||||||
Diluted | $ | ( | $ | ( | |||||||
Weighted-average shares outstanding used in loss per common share: | |||||||||||
Basic | |||||||||||
Diluted | |||||||||||
For the Three Months Ended March 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mezzanine Equity | Permanent Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A Preferred Stock (Shares) | Series A Preferred Stock (Amount) | Series B Preferred Stock (Shares) | Series B Preferred Stock (Amount) | Common Stock (Shares) | Common Stock (Amount) | Additional Paid-In Capital | Retained Losses | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) income | — | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Share based compensation expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||
Deemed and imputed dividends on Series A Preferred Stock | — | — | — | — | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A Preferred Stock Dividends | — | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2023 | $ | $ | $ | $ | $ | ( | $ | ( |
For the Three Months Ended March 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Mezzanine Equity | Permanent Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Series A Preferred Stock (Shares) | Series A Preferred Stock (Amount) | Common Stock (Shares) | Common Stock (Amount) | Additional Paid-In Capital | Retained Losses | Total | Non-Controlling Interest | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | $ | $ | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||
Net (loss) income | — | — | — | — | — | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||||||
Share-based compensation expense | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Shares issued under share-based compensation plans | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Taxes paid related to the net settlement of shares | — | — | ( | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||
Deemed and imputed dividends on Series A Preferred Stock | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Series A Preferred Stock dividends | — | — | — | ( | — | ( | — | ( | ||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | $ | $ | $ | ( | $ | $ | $ |
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
Net loss | $ | ( | $ | ( | |||||||
Adjustments to reconcile net loss to net cash and restricted cash (used in) provided by operating activities: | |||||||||||
Depreciation and amortization | |||||||||||
Non-cash lease expense | |||||||||||
Amortization of debt issuance costs | |||||||||||
Deferred income taxes | |||||||||||
Gains on sales of real estate, property and equipment | ( | ( | |||||||||
Non-cash share-based compensation | |||||||||||
Loss (gain) on ARO settlements | ( | ||||||||||
Realization of deferred gain on ERT project performance | ( | ||||||||||
Increase (decrease) in cash and restricted cash due to changes in: | |||||||||||
Trade accounts receivable | ( | ||||||||||
Contract assets and liabilities | ( | ||||||||||
Inventory | |||||||||||
Accounts payable | ( | ||||||||||
Lease liabilities | ( | ||||||||||
Asset retirement obligation | ( | ( | |||||||||
Other assets and liabilities | ( | ||||||||||
Net cash and restricted cash used in operating activities | ( | ( | |||||||||
Cash flows from investing activities: | |||||||||||
Net proceeds from the sales of real estate, property and equipment | |||||||||||
Purchases of property and equipment | ( | ( | |||||||||
Net cash and restricted cash provided by investing activities | |||||||||||
Cash flows from financing activities: | |||||||||||
Proceeds on asset-based lending credit agreement | |||||||||||
Proceeds from long-term debt | |||||||||||
Principal payments on long-term debt | ( | ( | |||||||||
Payments of debt issuance costs | ( | ||||||||||
Principal payments on finance lease obligations | ( | ( | |||||||||
Net cash and restricted cash provided by (used in) financing activities | ( | ||||||||||
Net decrease in cash and restricted cash | ( | ( | |||||||||
Cash and restricted cash, beginning of period | |||||||||||
Cash and restricted cash, end of period | $ | $ |
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid during the period for interest | $ | ||||||||||
Cash refunds during the period for taxes | |||||||||||
Supplemental disclosures and non-cash investing and financing transactions: | |||||||||||
Proceeds from the sale of equipment in accounts receivable, net | $ | $ | |||||||||
Series A Preferred Stock dividends payable included in accrued expenses | |||||||||||
Deemed and imputed dividends on Series A Preferred Stock | |||||||||||
Equipment acquired through finance leases | |||||||||||
Property and equipment included in accounts payable and accrued expenses | |||||||||||
As reported within the unaudited condensed consolidated balance sheet: | |||||||||||
Cash | $ | $ | |||||||||
Restricted cash | |||||||||||
Total cash and restricted cash as presented in the balance sheet | $ | $ |
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
Construction contracts | $ | $ | |||||||||
Byproduct services | |||||||||||
Raw material sales | |||||||||||
Total revenue | $ | $ |
Consideration and direct transaction costs: | |||||
Asset retirement obligations | $ | ( | |||
Direct transaction costs | ( | ||||
Total consideration and transaction costs incurred | $ | ( | |||
Assets Acquired: | |||||
Restricted Cash | $ | ||||
Land, land improvements and structural fill sites | |||||
Plant, machinery and equipment | |||||
Vehicles | |||||
Total allocated value of assets acquired | $ |
Other Assumptions: | |||||
Inflation rate | % | ||||
Weighted average rate applicable to our long-term asset retirement obligations | % |
Consideration and direct transaction costs: | |||||
Asset retirement obligations | $ | ( | |||
Direct transaction costs and accrued expenses | ( | ||||
Total consideration and transaction costs incurred | $ | ( | |||
Assets Acquired: | |||||
Cash | $ | ||||
Restricted cash | |||||
Total allocated value of assets acquired | $ | ||||
Excess of fair value of assets acquired over total consideration – deferred gain | $ | ( |
Other Assumptions: | |||||
Inflation rate | % | ||||
Weighted average rate applicable to our long-term asset retirement obligations | % |
March 31, 2023 | December 31, 2022 | ||||||||||
Plant, machinery and equipment | $ | $ | |||||||||
Structural fill site improvements | |||||||||||
Vehicles | |||||||||||
Office equipment | |||||||||||
Buildings and leasehold improvements | |||||||||||
Land, land improvements and structural fill sites | |||||||||||
Finance lease assets | |||||||||||
Total real estate, property and equipment | $ | $ | |||||||||
Less: accumulated depreciation and impairment | ( | ( | |||||||||
Real estate, property and equipment, net | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Lease receivable | $ | $ | |||||||||
Less: current portion in prepaid expenses and other current assets | ( | ( | |||||||||
Non-current portion in other assets | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Note receivable | $ | $ | |||||||||
Less: current portion in prepaid expenses and other current assets | ( | ( | |||||||||
Non-current portion in other assets | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Accrued expenses | $ | $ | |||||||||
Accrued payroll and bonuses | |||||||||||
Accrued interest | |||||||||||
Accrued preferred stock dividends | |||||||||||
Accrued liabilities | $ | $ |
Three Months Ended March 31, | |||||||||||
2023 | 2022 | ||||||||||
Balance, beginning of period | $ | $ | |||||||||
Liabilities settled | ( | ( | |||||||||
Accretion | |||||||||||
Loss (gain) on ARO settlement | ( | ||||||||||
Balance, end of period | |||||||||||
Less: current portion | ( | ( | |||||||||
Non-current portion | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Various equipment notes entered into in November 2017, payable in monthly installments ranging from $ | $ | $ | |||||||||
Various equipment notes entered into in 2018, payable in monthly installments ranging from $ | |||||||||||
Various equipment notes entered into in 2019, payable in monthly installments ranging from $ | |||||||||||
Various equipment notes entered into in 2020, payable in monthly installments ranging from $ | |||||||||||
Various equipment notes entered into in 2021, payable in monthly installments ranging from $ | |||||||||||
An equipment note entered into in 2022 with a customer, payable in monthly installments of $ | |||||||||||
Various commercial insurance premium financing agreements entered into in 2022, payable in monthly installments ranging from $ | |||||||||||
A $ | |||||||||||
Term Loan Agreement, issued August 2022, and related amendments (see Note 9). After consideration of the amendments, the Term Loan Agreement bears interest at | |||||||||||
Senior Unsecured Notes, issued August 2021 (see Note 9). The Notes are senior unsecured obligations of the Company, bearing stated interest at | |||||||||||
Total | |||||||||||
Less debt issuance costs, net | ( | ( | |||||||||
Less current maturities | ( | ( | |||||||||
Notes payable due after one year | $ | $ |
Classification on the Consolidated Balance Sheet | March 31, 2023 | December 31, 2022 | ||||||||||||
Assets | ||||||||||||||
Operating lease assets | Operating lease right-of-use assets | $ | $ | |||||||||||
Finance lease assets | ||||||||||||||
Total lease assets | $ | $ | ||||||||||||
Liabilities | ||||||||||||||
Current | ||||||||||||||
Operating | Operating lease liabilities, current | $ | $ | |||||||||||
Finance | Finance lease obligations, current | |||||||||||||
Non-current | ||||||||||||||
Operating | Operating lease liabilities, long-term | |||||||||||||
Finance | Finance lease obligations, less current portion | |||||||||||||
Total lease liabilities | $ | $ |
March 31, 2023 | |||||
Finance lease costs: | |||||
Amortization expense | $ | ||||
Interest expense | |||||
Operating lease costs | |||||
Short-term lease expense | |||||
Total lease expense | $ |
March 31, 2023 | |||||
Weighted-average remaining term in years | |||||
Finance leases | |||||
Operating leases | |||||
Weighted-average discount rate | |||||
Finance leases | % | ||||
Operating leases | % |
March 31, 2023 | |||||
Cash paid amounts included in the measurement of lease liabilities: | |||||
Operating cash flows used for operating leases | $ | ||||
Operating cash flows used for finance leases | |||||
Financing cash flows used for finance leases | |||||
Total | $ | ||||
Right-of-use assets obtained in exchange for: | |||||
New finance lease liabilities | $ | ||||
New operating lease liabilities | |||||
Total | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Costs and estimated earnings in excess of billings | $ | $ | |||||||||
Retainage | |||||||||||
Total contract assets | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Billings in excess of costs and estimated earnings | $ | $ | |||||||||
Deferred revenue | |||||||||||
Total contract liabilities | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Costs incurred on uncompleted contracts | $ | $ | |||||||||
Estimated earnings | |||||||||||
Total costs and estimated earnings | |||||||||||
Less billings to date | ( | ( | |||||||||
Net balance in process | $ | $ |
March 31, 2023 | December 31, 2022 | ||||||||||
Costs and estimated earnings in excess of billings | $ | $ | |||||||||
Billings in excess of costs and estimated earnings | ( | ( | |||||||||
Net balance in process | $ | $ |
Restricted Stock | Performance Stock | Total | |||||||||||||||||||||||||||||||||
Shares | Weighted-Average Grant Date Fair Value | Shares | Weighted-Average Grant Date Fair Value | Shares | Weighted-Average Grant Date Fair Value | ||||||||||||||||||||||||||||||
Balance as of December 31, 2022 | $ | $ | $ | ||||||||||||||||||||||||||||||||
Granted | |||||||||||||||||||||||||||||||||||
Forfeited | |||||||||||||||||||||||||||||||||||
Vested | |||||||||||||||||||||||||||||||||||
Balance as of March 31, 2023 | $ | $ | $ |
Restricted Stock | Performance Stock | Total | |||||||||||||||||||||||||||||||||
Weighted Average Remaining Contractual Terms (Years) | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Terms (Years) | Aggregate Intrinsic Value | Weighted Average Remaining Contractual Terms (Years) | Aggregate Intrinsic Value | ||||||||||||||||||||||||||||||
Balance as of December 31, 2022 | $ | $ | $ | ||||||||||||||||||||||||||||||||
Balance as of March 31, 2023 | $ | $ | $ |
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
Numerator: | |||||||||||
Net loss attributable to Charah Solutions, Inc. | $ | ( | $ | ( | |||||||
Deemed and imputed dividends on Series A Preferred Stock | ( | ( | |||||||||
Series A Preferred Stock dividends | ( | ( | |||||||||
Net loss attributable to common stockholders | $ | ( | $ | ( | |||||||
Denominator: | |||||||||||
Weighted average shares outstanding | |||||||||||
Dilutive share-based awards | |||||||||||
Total weighted average shares outstanding, including dilutive shares | |||||||||||
Net loss attributable to common stockholders per common share | |||||||||||
Basic | $ | ( | $ | ( | |||||||
Diluted | $ | ( | $ | ( |
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
Diluted earnings per share: | |||||||||||
Anti-dilutive restricted and performance stock units | |||||||||||
Anti-dilutive Series A Preferred Stock convertible into common stock | |||||||||||
Potentially dilutive securities, excluded as anti-dilutive |
Three Months Ended | |||||||||||||||||||||||
March 31, | Change | ||||||||||||||||||||||
2023 | 2022 | $ | % | ||||||||||||||||||||
(dollars in thousands) | |||||||||||||||||||||||
Construction and service revenue | $ | 61,846 | $ | 54,858 | $ | 6,988 | 12.7 | % | |||||||||||||||
Raw material sales | 9,067 | 11,193 | (2,126) | (19.0) | % | ||||||||||||||||||
Total revenues | 70,913 | 66,051 | 4,862 | 7.4 | % | ||||||||||||||||||
Construction and service cost of sales | (57,109) | (59,242) | 2,133 | (3.6) | % | ||||||||||||||||||
Raw material cost of sales | (7,772) | (10,576) | 2,804 | (26.5) | % | ||||||||||||||||||
Total cost of sales | (64,881) | (69,818) | 4,937 | (7.1) | % | ||||||||||||||||||
Gross profit (loss) | 6,032 | (3,767) | 9,799 | 260.1 | % | ||||||||||||||||||
General and administrative expenses | (6,234) | (8,952) | 2,718 | (30.4) | % | ||||||||||||||||||
Gains on sales of real estate, property and equipment, net | 2,975 | 3,543 | (568) | (16.0) | % | ||||||||||||||||||
(Loss) gain on ARO settlement | (41) | 2,451 | (2,492) | (101.7) | % | ||||||||||||||||||
Other operating expenses from ERT services | (3,813) | (667) | (3,146) | 471.7 | % | ||||||||||||||||||
Operating loss | (1,081) | (7,392) | 6,311 | 85.4 | % | ||||||||||||||||||
Interest expense, net | (4,890) | (4,573) | (317) | 6.9 | % | ||||||||||||||||||
Loss before income taxes | (5,971) | (11,965) | 5,994 | (50.1) | % | ||||||||||||||||||
Income tax expense | (115) | (78) | (37) | 47.4 | % | ||||||||||||||||||
Net loss | (6,086) | (12,043) | 5,957 | 49.5 | % | ||||||||||||||||||
Less (loss) income attributable to non-controlling interest | — | (3) | 3 | 100.0 | % | ||||||||||||||||||
Net loss attributable to Charah Solutions, Inc. | $ | (6,086) | $ | (12,040) | 5,954 | 49.5 | % |
March 31, 2023 | December 31, 2022 | Change | |||||||||||||||
(in thousands) | |||||||||||||||||
Total assets | $ | 320,769 | $ | 338,543 | $ | (17,774) | |||||||||||
Total liabilities | 365,800 | 378,252 | (12,452) | ||||||||||||||
Mezzanine equity | 72,358 | 71,543 | 815 | ||||||||||||||
Total equity | (117,389) | (111,252) | (6,137) |
Three Months Ended | |||||||||||||||||
March 31, | Change | ||||||||||||||||
2023 | 2022 | $ | |||||||||||||||
(dollars in thousands) | |||||||||||||||||
Net cash and restricted cash used in operating activities | $ | (19,794) | $ | (23,912) | $ | 4,118 | |||||||||||
Net cash and restricted cash provided by investing activities | 3,174 | 969 | 2,205 | ||||||||||||||
Net cash and restricted cash provided by (used in) financing activities | 3,373 | (2,993) | 6,366 | ||||||||||||||
Net change in cash and restricted cash | $ | (13,247) | $ | (25,936) | $ | 12,689 |
Three Months Ended | |||||||||||
March 31, | |||||||||||
2023 | 2022 | ||||||||||
Net loss attributable to Charah Solutions, Inc. | $ | (6,086) | $ | (12,040) | |||||||
Interest expense, net | 4,890 | 4,573 | |||||||||
Income tax expense | 115 | 78 | |||||||||
Depreciation and amortization | 3,836 | 6,571 | |||||||||
Equity-based compensation | 752 | 791 | |||||||||
Impairment expense | — | 380 | |||||||||
Transaction-related expenses and other items(1) | 433 | 7 | |||||||||
Adjusted EBITDA | $ | 3,940 | $ | 360 | |||||||
Adjusted EBITDA margin(2) | 5.6 | % | 0.5 | % |
Exhibit Number | Description | |||||||
101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |||||||
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |||||||
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |||||||
101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document. | |||||||
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |||||||
104* | Cover page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* | Filed herewith. | |||||||
** | Furnished herewith. | |||||||
† | Indicates a management contract or compensatory plan or arrangement. | |||||||
†† | Schedules have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the Securities and Exchange Commission on request. | |||||||
CHARAH SOLUTIONS, INC. | ||||||||
June 30, 2023 | By: | /s/ Jonathan T. Batarseh | ||||||
Name: | Jonathan T. Batarseh | |||||||
Title: | President and Chief Executive Officer | |||||||
(Principal Executive Officer) | ||||||||
June 30, 2023 | By: | /s/ Joseph P. Skidmore | ||||||
Name: | Joseph P. Skidmore | |||||||
Title: | Chief Financial Officer and Treasurer | |||||||
(Principal Financial Officer and Principal Accounting Officer) | ||||||||
/s/ Jonathan T. Batarseh | |||||
Jonathan T. Batarseh | |||||
President and Chief Executive Officer | |||||
(Principal Executive Officer) |
/s/ Joseph P. Skidmore | |||||
Joseph P. Skidmore | |||||
Chief Financial Officer and Treasurer | |||||
(Principal Financial Officer) |
/s/ Jonathan T. Batarseh | |||||
Jonathan T. Batarseh | |||||
President and Chief Executive Officer | |||||
(Principal Executive Officer) |
/s/ Joseph P. Skidmore | |||||
Joseph P. Skidmore | |||||
Chief Financial Officer and Treasurer | |||||
(Principal Financial Officer) |
Nature of Business and Basis of Presentation |
3 Months Ended |
---|---|
Mar. 31, 2023 | |
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. (together with its wholly-owned subsidiaries, “Charah Solutions,” the “Company,” “we,” “us, or “our”) is a holding company formed in Delaware in January 2018. The Company's majority shareholder is Bernhard Capital Partners Management, LP and its affiliates (collectively, “BCP”). BCP owns 73% of the total voting power of our outstanding shares of common stock and all of the outstanding Series A and Series B Preferred Stock (collectively, the “Preferred Stock”), which is convertible at BCP's option into shares of common stock. Description of Business Operations The Company is a leading national service provider of mission-critical environmental services and byproduct recycling to the power generation industry, enabling our customers to address challenges related to the remediation of coal 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 remediation and compliance services, byproduct services, raw material sales and Environmental Risk Transfer (“ERT”) services. The Company has corporate offices in Kentucky and North Carolina and principally operates in the eastern and mid-central United States. 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 the reduced reporting requirements and exemptions, including the longer phase-in periods for adopting new or revised financial accounting standards under Section 107 of the JOBS Act until the Company is no longer an emerging growth company. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 and our disclosure obligations regarding executive compensation may be reduced. We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the IPO, or December 31, 2023. However, if certain events occur before the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenue exceeds $1.07 billion, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company before the end of such five-year period. Basis for Presentation The Company’s fiscal year ends December 31. The accompanying unaudited condensed consolidated financial statements include the assets, liabilities, stockholders’ equity and results of operations of the Company and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission 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 (“GAAP”) have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022. Going Concern The accompanying unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As discussed in Note 9, Long-term Debt, the Company entered into an amendment to its Credit Agreement (as defined elsewhere herein) to change the maturity date from November 9, 2025 to January 31, 2024, amongst other changes. The Company does not have sufficient cash on hand or available liquidity to repay the maturing credit agreement debt, including the outstanding letters of credit, as it becomes due within one year after the date that these unaudited condensed consolidated financial statements are issued. Combined with the Company’s recurring losses, recurring and continuing negative operating cash flows, and lack of available liquidity or cash on hand to sustain operations, these conditions raise substantial doubt about the Company’s ability to continue as a going concern. In response, the Company has entered into a definitive agreement to be acquired by SER Capital Partners, which management anticipates will bring necessary funding to support the ongoing operations of the Company, and has implemented certain cost saving strategies to preserve liquidity. Additionally, the Company is currently pursuing a plan to refinance its Credit Agreement before the maturity date and other strategies to secure additional liquidity. However, these factors are subject to external conditions that are not within the Company’s control, and therefore, implementation of management’s plans cannot be deemed probable. As a result, management has concluded these plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern. The accompanying unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. Segment Information The Company operates as one reportable segment, reflecting the suite of end-to-end services we offer our utility partners and how our Chief Operating Decision Maker (“CODM”) reviews consolidated financial information to evaluate results of operations, assess performance and allocate resources. Due to the nature of the Company’s business, the Company's Chief Executive Officer, who is also the CODM, evaluates the performance of the Company and allocates resources of the Company based on consolidated gross profit, general and administrative expenses, balance sheet, liquidity, capital spending, safety statistics and business development reports for the Company as a whole. Since the Company has a single operating segment, all required financial segment information can be found in the unaudited condensed consolidated financial statements. We provide the following services through our one segment: remediation and compliance services, byproduct services, raw material sales and ERT services. Remediation and compliance services are associated with our customers’ need for multi-year environmental improvement and sustainability initiatives, whether driven by regulatory requirements, power generation customer initiatives or consumer expectations and standards. Byproduct services consist of recurring and mission-critical coal ash management and operations for coal-fired power generation facilities while also supporting both our power generation customers’ desire to recycle their recurring and legacy volumes of coal combustion residuals (“CCRs”), commonly known as coal ash, and our ultimate end customers’ need for high-quality, cost-effective supplemental cementitious materials (“SCMs”) that provide a sustainable, environmentally-friendly substitute for Portland cement in concrete. Our raw material sales provide customers with the raw materials essential to their business while also providing the sourcing, logistics, and management needed to facilitate these raw material transactions around the globe. ERT services represent an innovative solution designed to meet our coal-fired plant energy providers’ evolving and increasingly complex plant closure and environmental remediation needs. These customers need to retire and decommission older or underutilized assets while maximizing the assets’ value and improving the environment. Our ERT services manage the sites’ environmental remediation requirements, benefiting the communities and lowering the coal-fired plant energy providers’ costs.
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Recent Accounting Pronouncements |
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Mar. 31, 2023 | |
Accounting Changes and Error Corrections [Abstract] | |
Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASC 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 12 months or less). We adopted ASC 842 using a modified retrospective approach, which required recognition under the new standard, ASC 842, to be applied as of the date of adoption with all prior periods being presented under Leases (Topic 840) (“ASC 840”). In accordance with ASU No. 2020-05, ASC 842 was effective for non-public business entities for the fiscal year ending December 31, 2022 and interim periods within the fiscal year ending December 31, 2023. Therefore, financial information as of and for the period ended March 31, 2022 herein is presented under ASC 840, and financial information as of and for the periods ended December 31, 2022 and March 31, 2023 herein is presented under ASC 842. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments, which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new model will apply to: (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income, and (4) beneficial interests in securitized financial assets. The amendments contained in this ASU will be applied through a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2018, the FASB issued ASU No. 2018-19, which amended the effective date of ASU No. 2016-13 and clarified that receivables arising from operating leases are not within the scope of Subtopic 326-20. In October 2019, the FASB delayed the effective date of this ASU, extending the effective date for non-public business entities and making the ASU effective for the Company for the fiscal year ending December 31, 2023, and interim periods therein. The adoption of this ASU has not had a material impact on the Company's consolidated financial statements and is not expected to have a material impact on the Company's consolidated financial statements on a go-forward basis. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Inter-bank Offered Rate (“LIBOR”) or another rate that is expected to be discontinued. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848). This ASU provides supplemental guidance and clarification to ASU No. 2020-04, and these updates must be adopted concurrently, cumulatively referred to as “Topic 848.” The amendments in Topic 848 are currently effective for all entities, and upon adoption, may be applied prospectively to contract modifications made on or before December 31, 2022. The adoption of this ASU has not had a material impact on the Company's consolidated financial statements and is not expected to have a material impact on the Company's consolidated financial statements on a go-forward basis. In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the guidance on accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible debt with a beneficial conversion feature. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock unless certain other conditions are met. Also, the ASU requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will no longer be available. This ASU will be effective for the Company for the fiscal year ending December 31, 2024, and interim periods therein, with early adoption permitted. The Company is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements.
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Revenue |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | Revenue We disaggregate our revenue from customers by customer arrangement as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. See details in the table below.
As of March 31, 2023, the Company had remaining performance obligations with an aggregate transaction price of $498,504 on construction contracts for which we recognize revenue over time. We expect to recognize approximately 15% of our remaining performance obligations as revenue during the remainder of 2023, 14% in 2024, 12% in 2025, and 59% thereafter. Revenue associated with our remaining performance obligations includes performance obligations related to our construction contracts. The balance of remaining performance obligations does not include variable consideration that was determined to be constrained as of March 31, 2023. As of March 31, 2023, there were $2,113 of unapproved change orders associated with project scope changes included in determining the profit or loss on certain construction contracts, of which $1,014 were approved subsequent to quarter-end. The Company did not have any foreign revenue for the three months ended March 31, 2023 and 2022. Contract Assets and LiabilitiesThe timing of revenue recognition, billings and cash collections results in accounts receivable, contract assets, and contract liabilities on the accompanying unaudited condensed consolidated balance sheets.Our contract assets are as follows:
Our contract liabilities are as follows:
We recognized revenue of $8,198 for the three months ended March 31, 2023 that was previously included in contract liabilities at December 31, 2022. We recognized revenue of $5,772 for the three months ended March 31, 2022, which was previously included in the contract liability balance at December 31, 2021. The Company's net position on uncompleted contracts is as follows:
The net balance in process classified on the accompanying unaudited condensed consolidated balance sheets is as follows:
Anticipated losses on long-term contracts are recognized when such losses become evident. As of March 31, 2023 and December 31, 2022, accruals for anticipated losses on long-term contracts were $8 and $120, respectively.
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Asset Acquisitions |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Acquisitions | Asset Acquisitions As part of its ERT service offerings, the Company closed on two acquisitions during the year ended December 31, 2022: the Avon Lake Asset Acquisition and the Cheswick Generation Station Asset Acquisition. As each asset group lacked the necessary elements of a business, these transactions were accounted for as asset acquisitions in accordance with ASC 805, Business Combinations, with the assumed liabilities, plus expenses and cash paid by or owed to the seller, comprising the purchase price. Since the fair value of the net assets acquired was different than the purchase price of the assets, the Company allocated the difference pro rata on the basis of relative fair values to reduce the basis of land, land improvements and structural fill sites, property and equipment and other assets acquired. For the Cheswick Generating Station Asset Acquisition, the Company recognized a deferred gain representing the difference between the fair value of the assets acquired and the consideration given (including transaction costs incurred). The Company has identified asset retirement obligations within the assumed liabilities to be initially measured and valued in accordance with ASC 410, Asset Retirement and Environmental Obligations. We developed our estimates of these obligations using input from our operations personnel. Our estimates are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value. Absent quoted market prices, the estimate of fair value is based on the best available information, including the results of present value techniques. We use professional engineering judgment and estimated prices based on quoted rates from third parties and amounts paid for similar work to determine the fair value of these obligations. We are required to recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves. Once we determined the estimated closure and post-closure costs for each asset retirement obligation, we inflation-adjusted those costs to the expected time of payment using an estimated inflation rate and discounted those expected future costs back to present value using the credit-adjusted, risk-free rate effective at the time the obligation was incurred, consistent with the expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated cash flows are treated as a new liability and discounted at the current rate, while downward revisions are discounted at the historical weighted average rate of the recorded obligation. The credit-adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each specific asset retirement obligation. Gains on ARO settlements result from the requirement to record costs plus an estimate of third-party profit in determining the ARO. When we perform the work using internal resources and reduce the ARO for work performed, we recognize a gain if actual costs are less than the estimated costs plus the third-party profit. Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing of future closure, demolition, and post-closure activities could result in a material change in these liabilities, related assets, and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually or more often if conditions warrant. Changes in timing or extent of future final closure and post-closure activities typically result in a current adjustment to the recorded liability and land, land improvements and structural fill sites asset. Avon Lake Asset Acquisition On April 4, 2022, the Company, through its wholly-owned special purpose vehicle subsidiary Avon Lake Environmental Redevelopment Group, LLC (“ALERG”), completed the full acquisition of the Avon Lake Generating Station and adjacent property (the "Avon Lake Property") from GenOn Power Midwest, LP, (“GenOn”) and has begun environmental remediation and sustainable redevelopment of the property. As part of this agreement, the Company acquired the Avon Lake Property, which is a 40-acre area located on Lake Erie that consists of multiple parcels of land adjacent to the retired generating plant, including the generating station, which ceased electric generation in March 2022, submerged lands lease in Lake Erie, substation/switch gear and transformers, administrative offices and structures, coal rail and storage yard parcels. ALERG assumed all liabilities related to the Avon Lake Property and will be responsible for the shutdown and decommissioning of the coal power plant and performing all environmental remediation and redevelopment work at the site. The decommissioning of the coal power plant and redevelopment of the property are expected to be completed within 36 months from the date of acquisition. The assets acquired and liabilities assumed as recognized within the Company's condensed consolidated balance sheet upon closing on the APA consisted of the following:
A summary of the other assumptions included in the fair value measurement of the asset retirement obligations to be recognized upon closing of the APA consisted of the following:
As part of the acquisition, the Company acquired certain plant, machinery and equipment and vehicles for which management committed to a plan to sell. Property and equipment of $505 that was initially classified as held for sale was subsequently sold to third parties in 2022. Restricted cash is exclusively used to fund initial costs related to the acquisition and the remaining balance will be used to fund a portion of the asset retirement obligations. Restricted cash is held and will be disbursed by an escrow agent. Funds will be released to the Company as asset retirement obligation costs are incurred and performance of remediation activities are certified by an authorized representative of GenOn. Cheswick Generating Station Asset Acquisition On April 6, 2022, the Company, through its wholly-owned special purpose vehicle subsidiaries, Cheswick Plant Environmental Redevelopment Group, LLC, Cheswick Lefever, LLC and Harwick Operating Company, LLC (collectively, “CPERG”), completed the full acquisition of the Cheswick Generating Station, the Lefever Ash Landfill and the Monarch Wastewater Treatment Facility (the "Cheswick Property") from GenOn and began environmental remediation and sustainable redevelopment of the Pennsylvania properties immediately. The Cheswick Generating Station ceased electrical generation operations on March 31, 2022. As part of this agreement, the Company, through CPERG, has acquired properties consisting of: ▪The retired Cheswick Generating Station, a 565 MW coal-fired plant previously operated by GenOn, located in Springdale, PA. The 56-acre primary generating station site, along with an adjacent 27-acre parcel, consists of an operating rail line, a coal yard, bottom ash emergency and recycle ponds, waste ponds and a coal pile runoff pond, coal delivery equipment, and an ash handling parcel. CPERG is responsible for the shutdown and decommissioning of the coal power plant, the remediation of the two ash ponds and performing all environmental remediation and redevelopment work at the site. ▪The Lefever Ash Landfill in Cheswick, PA. The 182-acre site, including the 50-acre landfill facility, provided disposal of coal combustion residuals (CCR) and residual waste from the Cheswick Generating Station. CPERG is responsible for the closure design, remediation closure work and post-closure monitoring of the landfill. ▪The Monarch Wastewater Treatment Facility in Allegheny County, PA. CPERG is responsible for management and compliance with all applicable environmental regulations. In the process of accounting for this transaction, the basis of the land, property and equipment acquired was reduced to zero, resulting in an excess of financial assets over and above the purchase price. The Company recorded a deferred gain of $4,476, representing the difference between the fair value of the assets acquired and the consideration given (including transaction costs incurred). This deferred gain will be recognized ratably over the entire project as remediation costs are incurred in proportion to total estimated remediation costs. During the three months ended March 31, 2023, the Company recognized $278 of the deferred gain within gains on sales of real estate, property and equipment, net, in the Company's condensed consolidated statements of operations. The decommissioning of the coal power plant and redevelopment of these properties are expected to be completed within 42 months from the date of acquisition, and the post-closure monitoring associated with the Lefever Ash Landfill and Monarch Wastewater Treatment Facility will occur for 30 years after the closure of the sites. The assets acquired and liabilities assumed as recognized within the Company's condensed consolidated balance sheet upon closing on the APA consisted of the following:
A summary of the other assumptions included in the fair value measurement of the asset retirement obligations to be recognized upon closing of the APA consisted of the following:
As part of the acquisition, the Company acquired certain plant, machinery and equipment and vehicles for which management committed to a plan to sell. Property and equipment that was initially classified as held for sale was subsequently sold to third parties in 2022. Restricted cash is exclusively used to fund initial costs related to the acquisition and the remaining balance will be used to fund a portion of the asset retirement obligations. Restricted cash is held and will be disbursed by an escrow agent. Funds will be released to the Company as certain project milestones are met and performance of remediation activities are certified by an authorized representative of GenOn.
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Balance Sheet Items |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance Sheet Items | Balance Sheet Items Real estate, property and equipment, net The following table shows the components of real estate, property and equipment, net:
Land, land improvements and structural fill sites include $18,870 of real property acquired in the asset acquisitions discussed in Note 4 that the Company is actively demolishing and for which depreciation expense is not being recorded. During the three months ended March 31, 2023 and 2022, the Company capitalized $64 and $842, respectively, of demolition costs and sold scrap with a cost basis of $237 and $990, respectively. Depreciation expense was $3,836 and $4,597 for the three months ended March 31, 2023 and 2022, respectively. Impairment of Long-Lived Assets Other than Goodwill and Intangible Assets Long-lived assets other than goodwill and indefinite-lived intangible assets, held and used by the Company, including inventory and property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company evaluates the recoverability of assets to be held and used by comparing the carrying amount of an asset to the future net undiscounted cash flows expected to be generated by the asset to determine if the carrying value is not recoverable. If the carrying value is not recoverable, the Company fair values the asset and compares that fair value to the carrying value. If the asset is considered to be impaired, the impairment loss is measured as the amount by which the carrying amount of the asset exceeds its fair value. During the year ended December 31, 2022, the Company determined that a triggering event occurred that indicated that the carrying value of certain long-lived assets may not be recoverable. The Company determined that the discounted future cash flows were less that the carrying value of the asset group, indicating impairment. The fair value of the assets was determined through a market approach using the net realizable value of the assets, which indicated that certain assets were impaired that resulted in an impairment charge of $10,484 recognized on October 1, 2022. The long-lived assets impaired had a remaining fair value of $20,003 as of December 31, 2022. Sales-type lease In March 2021, the Company amended an existing ground lease with a third party concerning one of the Company's structural fill assets with a 30-year term expiring on December 31, 2050. The lease includes multiple options that may be exercised at any time during the lease term for the lessee to purchase all or a portion of the premises as well as a put option (the “Put Option”) that provides the Company the option to require the lessee to purchase all of the premises at the end of the lease term. In accordance with ASC 840 and ASC 842, Leases, the Company considered whether this lease, as amended, met any of the following four criteria as part of classifying the lease at the amendment date: (a) the lease transfers ownership of the property to the lessee by the end of the lease term; (b) the lease contains a bargain purchase option; (c) the lease term is equal to 75 percent or more of the estimated economic life of the lease property; and (d) the present value of the minimum lease payments, excluding executory costs, equals or exceeds 90 percent of the excess of the fair value of the lease property to the lessor at lease inception. This lease was recorded as a sales-type finance lease due to the Put Option provision contained within the lease agreement that represents a transfer of ownership of the property by the end of the lease term. Additionally, the Company determined that collectability of the lease payments was reasonably assured and that there were not any significant uncertainties related to costs that it has yet to incur with respect to the lease. At the amendment date of the lease, a discount rate of 3.9% implicit in the sales-type lease was used to calculate the present value of the minimum lease payments, which the Company recorded as a lease receivable. The following table reflects the classification of the lease receivable within our accompanying unaudited condensed consolidated balance sheet:
Asset Sale Agreement In June 2021, the Company consummated an asset sale with an unrelated third party in which the Company assigned a lease agreement to the purchaser and sold certain grinding-related inventory and fixed assets for an aggregate sale price of $2,852. The Company received $1,250 in cash at closing, with the remaining portion to be paid over time on specified dates, with the final payment to be received 36 months from the closing date. The Company determined that the note receivable included a significant financing component. As a result, the sale price and gain on sale were determined on a discounted cash flow basis. The following table reflects the classification of the note receivable within our unaudited condensed consolidated balance sheet:
Accrued liabilities The following table shows the components of accrued liabilities:
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Asset Retirement Obligations |
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Asset Retirement Obligation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Retirement Obligations | Asset Retirement Obligations As of March 31, 2023, the Company owns two structural fill sites with continuing maintenance and monitoring requirements after their closure, one wastewater treatment facility with continuing maintenance and monitoring requirements, and eight tracts of real property with decommissioning, remediation and monitoring requirements. As of March 31, 2023 and December 31, 2022, the Company has accrued $58,639 and $68,561, respectively, for the asset retirement obligations (“ARO”). The following table reflects the activity for our asset retirement obligations:
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Related Party Transactions |
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Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party Transactions ATC Group Services LLC (“ATC”), an entity owned by BCP, our majority stockholder, provided environmental consulting and engineering services at certain service sites. Expenses to ATC were $10 and $18 for the three months ended March 31, 2023 and 2022, respectively. The Company had no receivables outstanding from ATC at March 31, 2023 and December 31, 2022. The Company had payables and accrued expenses, net of credit memos, due to ATC of $5 and $14 at March 31, 2023 and December 31, 2022, respectively. As further discussed in Note 9, Long-term Debt, in August 2021, the Company completed an offering of $135,000, in the aggregate, of the Company’s 8.50% Senior Notes due 2026 (the “Notes”), which amount included the exercise by the underwriters of their option to purchase an additional $5,000 aggregate principal amount of Notes. B. Riley Securities, Inc. (“B. Riley”), a shareholder of the Company with board representation, served as the lead book-running manager and underwriter for this offering, purchasing a principal amount of $80,325 of the Notes. Fees paid to B. Riley related to this offering were $7,914. These fees were capitalized as debt issuance costs within notes payable, less current maturities in the accompanying unaudited condensed consolidated balance sheets and will be amortized prospectively through interest expense, net in the accompanying unaudited condensed consolidated statements of operations using the effective interest method through the maturity date of the Notes. As further discussed in Note 9, Long-term Debt, on August 15, 2022, the Company, through its GCERG subsidiary, entered into the Term Loan Agreement with BCP that provides for a delayed-draw term loan in an aggregate principal amount of $20,000. As further discussed in Note 12, Mezzanine Equity, in March 2020, the Company entered into an agreement with an investment fund affiliated with BCP to sell 26 (twenty-six thousand) shares of Series A Preferred Stock and, in November 2022, the Company entered into an investment agreement with BCP to sell 30 (thirty thousand) shares of Series B Preferred Stock.
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Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | GoodwillGoodwill is not amortized but instead is tested for impairment annually or more often if events or changes in circumstances indicate that the fair value of the asset may have decreased below its carrying value. We perform our impairment test effective October 1st of each year and evaluate for impairment indicators between annual impairment tests, of which there were none. There was no goodwill activity during the three months ended March 31, 2023. |
Long-term Debt |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-term Debt | Long-term Debt Senior Notes On August 25, 2021, the Company completed a public offering of $135,000, in the aggregate, of the Company’s Notes, which amount includes the exercise by the underwriters of their option to purchase an additional $5,000 aggregate principal amount of Notes. The Notes were issued pursuant to the First Supplemental Indenture (the “First Supplemental Indenture”), dated as of August 25, 2021, between the Company and Wilmington Savings Fund Society, FSB, as trustee (the “Trustee”). The First Supplemental Indenture supplements the Indenture entered into by and between the Company and the Trustee, dated as of August 25, 2021 (the “Base Indenture” and, together with the First Supplemental Indenture, the “Indenture”). The public offering price of the Notes was 100.0% of the principal amount. The Company received proceeds before payment of expenses and other fees of $135,000. The Company used the proceeds, along with cash from the sale of equity to B. Riley, to fully repay and terminate the Company’s Credit Facility, as defined below, with any remaining proceeds being used for general corporate purposes, including funding future acquisitions and investments, repaying indebtedness, making capital expenditures and funding working capital. The Notes bear interest at the rate of 8.50% per annum. Interest on the Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing October 31, 2021. The Notes will mature on August 31, 2026. The Company may redeem the Notes for cash in whole or in part at any time (i) on or after August 31, 2023 and prior to August 31, 2024, at a price equal to 103% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after August 31, 2024 and prior to August 31, 2025, at a price equal to 102% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iii) on or after August 31, 2025 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption. On and after any redemption date, interest will cease to accrue on the redeemed Notes. If the Company is redeeming less than all of the Notes, the Trustee will select the Notes to be redeemed by such method as the Trustee deems fair and appropriate in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Indenture also contains customary event of default and cure provisions. If an uncured default occurs and is continuing, the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes may declare the Notes to be immediately due and payable. The Notes are senior unsecured obligations of the Company and rank equal in right of payment with the Company’s existing and future senior unsecured indebtedness. As a result of the issuance of the Notes, $12,116 of third-party fees were capitalized as debt issuance costs that will be amortized through interest expense, net in the accompanying unaudited condensed consolidated statements of operations using the effective interest method through the maturity date of the Notes. Asset-Based Lending Credit Agreement On November 9, 2021, the Company entered into a new Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent, the lenders party thereto and certain subsidiary guarantors named therein. The Credit Agreement provides for a four-year senior secured revolving credit facility with initial aggregate commitments from the lenders of $30,000, which includes $5,000 available for swingline loans, plus an additional $5,000 of capacity available for the issuance of letters of credit if supported by cash collateral provided by the Company (with a right to increase such amount by up to an additional $5,000) (“Aggregate Revolving Commitments”). Availability under the Credit Agreement is subject to a borrowing base calculated based on the value of certain eligible accounts receivable, inventory, and equipment of the Company and subject to redeterminations made in good faith and in the exercise of permitted discretion of JPMorgan. Proceeds of the Credit Agreements may be used for working capital and general corporate purposes. The Credit Agreement provides for borrowings of either base rate loans or Eurodollar loans. Principal amounts borrowed are payable on the maturity date with such borrowings bearing interest that is payable (i) with respect to base rate loans, monthly and (ii) with respect to Eurodollar loans, the last day of each Interest Period (as defined below); provided that if any Interest Period for a Eurodollar loan exceeds three months, interest will be payable on the respective dates that fall every three months after the beginning of such Interest Period. Eurodollar Loans bear interest at a rate per annum equal to the Adjusted LIBOR for one, three or six months (the “Interest Period”), plus an applicable margin of 2.25%. Base rate loans bear interest at a rate per annum equal to the greatest of (i) the agent bank’s reference rate, (ii) the federal funds effective rate plus 50 basis points and (iii) the rate for one month Adjusted LIBOR loans plus 100 basis points, plus an applicable rate of 125 basis points. The Credit Agreement contains a provision for sustainability adjustments annually that will impact the applicable margin by between positive 0.05% and negative 0.05% based on the achievement, or lack thereof, of certain metrics agreed upon between JPMorgan and the Company and publicly reported through the Company’s annual non-financial sustainability report. The Credit Agreement is guaranteed by certain of the Company’s subsidiaries and is secured by substantially all of the Company’s and such subsidiaries’ assets. The Credit Agreement contains customary restrictive covenants for asset-based loans that may limit the Company’s ability to, among other things: incur additional indebtedness, sell assets, make loans to others, make investments, enter into mergers, make certain restricted payments, incur liens, and engage in certain other transactions without the prior consent of the lenders. A covenant testing period (“Covenant Testing Period”) is a period in which excess availability (which is defined in the Credit Agreement as the sum of availability and an amount up to $1,000) is less than the greater of (a) 12.5% of the lesser of the aggregate revolving commitments and the borrowing base, (b) the lesser of $7,500 and the PP&E Component as defined in the Credit Agreement, and (c) $3,500, for three consecutive business days. During a Covenant Testing Period, the Credit Agreement requires the Company to maintain a fixed charge coverage ratio as defined in the Credit Agreement, determined for any period of twelve (12) consecutive months ending on the last day of each fiscal quarter, of at least 1.00 to 1.00. As of March 31, 2023 and December 31, 2022, the Company had $8,500 and $0, respectively, drawn on the Credit Agreement. Outstanding letters of credit were $12,487 and $10,687 as of March 31, 2023 and December 31, 2022, respectively. On August 15, 2022, the Company entered into Amendment No. 1 to the Credit Agreement (the “Credit Agreement Amendment”) with JPMorgan Chase Bank, N.A., as administrative agent, the lenders party thereto and certain subsidiary guarantors named therein. The Credit Agreement Amendment, among other things, permitted the Company (and certain of its subsidiaries) to execute the Term Loan Agreement and guarantee the Term Loan Agreement borrower’s obligations under the Term Loan Agreement. Additionally, the Credit Agreement Amendment permits the Company to include certain gains on ARO settlements and cash received for deferred gains from ERT projects in the calculation of the Company’s fixed charge coverage ratio under the Credit Agreement's financial covenant. On November 14, 2022, the Company entered into Amendment No. 2 to the Credit Agreement (the “Second Credit Agreement Amendment”) with JPMorgan Chase Bank, N.A., as administrative agent, the lenders party thereto and certain subsidiary guarantors named therein. The Second Credit Agreement Amendment, among other things, changed the benchmark rate floor on such loans from the LIBO Rate to the Adjusted Term SOFR Rate, increased the revolver Term Benchmark spread from 2.25% to 2.75%, and modified the test for the Covenant Testing Period such that any excess borrowing base over the revolving commitment amount could reduce the threshold that triggers the covenant test up to $2,000. Additionally, the Second Credit Agreement Amendment permits the Company to include $15,000 of equity contributions in "EBITDA", as defined in the Second Credit Agreement Amendment, for the fourth quarter of 2022. On April 28, 2023, the Company entered into Consent and Amendment No. 3 to Credit Amendment ("Amendment No. 3") that, among other things, (i) provides consent to the Merger Agreement (as defined elsewhere herein), subject to certain conditions, provided that it occurs before October 16, 2023, is materially consistent with the terms of the Merger Agreement and related documents, and no event of default, as defined within the Credit Agreement, has occurred or will result from the acquisition; (ii) amends the definition of Progress Billings Cap Amount to be used in certain borrowing base certificates; (iii) amends the definition of the Applicable Rate; (iv) changes the maturity date from November 9, 2025 to January 31, 2024; and (v) consents to an extension of the deadline for certain financial deliverables for the fiscal year ended December 31, 2022. As a result of entering into the Credit Agreement, $1,366 of third-party fees were capitalized as debt issuance costs that will be amortized through interest expense, net in the unaudited condensed consolidated Statements of Operations using the straight-line method through the maturity date of the Credit Agreement. Unamortized debt issuance costs as of March 31, 2023 and December 31, 2022 were $1,018 and $1,114, respectively, and classified in other assets in the accompanying unaudited condensed consolidated balance sheets. Term Loan Agreement On August 15, 2022, the Company, through its GCERG subsidiary (the “Term Loan Borrower”), entered into a term loan agreement (the “Term Loan Agreement”) with Charah Preferred Stock Aggregator, LP, an affiliate of Bernhard Capital Partners Management, LP (“BCP”). As a result of unexpected operating losses, an increase in contract assets and accelerated cash outflows for remediation activities on an ERT project that led to a decrease in cash during the six months ended June 30, 2022, the Company sought additional financing options to fund ongoing operations and project level investment. The Term Loan Agreement was executed to provide additional liquidity for the Company and accelerate the timing of the Company's cash flows for anticipated sales of the GCERG real estate parcels. The Term Loan Agreement provides for a delayed-draw term loan in an aggregate principal amount of $20,000. The Term Loan Agreement is scheduled to mature on the earlier of the sale of the remaining GCERG real estate parcels or April 15, 2024. The Company elected to draw down the full borrowing capacity available under the Term Loan Agreement by November 8, 2022 through separate funding requests in order to fund operating activities. Borrowings under the Term Loan Agreement accrue interest at a percentage per annum equal to 12.0%, with interest payments due on the first business day of each calendar quarter following the effective date of the Term Loan Agreement and on the maturity date. The Term Loan Borrower agreed to pay a commitment fee equal to $1,000 that is payable on the earliest of (i) April 15, 2024, (ii) the date on which the loans are redeemed in full and all commitments are terminated and (iii) the date on which all commitments are terminated in full. The Term Loan Agreement is secured by a lien on, and security interest in, substantially all of the Term Loan Borrower’s assets, including real property, and is guaranteed on an unsecured basis by the Company and Charah, LLC. Voluntary prepayments are permitted at any time, without premium or penalty. The Term Loan Agreement contains certain customary representations and warranties and affirmative and negative covenants. The negative covenants include, subject to customary exceptions, limitations on indebtedness, investments and acquisitions, mergers and consolidations, restricted payments, transactions with affiliates, liens and dispositions. The Term Loan Agreement allows the Term Loan Borrower to make distributions to its equity holders with the proceeds of the loans made thereunder. The Term Loan Agreement contains customary events of default. If an event of default occurs and is continuing, the lenders may declare all loans to be immediately due and payable. On April 16, 2023, the Company entered into Amendment No. 2 to the Term Loan Amendment that, among other things, (i) waives the mandatory prepayment provisions with respect to certain asset sale proceeds, (ii) joins certain subsidiaries of the Company as guarantors under Term Loan Agreement, and (iii) consents to an extension of the deadline for certain financial deliverables for the fiscal year ended December 31, 2022. In connection with the Term Loan Amendment, ALERG, Cheswick Lefever LLC and Cheswick Plant Environmental Redevelopment Group LLC (collectively, the “Grantors”) entered into a security agreement, dated as of April 16, 2023, with Charah Preferred Stock Aggregator, LP, an affiliate of BCP, as the secured party (the “Secured Party”), pursuant to which the Grantors granted liens over substantially all of their assets in favor of the Secured Party. As a result of entering into the Term Loan Agreement, $598 of third-party fees were capitalized as debt issuance costs that will be amortized through interest expense, net in the unaudited condensed consolidated statements of operations using the effective interest method through the maturity date of the Term Loan Agreement. Notes PayableThe 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 March 31, 2023 and December 31, 2022:
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Notes Payable |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable | Long-term Debt Senior Notes On August 25, 2021, the Company completed a public offering of $135,000, in the aggregate, of the Company’s Notes, which amount includes the exercise by the underwriters of their option to purchase an additional $5,000 aggregate principal amount of Notes. The Notes were issued pursuant to the First Supplemental Indenture (the “First Supplemental Indenture”), dated as of August 25, 2021, between the Company and Wilmington Savings Fund Society, FSB, as trustee (the “Trustee”). The First Supplemental Indenture supplements the Indenture entered into by and between the Company and the Trustee, dated as of August 25, 2021 (the “Base Indenture” and, together with the First Supplemental Indenture, the “Indenture”). The public offering price of the Notes was 100.0% of the principal amount. The Company received proceeds before payment of expenses and other fees of $135,000. The Company used the proceeds, along with cash from the sale of equity to B. Riley, to fully repay and terminate the Company’s Credit Facility, as defined below, with any remaining proceeds being used for general corporate purposes, including funding future acquisitions and investments, repaying indebtedness, making capital expenditures and funding working capital. The Notes bear interest at the rate of 8.50% per annum. Interest on the Notes is payable quarterly in arrears on January 31, April 30, July 31 and October 31 of each year, commencing October 31, 2021. The Notes will mature on August 31, 2026. The Company may redeem the Notes for cash in whole or in part at any time (i) on or after August 31, 2023 and prior to August 31, 2024, at a price equal to 103% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption, (ii) on or after August 31, 2024 and prior to August 31, 2025, at a price equal to 102% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption, and (iii) on or after August 31, 2025 and prior to maturity, at a price equal to 100% of their principal amount, plus accrued and unpaid interest to, but excluding, the date of redemption. On and after any redemption date, interest will cease to accrue on the redeemed Notes. If the Company is redeeming less than all of the Notes, the Trustee will select the Notes to be redeemed by such method as the Trustee deems fair and appropriate in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Indenture also contains customary event of default and cure provisions. If an uncured default occurs and is continuing, the Trustee or the holders of not less than 25% in aggregate principal amount of the Notes may declare the Notes to be immediately due and payable. The Notes are senior unsecured obligations of the Company and rank equal in right of payment with the Company’s existing and future senior unsecured indebtedness. As a result of the issuance of the Notes, $12,116 of third-party fees were capitalized as debt issuance costs that will be amortized through interest expense, net in the accompanying unaudited condensed consolidated statements of operations using the effective interest method through the maturity date of the Notes. Asset-Based Lending Credit Agreement On November 9, 2021, the Company entered into a new Credit Agreement (the “Credit Agreement”) with JPMorgan Chase Bank, N.A. (“JPMorgan”), as administrative agent, the lenders party thereto and certain subsidiary guarantors named therein. The Credit Agreement provides for a four-year senior secured revolving credit facility with initial aggregate commitments from the lenders of $30,000, which includes $5,000 available for swingline loans, plus an additional $5,000 of capacity available for the issuance of letters of credit if supported by cash collateral provided by the Company (with a right to increase such amount by up to an additional $5,000) (“Aggregate Revolving Commitments”). Availability under the Credit Agreement is subject to a borrowing base calculated based on the value of certain eligible accounts receivable, inventory, and equipment of the Company and subject to redeterminations made in good faith and in the exercise of permitted discretion of JPMorgan. Proceeds of the Credit Agreements may be used for working capital and general corporate purposes. The Credit Agreement provides for borrowings of either base rate loans or Eurodollar loans. Principal amounts borrowed are payable on the maturity date with such borrowings bearing interest that is payable (i) with respect to base rate loans, monthly and (ii) with respect to Eurodollar loans, the last day of each Interest Period (as defined below); provided that if any Interest Period for a Eurodollar loan exceeds three months, interest will be payable on the respective dates that fall every three months after the beginning of such Interest Period. Eurodollar Loans bear interest at a rate per annum equal to the Adjusted LIBOR for one, three or six months (the “Interest Period”), plus an applicable margin of 2.25%. Base rate loans bear interest at a rate per annum equal to the greatest of (i) the agent bank’s reference rate, (ii) the federal funds effective rate plus 50 basis points and (iii) the rate for one month Adjusted LIBOR loans plus 100 basis points, plus an applicable rate of 125 basis points. The Credit Agreement contains a provision for sustainability adjustments annually that will impact the applicable margin by between positive 0.05% and negative 0.05% based on the achievement, or lack thereof, of certain metrics agreed upon between JPMorgan and the Company and publicly reported through the Company’s annual non-financial sustainability report. The Credit Agreement is guaranteed by certain of the Company’s subsidiaries and is secured by substantially all of the Company’s and such subsidiaries’ assets. The Credit Agreement contains customary restrictive covenants for asset-based loans that may limit the Company’s ability to, among other things: incur additional indebtedness, sell assets, make loans to others, make investments, enter into mergers, make certain restricted payments, incur liens, and engage in certain other transactions without the prior consent of the lenders. A covenant testing period (“Covenant Testing Period”) is a period in which excess availability (which is defined in the Credit Agreement as the sum of availability and an amount up to $1,000) is less than the greater of (a) 12.5% of the lesser of the aggregate revolving commitments and the borrowing base, (b) the lesser of $7,500 and the PP&E Component as defined in the Credit Agreement, and (c) $3,500, for three consecutive business days. During a Covenant Testing Period, the Credit Agreement requires the Company to maintain a fixed charge coverage ratio as defined in the Credit Agreement, determined for any period of twelve (12) consecutive months ending on the last day of each fiscal quarter, of at least 1.00 to 1.00. As of March 31, 2023 and December 31, 2022, the Company had $8,500 and $0, respectively, drawn on the Credit Agreement. Outstanding letters of credit were $12,487 and $10,687 as of March 31, 2023 and December 31, 2022, respectively. On August 15, 2022, the Company entered into Amendment No. 1 to the Credit Agreement (the “Credit Agreement Amendment”) with JPMorgan Chase Bank, N.A., as administrative agent, the lenders party thereto and certain subsidiary guarantors named therein. The Credit Agreement Amendment, among other things, permitted the Company (and certain of its subsidiaries) to execute the Term Loan Agreement and guarantee the Term Loan Agreement borrower’s obligations under the Term Loan Agreement. Additionally, the Credit Agreement Amendment permits the Company to include certain gains on ARO settlements and cash received for deferred gains from ERT projects in the calculation of the Company’s fixed charge coverage ratio under the Credit Agreement's financial covenant. On November 14, 2022, the Company entered into Amendment No. 2 to the Credit Agreement (the “Second Credit Agreement Amendment”) with JPMorgan Chase Bank, N.A., as administrative agent, the lenders party thereto and certain subsidiary guarantors named therein. The Second Credit Agreement Amendment, among other things, changed the benchmark rate floor on such loans from the LIBO Rate to the Adjusted Term SOFR Rate, increased the revolver Term Benchmark spread from 2.25% to 2.75%, and modified the test for the Covenant Testing Period such that any excess borrowing base over the revolving commitment amount could reduce the threshold that triggers the covenant test up to $2,000. Additionally, the Second Credit Agreement Amendment permits the Company to include $15,000 of equity contributions in "EBITDA", as defined in the Second Credit Agreement Amendment, for the fourth quarter of 2022. On April 28, 2023, the Company entered into Consent and Amendment No. 3 to Credit Amendment ("Amendment No. 3") that, among other things, (i) provides consent to the Merger Agreement (as defined elsewhere herein), subject to certain conditions, provided that it occurs before October 16, 2023, is materially consistent with the terms of the Merger Agreement and related documents, and no event of default, as defined within the Credit Agreement, has occurred or will result from the acquisition; (ii) amends the definition of Progress Billings Cap Amount to be used in certain borrowing base certificates; (iii) amends the definition of the Applicable Rate; (iv) changes the maturity date from November 9, 2025 to January 31, 2024; and (v) consents to an extension of the deadline for certain financial deliverables for the fiscal year ended December 31, 2022. As a result of entering into the Credit Agreement, $1,366 of third-party fees were capitalized as debt issuance costs that will be amortized through interest expense, net in the unaudited condensed consolidated Statements of Operations using the straight-line method through the maturity date of the Credit Agreement. Unamortized debt issuance costs as of March 31, 2023 and December 31, 2022 were $1,018 and $1,114, respectively, and classified in other assets in the accompanying unaudited condensed consolidated balance sheets. Term Loan Agreement On August 15, 2022, the Company, through its GCERG subsidiary (the “Term Loan Borrower”), entered into a term loan agreement (the “Term Loan Agreement”) with Charah Preferred Stock Aggregator, LP, an affiliate of Bernhard Capital Partners Management, LP (“BCP”). As a result of unexpected operating losses, an increase in contract assets and accelerated cash outflows for remediation activities on an ERT project that led to a decrease in cash during the six months ended June 30, 2022, the Company sought additional financing options to fund ongoing operations and project level investment. The Term Loan Agreement was executed to provide additional liquidity for the Company and accelerate the timing of the Company's cash flows for anticipated sales of the GCERG real estate parcels. The Term Loan Agreement provides for a delayed-draw term loan in an aggregate principal amount of $20,000. The Term Loan Agreement is scheduled to mature on the earlier of the sale of the remaining GCERG real estate parcels or April 15, 2024. The Company elected to draw down the full borrowing capacity available under the Term Loan Agreement by November 8, 2022 through separate funding requests in order to fund operating activities. Borrowings under the Term Loan Agreement accrue interest at a percentage per annum equal to 12.0%, with interest payments due on the first business day of each calendar quarter following the effective date of the Term Loan Agreement and on the maturity date. The Term Loan Borrower agreed to pay a commitment fee equal to $1,000 that is payable on the earliest of (i) April 15, 2024, (ii) the date on which the loans are redeemed in full and all commitments are terminated and (iii) the date on which all commitments are terminated in full. The Term Loan Agreement is secured by a lien on, and security interest in, substantially all of the Term Loan Borrower’s assets, including real property, and is guaranteed on an unsecured basis by the Company and Charah, LLC. Voluntary prepayments are permitted at any time, without premium or penalty. The Term Loan Agreement contains certain customary representations and warranties and affirmative and negative covenants. The negative covenants include, subject to customary exceptions, limitations on indebtedness, investments and acquisitions, mergers and consolidations, restricted payments, transactions with affiliates, liens and dispositions. The Term Loan Agreement allows the Term Loan Borrower to make distributions to its equity holders with the proceeds of the loans made thereunder. The Term Loan Agreement contains customary events of default. If an event of default occurs and is continuing, the lenders may declare all loans to be immediately due and payable. On April 16, 2023, the Company entered into Amendment No. 2 to the Term Loan Amendment that, among other things, (i) waives the mandatory prepayment provisions with respect to certain asset sale proceeds, (ii) joins certain subsidiaries of the Company as guarantors under Term Loan Agreement, and (iii) consents to an extension of the deadline for certain financial deliverables for the fiscal year ended December 31, 2022. In connection with the Term Loan Amendment, ALERG, Cheswick Lefever LLC and Cheswick Plant Environmental Redevelopment Group LLC (collectively, the “Grantors”) entered into a security agreement, dated as of April 16, 2023, with Charah Preferred Stock Aggregator, LP, an affiliate of BCP, as the secured party (the “Secured Party”), pursuant to which the Grantors granted liens over substantially all of their assets in favor of the Secured Party. As a result of entering into the Term Loan Agreement, $598 of third-party fees were capitalized as debt issuance costs that will be amortized through interest expense, net in the unaudited condensed consolidated statements of operations using the effective interest method through the maturity date of the Term Loan Agreement. Notes PayableThe 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 March 31, 2023 and December 31, 2022:
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Leases |
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Leases | LeasesThe Company leases equipment, vehicles, and real estate under various arrangements which are classified as either operating or finance leases. A lease exists when a contract or part of a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In determining whether a lease exists, we consider whether a contract provides us with both: (a) the right to obtain substantially all of the economic benefits from the use of the identified asset and (b) the right to direct the use of the identified asset. Our leases typically include a combination of fixed and variable payments. Fixed payments are generally included when measuring the right-of-use asset and lease liability. Variable payments, which primarily represent payments based on usage of the underlying asset, are generally excluded from such measurement and expensed as incurred. In addition, certain of our lease arrangements may contain a lease coupled with an arrangement to provide other services, such as maintenance, or may require us to make other payments on behalf of the lessor related to the leased asset, such as payments for taxes or insurance. We elected the practical expedient to not separate lease and non-lease components for all leases entered into after the date of adoption. The Company has elected the short-term lease exemption for all underlying asset classes. Accordingly, leases with an initial term of 12 months or less which are not expected to be renewed beyond one year, are not recorded on the balance sheet and are recognized as a lease expense on a straight-line basis over the lease term. The measurement of right-of-use assets and lease liabilities requires us to estimate appropriate discount rates. To the extent the rate implicit in the lease is readily determinable, such rate is utilized. However, based on information available at lease commencement for our leases, the rate implicit in the lease is not known. As such, we utilize an incremental borrowing rate, which represents the rate of interest that we would pay to borrow on a collateralized basis, over a similar term, an amount equal to the lease payments. Lease position as of March 31, 2023 and December 31, 2022 The following table presents the lease-related assets and liabilities reported in the Consolidated Balance Sheet as of March 31, 2023 and December 31, 2022:
As of March 31, 2023, the Company had gross finance lease assets of $49,437 offset by accumulated amortization and impairment of $20,129. As of December 31, 2022, the Company had gross finance lease assets of $49,306 offset by accumulated amortization and impairment of $17,719. Lease costs The following table presents information related to our lease expense for the three months ended March 31, 2023:
Lease term and Discount rate The following table presents certain information related to the lease terms and discount rates for our leases as of March 31, 2023:
Other Information The following table presents supplemental cash flow information related to our leases for the three months ended March 31, 2023:
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Leases | LeasesThe Company leases equipment, vehicles, and real estate under various arrangements which are classified as either operating or finance leases. A lease exists when a contract or part of a contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. In determining whether a lease exists, we consider whether a contract provides us with both: (a) the right to obtain substantially all of the economic benefits from the use of the identified asset and (b) the right to direct the use of the identified asset. Our leases typically include a combination of fixed and variable payments. Fixed payments are generally included when measuring the right-of-use asset and lease liability. Variable payments, which primarily represent payments based on usage of the underlying asset, are generally excluded from such measurement and expensed as incurred. In addition, certain of our lease arrangements may contain a lease coupled with an arrangement to provide other services, such as maintenance, or may require us to make other payments on behalf of the lessor related to the leased asset, such as payments for taxes or insurance. We elected the practical expedient to not separate lease and non-lease components for all leases entered into after the date of adoption. The Company has elected the short-term lease exemption for all underlying asset classes. Accordingly, leases with an initial term of 12 months or less which are not expected to be renewed beyond one year, are not recorded on the balance sheet and are recognized as a lease expense on a straight-line basis over the lease term. The measurement of right-of-use assets and lease liabilities requires us to estimate appropriate discount rates. To the extent the rate implicit in the lease is readily determinable, such rate is utilized. However, based on information available at lease commencement for our leases, the rate implicit in the lease is not known. As such, we utilize an incremental borrowing rate, which represents the rate of interest that we would pay to borrow on a collateralized basis, over a similar term, an amount equal to the lease payments. Lease position as of March 31, 2023 and December 31, 2022 The following table presents the lease-related assets and liabilities reported in the Consolidated Balance Sheet as of March 31, 2023 and December 31, 2022:
As of March 31, 2023, the Company had gross finance lease assets of $49,437 offset by accumulated amortization and impairment of $20,129. As of December 31, 2022, the Company had gross finance lease assets of $49,306 offset by accumulated amortization and impairment of $17,719. Lease costs The following table presents information related to our lease expense for the three months ended March 31, 2023:
Lease term and Discount rate The following table presents certain information related to the lease terms and discount rates for our leases as of March 31, 2023:
Other Information The following table presents supplemental cash flow information related to our leases for the three months ended March 31, 2023:
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Mezzanine Equity |
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Mar. 31, 2023 | |
Temporary Equity Disclosure [Abstract] | |
Mezzanine Equity | Mezzanine Equity Series A Preferred Stock In March 2020, the Company entered into an agreement with an investment fund affiliated with BCP to sell 26 (twenty-six thousand) shares of Series A Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), with an initial aggregate liquidation preference of $26,000, net of a 3% Original Issue Discount (“OID”) of $780 for net proceeds of $25,220 in a private placement (the “Series A Preferred Stock Offering”). Proceeds from the Series A Preferred Stock Offering were used for liquidity and general corporate purposes. In connection with the issuance of the Series A Preferred Stock, the Company incurred direct expenses of $966, including financial advisory fees, closing costs, legal expenses and other offering-related expenses. The Series A Preferred Stock was initially recorded net of OID and direct expenses, which will be accreted through paid-in-capital as a deemed dividend from the date of issuance through the first possible known redemption date, March 16, 2023. As of March 31, 2023 and December 31, 2022, the Company had accrued dividends of $1,208 and $1,170, respectively, associated with the Series A Preferred Stock, which was recorded at a fair value of $677 and $689, respectively, using observable information for similar items and is classified as a level 2 fair value measurement. Dividend Rights The Series A Preferred Stock ranks senior to the Company’s common stock with respect to dividend rights and rights on the distribution of assets in any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The Series A Preferred Stock had an initial liquidation preference of $1 (one thousand dollars) per share. The holders of the Series A Preferred Stock are entitled to a cumulative dividend paid in cash at the rate of 10.0% per annum on the liquidation preference, payable on a quarterly basis. If we do not declare and pay a cash dividend to the holders of the Series A Preferred Stock, the dividend rate will increase to 13.0% per annum, and the dividends will be paid-in-kind by adding such amount to the liquidation preference. The Company’s intention is to declare and pay in-kind dividends for the foreseeable future. The dividend rate will increase to 16.0% per annum upon the occurrence and during the continuance of an event of default. As of March 31, 2023, the liquidation preference of the Series A Preferred Stock was $38,385. Conversion Features The Series A Preferred Stock is convertible at the option of the holders at any time into shares of common stock by dividing the liquidation preference by a conversion price of $2.77 per share (the “Conversion Price”), which represents a 30% premium to the 20-day volume-weighted average price ended March 4, 2020. As of March 31, 2023, the maximum number of common shares that could be required to be issued if converted is 13,857 (thirteen million eight hundred fifty-seven thousand). The conversion rate is subject to the following customary anti-dilution and other adjustments: •the issuance of common stock as a dividend or the subdivision, combination, or reclassification of common stock into a greater or lesser number of shares of common stock; •the dividend, distribution or other issuance of rights, options or warrants to holders of common stock entitling them to subscribe for or purchase shares of common stock at a price per share that is less than the market value for such issuance; •the issuance of a dividend or similar distribution in-kind, which can include shares of any class of capital stock, evidences of the Company’s indebtedness, assets or other property or securities, to holders of common stock; •a transaction in which a subsidiary of the Company ceases to be a subsidiary of the Company as a result of the distribution of the equity interests of the subsidiary to the holders of the Company’s common stock; and •the payment of a cash dividend to the holders of common stock. On or after the three-year anniversary of the date of issuance, if the holders have not elected to convert all their shares of Series A Preferred Stock, the Company may give 30 days’ notice to the holders giving the holders the option to choose, in their sole discretion, to have all outstanding shares of Series A Preferred Stock converted into shares of common stock or redeemed in cash at the then applicable Redemption Price (as defined below). The Company may not issue this conversion notice unless (i) the average volume-weighted average price per share of the Company’s common stock during each of the 20 consecutive trading days before the conversion is greater than 120% of the conversion price; (ii) the Company’s common stock is listed on a national securities exchange; (iii) a registration statement for the re-sale of the common stock is then effective; and (iv) the Company is not then in possession of material non-public information as determined by Regulation FD promulgated under the Exchange Act. The Series A Preferred Stock and the associated dividend payable on March 31, 2020, did not generate a beneficial conversion feature (“BCF”) upon issuance as the fair value of the Company’s common stock was less than the conversion price. If a BCF is recognized, a reduction to paid-in capital and the Series A Preferred Stock will be recorded and subsequently accreted through the first redemption date. Additionally, the Company determined that the nature of the Series A Preferred Stock was more akin to an equity instrument and that the economic characteristics and risks of the embedded conversion options were clearly and closely related to the Series A Preferred Stock. As such, the conversion options were not required to be bifurcated from the host under ASC 815, Derivatives and Hedging. Redemption Rights If the Company undergoes certain change of control transactions, the Company will be required to immediately make an offer to repurchase all of the then-outstanding shares of Series A Preferred Stock for cash consideration per share equal to the greater of (i) 100% of the liquidation preference, including accrued and unpaid dividends, if any, plus, if applicable for a transaction occurring before the third anniversary of the closing, a make-whole premium determined pursuant to a calculation of the present value of the dividends that would have accrued through such anniversary, discounted at a rate equal to the applicable treasury rate plus 0.50% (the “Make-Whole Premium”); provided that if the transaction occurs before the first anniversary of the closing, the Make-Whole Premium shall be no greater than $4,000 and (ii) the closing sale price of the common stock on the date of such redemption multiplied by the number of shares of common stock issuable upon conversion of the outstanding Series A Preferred Stock. On or after the three-year anniversary of the issuance of the Series A Preferred Stock, the Company may redeem the Series A Preferred Stock, in whole or in part, for an amount in cash equal to the greater of (i) the closing sale price of the common stock on the date the Company delivers such notice multiplied by the number of shares of common stock issuable upon conversion of the outstanding Series A Preferred Stock and (ii) (x) if the redemption occurs before the fourth anniversary of the date of the closing, 103% of the liquidation preference, including accrued and unpaid dividends, or (y) if the redemption occurs on or after the fourth anniversary of the date of the closing, the liquidation preference plus accrued and unpaid dividends (the foregoing clauses (i) or (ii), as applicable, the “Redemption Price”). On or after the seven-year anniversary of the date of issuance, the holders have the right, subject to applicable law, to require the Company to redeem the Series A Preferred Stock, in whole or in part, into cash consideration equal to the liquidation preference, including all accrued and unpaid dividends, from any source of funds legally available for such purpose. Since the redemption of the Series A Preferred Stock is contingently or optionally redeemable and therefore not certain to occur, the Preferred Stock is not required to be classified as a liability under ASC 480, Distinguishing Liabilities from Equity. As the Series A Preferred Stock is redeemable in certain circumstances at the option of the holder and is redeemable in certain circumstances upon the occurrence of an event that is not solely within our control, we have classified the Series A Preferred Stock in mezzanine equity in the accompanying unaudited condensed consolidated balance sheets. Liquidation Rights In the event of any liquidation, winding-up or dissolution of the Company, whether voluntary or involuntary, the holders of the Series A Preferred Stock would receive an amount in cash equal to the greater of (i) 100% of the liquidation preference plus a Make-Whole Premium and (ii) the amount such holders would be entitled to receive at such time if the Series A Preferred Stock were converted into Company common stock immediately before the liquidation event. The Make-Whole Premium is removed from the calculation for a liquidation event occurring after the third anniversary of the issuance date. Voting Rights The holders of the Series A Preferred Stock are entitled to vote with the holders of the common stock on an as-converted basis in addition to voting as a separate class as provided by applicable Delaware law and the Company’s organizational documents. The holders, acting exclusively and as a separate class, shall have the right to appoint either a non-voting observer to the Company’s Board of Directors or one director to the Company’s Board of Directors. Registration Rights The holders of the Series A Preferred Stock have certain customary registration rights with respect to the shares of common stock into which the Series A Preferred Stock is converted, pursuant to the terms of a registration rights agreement. Series B Preferred Stock On November 14, 2022, the Company and an investment fund affiliated with BCP entered into (i) an agreement to sell 30 (thirty thousand) shares of Series B Preferred Stock, par value $0.01 per share (the “Series B Preferred Stock”), with an initial aggregate liquidation preference of $30,000, net of a 4% Original Issue Discount (“OID”) of $1,200 for net proceeds of $28,800 in a private placement (the “Series B Preferred Stock Investment”). The Series B Preferred Stock ranks senior to all classes or series of equity securities of the Company with respect to dividend rights and rights on liquidation. In the event of any liquidation or winding up of the Company, the holder of each share of the Series B Preferred Stock will receive in preference to the holders of the Company common stock a per share amount equal to the greater of (i) the stated value of the Series B Preferred Stock and (ii) the amount such holders would be entitled to receive at such time if the Series B Preferred Stock were converted into Company common stock. Proceeds from the Series B Preferred Stock Investment were used for liquidity and general corporate purposes. Conversion Features The holder of the Series B Preferred Stock may at any time following the 3-month anniversary of issuance convert all or a portion of the Series B Preferred Stock into common stock of the Company. Each share of Series B Preferred Stock will be convertible into a number of shares of common stock of the Company equal to the purchase price of such share divided by the conversion price, which will be set at an amount representing the volume-weighted average closing price of the Company common stock for the 20-trading days immediately preceding the public announcement of this transaction. At any time after the three-year anniversary of the date of issuance, if the holders have not elected to convert all their shares of Series B Preferred Stock, the Company will have the option to convert all of the then-outstanding shares of Series B Preferred Stock; provided that (i) the closing price of the Company’s common stock exceeds 120% of the conversion price for each of the 20 consecutive trading days prior to the date of conversion, (ii) the Company’s common stock is then listed on a national securities exchange, (iii) a registration statement for re-sale of the Company’s common stock is then effective and (iv) the Company is not then in possession of material non-public information. The Company will provide the holders with 30 days’ notice of its intention to convert the Series B Preferred Stock and the holders will then have the option, in their sole discretion, to have their Series B Preferred Stock converted at the then-applicable Conversion Price or redeemed in cash at the Company’s redemption price as defined in the agreement. In the event the holders elect to have the Series B Preferred Stock redeemed in cash and the Company is unable to redeem the Series B Preferred Stock in cash, then the holders shall not be required to participate in any conversion and shall retain their then-outstanding Series B Preferred Stock in all respects. Redemption Rights If a change of control of the Company occurs, subject to the payment in full of all obligations under the Credit Agreement, the Company will be required to immediately make an offer to repurchase all of the then-outstanding shares of Series B Preferred Stock for cash consideration per share equal to the Company’s redemption price as defined in the agreement. Unless the holders buy all or substantially all of the Company’s assets in a transaction or a series of related transactions approved by the Company’s board of directors, no acquisition or disposition of securities by the holders shall constitute a change of control hereunder. At any time after the 30-month anniversary of the date of closing, the holders will have the option to require the Company to redeem any or all of the then outstanding shares of Series B Preferred Stock for cash consideration equal to the stated value provided that the Company has the financial means and subject to the approval of the Company's lender if required under a customary credit facility. At any time after the 30-month anniversary of the date of closing, and upon not less than 30 days prior written notice, if the holders have not elected to convert or redeem all their shares of Series B Preferred Stock, the Company may elect to redeem all shares of Series B Preferred Stock for an amount equal to the greater of (i) the closing sale price of the Common Stock on the date the Company delivers such notice multiplied by the number of shares of Common Stock issuable upon conversion of the outstanding Series B Preferred Stock and (ii) the stated value. Voting Rights The holders of the Series B Preferred Stock are entitled to vote with the holders of the common stock on an as-converted basis and not as a separate class. The voting power of the Series B Preferred Stock will be limited to 5.0% of the outstanding common stock of the Company. Registration Rights The holders of the Series B Preferred Stock will receive (i) customary transferable shelf registration rights pertaining to the Series B Preferred Stock and any shares of Company common stock issued upon the conversion thereof and (ii) customary piggyback and demand rights in respect of any Company common stock issued upon the conversion of any preferred stock, in each case, by amendment to the Company’s current registration rights agreement or otherwise and on terms consistent therewith.
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Contract Assets and Liabilities |
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Contract Assets and Liabilities | Revenue We disaggregate our revenue from customers by customer arrangement as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. See details in the table below.
As of March 31, 2023, the Company had remaining performance obligations with an aggregate transaction price of $498,504 on construction contracts for which we recognize revenue over time. We expect to recognize approximately 15% of our remaining performance obligations as revenue during the remainder of 2023, 14% in 2024, 12% in 2025, and 59% thereafter. Revenue associated with our remaining performance obligations includes performance obligations related to our construction contracts. The balance of remaining performance obligations does not include variable consideration that was determined to be constrained as of March 31, 2023. As of March 31, 2023, there were $2,113 of unapproved change orders associated with project scope changes included in determining the profit or loss on certain construction contracts, of which $1,014 were approved subsequent to quarter-end. The Company did not have any foreign revenue for the three months ended March 31, 2023 and 2022. Contract Assets and LiabilitiesThe timing of revenue recognition, billings and cash collections results in accounts receivable, contract assets, and contract liabilities on the accompanying unaudited condensed consolidated balance sheets.Our contract assets are as follows:
Our contract liabilities are as follows:
We recognized revenue of $8,198 for the three months ended March 31, 2023 that was previously included in contract liabilities at December 31, 2022. We recognized revenue of $5,772 for the three months ended March 31, 2022, which was previously included in the contract liability balance at December 31, 2021. The Company's net position on uncompleted contracts is as follows:
The net balance in process classified on the accompanying unaudited condensed consolidated balance sheets is as follows:
Anticipated losses on long-term contracts are recognized when such losses become evident. As of March 31, 2023 and December 31, 2022, accruals for anticipated losses on long-term contracts were $8 and $120, respectively.
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Stock-Based Compensation |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation | Stock-Based Compensation The Company adopted the Charah Solutions, Inc. 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's stockholders. The Company has reserved 5,007 shares of common stock for issuance under the 2018 Plan. A summary of the Company’s non-vested share activity for the three months ended March 31, 2023 is as follows:
Stock-based compensation expense related to the restricted stock issued was $453 and $571 during the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, total unrecognized stock-based compensation expense related to non-vested awards of restricted stock, net of estimated forfeitures, was $1,115, and is expected to be recognized over a weighted-average period of 1.33 years. Stock-based compensation expense related to the performance stock issued was $299 and $220 during the three months ended March 31, 2023 and 2022, respectively. As of March 31, 2023, total unrecognized stock-based compensation expense related to non-vested awards of performance stock, net of estimated forfeitures, was $722, and is expected to be recognized over a weighted-average period of 1.61 years.
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Commitments and Contingencies |
3 Months Ended |
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Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies In December 2022, the Company was notified by a whistleblower that certain employees had engaged in improper spending activities at one of our project sites. In response, the Company conducted an internal investigation that substantiated the whistleblower's allegations. The Company engaged external legal counsel and a forensic accounting investigation team to thoroughly assess the extent of the fraudulent activities. Based on specific assumptions and limitations, we determined a range of $1,140 to $2,670 of possible loss related to potentially fraudulent transactions believed to have been billed to the customer from 2018 through 2022. The investigation will continue to proceed through the legal process, which includes examining the extent of involvement of the customer, its representatives or any third parties in contributory responsibility, evaluating the extent of insurance coverage available for reimbursement of the Company's losses, and collaborating with external law enforcement agencies to ascertain the full scope and magnitude of the overall fraudulent scheme. The Company has reversed revenue of $2,476 for these fraudulent activities during the year ended December 31, 2022, representing management's best estimate of the probable loss, irrespective of potential recoveries from third parties or insurance policies. In September 2022, TMPA served GCERG in the District Court of Travis County, Texas with a lawsuit alleging improper calculation of costs attributed to the remediation of the Site F Landfill on our Gibbons Creek project. In our APA with TMPA, GCERG agreed that if aggregate costs actually incurred to remediate the Site F Landfill did not exceed $13,600, then the cash and restricted cash received would be reduced on a dollar-for-dollar basis. In May 2023, the two parties held an unsuccessful mediation. This lawsuit is in the discovery phase and the Company intends to continue to defend the case vigorously. On June 15, 2023, a purported Company stockholder filed an action against the Company and its Board of Directors (the “Board”) captioned Wilson v. Charah Solutions, Inc., et al., No. 23-cv-00656, in the United States District Court for the District of Delaware (the “Wilson Action”). The plaintiff in the Wilson Action alleges that the Company and its Board violated federal securities laws, including Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated under the Exchange Act, by issuing a materially incomplete and misleading definitive proxy statement in connection with the Merger (as defined elsewhere herein). On June 16, 2023, another purported Company stockholder filed an action against the Company and its Board captioned Wilhelm v. Charah Solutions, Inc., et al., No. 23-cv-00661, in the United States District Court for the District of Delaware (the “Wilhelm Action”) and together with the Wilson Action, the “Actions”). The plaintiffs in the Wilhelm Action also allege that the Company and its Board violated federal securities laws, including Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated under the Exchange Act, by issuing a materially incomplete and misleading definitive proxy statement in connection with the Merger. The plaintiffs in each of the Actions seek, among other things, to enjoin the transactions contemplated by the Merger Agreement (as defined elsewhere herein) and an award of attorneys’ and expert fees and expenses. The Company believes that the allegations in the Actions are without merit. The Company has received demand letters containing similar allegations from other purported stockholders and additional lawsuits arising out of the Merger may also be filed in the future. From time to time the Company is a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of our business. For all such lawsuits, claims and proceedings, we record reserves when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. Although it is difficult to predict the ultimate outcome of these lawsuits, claims and proceedings, we do not believe that the ultimate disposition of any of these matters, individually or in the aggregate, would have a material adverse effect on our results of operations, financial position or cash flows. We maintain liability insurance for certain risks that is subject to certain self-insurance limits. We believe amounts previously recorded are sufficient to cover any liabilities arising from the proceedings with all outstanding legal claims. Except as reflected in such accruals, we are currently unable to estimate a range of reasonably possible loss or a range of reasonably possible loss in excess of the amount accrued for outstanding legal matters.
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Income Taxes |
3 Months Ended |
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Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes The Company and income tax expense of $115 and $78 for the three months ended March 31, 2023 and 2022, respectively, due to current state income tax expense and adjustments to the valuation allowance on deferred tax assets. The effective income tax rate for the three months ended March 31, 2023 was negative 3.9% and includes the effect of the valuation allowance, state income taxes and nondeductible items. The effective income tax rate for the three months ended March 31, 2023 was less than the federal and state statutory rates primarily due to changes in the valuation allowance, which had an impact of 28.1%. The Company’s income is subject to a federal statutory rate of 21.0% and an estimated state statutory rate of 4.1% before considering the valuation allowance. The Company evaluates its effective income tax rate at each interim period and adjusts it accordingly as facts and circumstances warrant. The determination of the annual estimated effective income 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. At March 31, 2023, deferred tax liabilities, net of deferred tax assets, was $894. A valuation allowance has been recorded for the deferred tax assets as the Company has determined that it is not more likely than not that the tax benefits related to all the deferred tax assets will be realized. The Company will continue to evaluate both the positive and negative evidence in determining the need for a valuation allowance on its deferred tax assets.
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Loss Per Share |
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Loss Per Share | Loss Per Share Basic loss per share is computed by dividing net loss attributable to the Company’s stockholders by the weighted-average number of shares outstanding during the period. Diluted loss per share reflects all potentially dilutive ordinary shares outstanding during the period and is computed by dividing net loss attributable to the Company’s stockholders 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. Basic and diluted loss per share is determined using the following information:
The holders of the Preferred Stock have non-forfeitable rights to common stock dividends or common stock dividend equivalents. Accordingly, the Preferred Stock qualifies as participating securities. As a result of the net loss per share for the three months ended March 31, 2023 and 2022, the inclusion of all potentially dilutive shares would be anti-dilutive. Therefore, dilutive shares of 3,221 and 1,311 were excluded from the computation of the weighted-average shares for diluted net loss per share for the three months ended March 31, 2023 and 2022, respectively. A summary of securities excluded from the computation of diluted earnings per share is presented below:
Reverse Stock Split On December 29, 2022, the Company effected a one-for-ten (1:10) reverse stock split of its common stock, par value $0.01 per share. The reverse stock split, which was authorized by its Board of Directors, was approved by Charah Solutions’ stockholders on November 23, 2022. The reverse stock split reduced the number of outstanding shares of the Company's common stock from 33,889 shares as of December 29, 2022, to 3,389 shares outstanding post-split. The primary purpose of the reverse stock split was to increase the per share market price of the Company’s common stock in an effort to maintain compliance with applicable NYSE continued listing standards with respect to the closing price of our common stock.
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Subsequent Events |
3 Months Ended |
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Mar. 31, 2023 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events Agreement and Plan of Merger On April 16, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Acquisition Parent 0423 Inc., a Delaware corporation (the “Parent”), and Acquisition Sub April 2023, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Parent (“Acquisition Sub”), pursuant to which, and subject to the terms and conditions therein, Acquisition Sub will be merged with and into the Company, with the Company continuing as the surviving corporation in the merger (the “Merger”). Following the consummation of the Merger, the Company will be a wholly owned subsidiary of Parent. Parent is a wholly owned subsidiary of investment funds affiliated with SER Capital Partners (“SER”), a private investment firm focused on sustainable investment. Pursuant to the terms of the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share of common stock, par value $0.01 per share, of the Company issued and outstanding immediately prior to the Effective Time will be cancelled and each share will be converted into the right to receive $6.00 per share in cash, without interest (the “Common Per Share Merger Consideration”). In addition, at the Effective Time, each share of Series A Preferred Stock of the Company and Series B Preferred Stock of the Company that is issued and outstanding immediately prior to the Effective Time shall be purchased and redeemed by Parent pursuant to Section 8 of the Certificate of Designations of Series A Preferred Stock and Section 7 of the Certificate of Designations of Series B Preferred Stock in exchange for the Series A Redemption Price of $40,061 (as such term is defined in the Merger Agreement) or the Series B Redemption Price of $30,000 (as such term is defined in the Merger Agreement), respectively (the “Redemption”). The parties to the Merger Agreement have made certain customary representations and warranties and have agreed to certain covenants. The Merger Agreement between Parent and the Company may be terminated by mutual consent of both parties or under certain conditions as detailed within the Merger Agreement. The closing of the transactions contemplated by the Merger Agreement is subject to (i) receipt of the Requisite Stockholder Approval, (ii) consent from the FCC under section 310 of the Communications Act of 1934, and (iii) consent from JPMorgan Chase Bank, N.A. to the Merger and the Redemption, to the extent the Existing Debt Agreement (as such term is defined in the Merger Agreement) remains outstanding. The Parent has obtained certain equity financing commitments pursuant to an equity commitment letter (the “Equity Commitment Letter”) for the purpose of financing the transactions contemplated by the Merger Agreement and paying related fees and expenses. Certain affiliates of SER Capital Partners (collectively, “Guarantors”) committed to contribute to Parent an equity contribution equal to $88,054 prior to or at the closing, on the terms and subject to the conditions set forth under those certain commitments. On April 16, 2023, the Guarantors and the Company executed a guarantee (the “Guarantee”) in favor of the Company in which the Guarantors have guaranteed the due and punctual payment of any and all payment obligations of Parent and Acquisition Sub, including Parent’s and/or Acquisition Sub’s obligations to pay actual damages incurred as a result of any knowing or intentional breach of the Merger Agreement prior to the valid termination of the Merger Agreement. In connection with the execution of the Merger Agreement, BCP, the Parent and the Company entered into a voting and support agreement (the “Letter Agreement”). Subject to the terms and conditions set forth in the Letter Agreement, BCP agreed, among other things, to vote their shares in favor of the adoption of the Merger Agreement, the Merger and the other transactions contemplated thereby, and against any agreement, transaction or proposal that relates to a competing proposal. The Letter Agreement also includes restrictions on the transfer of the Holder's shares and a waiver of appraisal rights. The Letter Agreement will terminate under certain circumstances as defined in the Letter Agreement.
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Nature of Business and Basis of Presentation (Policies) |
3 Months Ended |
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Mar. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business Operations and Basis for Presentation | Description of Business Operations The Company is a leading national service provider of mission-critical environmental services and byproduct recycling to the power generation industry, enabling our customers to address challenges related to the remediation of coal 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 remediation and compliance services, byproduct services, raw material sales and Environmental Risk Transfer (“ERT”) services. The Company has corporate offices in Kentucky and North Carolina and principally operates in the eastern and mid-central United States. 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 the reduced reporting requirements and exemptions, including the longer phase-in periods for adopting new or revised financial accounting standards under Section 107 of the JOBS Act until the Company is no longer an emerging growth company. Among other things, we are not required to provide an auditor attestation report on the assessment of the internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 and our disclosure obligations regarding executive compensation may be reduced. We may take advantage of these provisions until the last day of our fiscal year following the fifth anniversary of the IPO, or December 31, 2023. However, if certain events occur before the end of such five-year period, including if we become a “large accelerated filer,” our annual gross revenue exceeds $1.07 billion, or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company before the end of such five-year period. Basis for Presentation The Company’s fiscal year ends December 31. The accompanying unaudited condensed consolidated financial statements include the assets, liabilities, stockholders’ equity and results of operations of the Company and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission 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 (“GAAP”) have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2022.
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Segment Information | Segment Information The Company operates as one reportable segment, reflecting the suite of end-to-end services we offer our utility partners and how our Chief Operating Decision Maker (“CODM”) reviews consolidated financial information to evaluate results of operations, assess performance and allocate resources. Due to the nature of the Company’s business, the Company's Chief Executive Officer, who is also the CODM, evaluates the performance of the Company and allocates resources of the Company based on consolidated gross profit, general and administrative expenses, balance sheet, liquidity, capital spending, safety statistics and business development reports for the Company as a whole. Since the Company has a single operating segment, all required financial segment information can be found in the unaudited condensed consolidated financial statements. We provide the following services through our one segment: remediation and compliance services, byproduct services, raw material sales and ERT services. Remediation and compliance services are associated with our customers’ need for multi-year environmental improvement and sustainability initiatives, whether driven by regulatory requirements, power generation customer initiatives or consumer expectations and standards. Byproduct services consist of recurring and mission-critical coal ash management and operations for coal-fired power generation facilities while also supporting both our power generation customers’ desire to recycle their recurring and legacy volumes of coal combustion residuals (“CCRs”), commonly known as coal ash, and our ultimate end customers’ need for high-quality, cost-effective supplemental cementitious materials (“SCMs”) that provide a sustainable, environmentally-friendly substitute for Portland cement in concrete. Our raw material sales provide customers with the raw materials essential to their business while also providing the sourcing, logistics, and management needed to facilitate these raw material transactions around the globe. ERT services represent an innovative solution designed to meet our coal-fired plant energy providers’ evolving and increasingly complex plant closure and environmental remediation needs. These customers need to retire and decommission older or underutilized assets while maximizing the assets’ value and improving the environment. Our ERT services manage the sites’ environmental remediation requirements, benefiting the communities and lowering the coal-fired plant energy providers’ costs.
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Recent Accounting Pronouncements | Recent Accounting Pronouncements Recently Issued Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASC 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 12 months or less). We adopted ASC 842 using a modified retrospective approach, which required recognition under the new standard, ASC 842, to be applied as of the date of adoption with all prior periods being presented under Leases (Topic 840) (“ASC 840”). In accordance with ASU No. 2020-05, ASC 842 was effective for non-public business entities for the fiscal year ending December 31, 2022 and interim periods within the fiscal year ending December 31, 2023. Therefore, financial information as of and for the period ended March 31, 2022 herein is presented under ASC 840, and financial information as of and for the periods ended December 31, 2022 and March 31, 2023 herein is presented under ASC 842. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments, which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new model will apply to: (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income, and (4) beneficial interests in securitized financial assets. The amendments contained in this ASU will be applied through a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2018, the FASB issued ASU No. 2018-19, which amended the effective date of ASU No. 2016-13 and clarified that receivables arising from operating leases are not within the scope of Subtopic 326-20. In October 2019, the FASB delayed the effective date of this ASU, extending the effective date for non-public business entities and making the ASU effective for the Company for the fiscal year ending December 31, 2023, and interim periods therein. The adoption of this ASU has not had a material impact on the Company's consolidated financial statements and is not expected to have a material impact on the Company's consolidated financial statements on a go-forward basis. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, subject to meeting certain criteria, that reference the London Inter-bank Offered Rate (“LIBOR”) or another rate that is expected to be discontinued. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848). This ASU provides supplemental guidance and clarification to ASU No. 2020-04, and these updates must be adopted concurrently, cumulatively referred to as “Topic 848.” The amendments in Topic 848 are currently effective for all entities, and upon adoption, may be applied prospectively to contract modifications made on or before December 31, 2022. The adoption of this ASU has not had a material impact on the Company's consolidated financial statements and is not expected to have a material impact on the Company's consolidated financial statements on a go-forward basis. In August 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU simplifies the guidance on accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature and convertible debt with a beneficial conversion feature. As a result, after adopting the ASU’s guidance, entities will not separately present in equity an embedded conversion feature in such debt. Instead, they will account for a convertible debt instrument wholly as debt, and for convertible preferred stock wholly as preferred stock unless certain other conditions are met. Also, the ASU requires the application of the if-converted method for calculating diluted earnings per share and the treasury stock method will no longer be available. This ASU will be effective for the Company for the fiscal year ending December 31, 2024, and interim periods therein, with early adoption permitted. The Company is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements.
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Revenue (Tables) |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Disaggregation of Revenue |
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Asset Acquisitions (Tables) |
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Business Combination and Asset Acquisition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Asset Acquisition | The assets acquired and liabilities assumed as recognized within the Company's condensed consolidated balance sheet upon closing on the APA consisted of the following:
A summary of the other assumptions included in the fair value measurement of the asset retirement obligations to be recognized upon closing of the APA consisted of the following:
The assets acquired and liabilities assumed as recognized within the Company's condensed consolidated balance sheet upon closing on the APA consisted of the following:
A summary of the other assumptions included in the fair value measurement of the asset retirement obligations to be recognized upon closing of the APA consisted of the following:
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Balance Sheet Items (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Property and Equipment, Net | The following table shows the components of real estate, property and equipment, net:
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Schedule of Lease Receivable | The following table reflects the classification of the lease receivable within our accompanying unaudited condensed consolidated balance sheet:
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Schedule of Notes Receivable | The following table reflects the classification of the note receivable within our unaudited condensed consolidated balance sheet:
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Schedule of Accrued Liabilities | The following table shows the components of accrued liabilities:
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Asset Retirement Obligations (Tables) |
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Asset Retirement Obligation Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Asset Retirement Obligations | The following table reflects the activity for our asset retirement obligations:
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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 March 31, 2023 and December 31, 2022:
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Leases (Tables) |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Lease-Related Assets and Liabilities and Weighted-Average Lease Terms and Discount Rates | The following table presents the lease-related assets and liabilities reported in the Consolidated Balance Sheet as of March 31, 2023 and December 31, 2022:
The following table presents certain information related to the lease terms and discount rates for our leases as of March 31, 2023:
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Schedule of Supplemental Cash Flow and Other Information Related to Leases Expense | The following table presents information related to our lease expense for the three months ended March 31, 2023:
The following table presents supplemental cash flow information related to our leases for the three months ended March 31, 2023:
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Contract Assets and Liabilities (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Asset and Liabilities | Our contract assets are as follows:
Our contract liabilities are as follows:
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Schedule of Costs in Excess of Billings and Billings in Excess of Costs | The Company's net position on uncompleted contracts is as follows:
The net balance in process classified on the accompanying unaudited condensed consolidated balance sheets is as follows:
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Stock-Based Compensation (Tables) |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | A summary of the Company’s non-vested share activity for the three months ended March 31, 2023 is as follows:
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Loss Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Loss Per Share, Basic and Diluted | Basic and diluted loss per share is determined using the following information:
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Schedule of Antidilutive Securities Excluded from Computation | A summary of securities excluded from the computation of diluted earnings per share is presented below:
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Nature of Business and Basis of Presentation (Details) |
3 Months Ended |
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Mar. 31, 2023
segment
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Related Party Transaction [Line Items] | |
Number of reportable segments | 1 |
Charah Solutions | BCP | |
Related Party Transaction [Line Items] | |
Ownership percentage by noncontrolling owners | 73.00% |
Revenue - Schedule of Disaggregation of Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2023 |
Mar. 31, 2022 |
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Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 70,913 | $ 66,051 |
Construction contracts | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 33,276 | 30,840 |
Byproduct services | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | 28,570 | 24,018 |
Raw material sales | ||
Disaggregation of Revenue [Line Items] | ||
Total revenue | $ 9,067 | $ 11,193 |
Revenue - Narrative (Details) - USD ($) |
3 Months Ended | |
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Mar. 31, 2023 |
Mar. 31, 2022 |
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Disaggregation of Revenue [Line Items] | ||
Unapproved change orders | $ 2,113,000 | |
Approved change orders | 1,014,000 | |
Total revenues | 70,913,000 | $ 66,051,000 |
Non-US | ||
Disaggregation of Revenue [Line Items] | ||
Total revenues | $ 0 | $ 0 |
Asset Acquisitions - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands |
Apr. 06, 2022 |
Apr. 04, 2022 |
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
Dec. 31, 2021 |
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Consideration and direct transaction costs: | ||||||
Asset retirement obligations | $ (58,639) | $ (68,561) | $ (33,969) | $ (42,413) | ||
Asset Purchase Agreement | ||||||
Consideration and direct transaction costs: | ||||||
Asset retirement obligations | $ (30,179) | $ (34,300) | ||||
Direct transaction costs | (684) | (1,345) | ||||
Total consideration and transaction costs incurred | (30,863) | (35,645) | ||||
Assets Acquired: | ||||||
Cash | 5,577 | |||||
Restricted Cash | 29,762 | 2,900 | ||||
Land, land improvements and structural fill sites | 32,109 | |||||
Plant, machinery and equipment | 623 | |||||
Vehicles | 13 | |||||
Total allocated value of assets acquired | 35,339 | $ 35,645 | ||||
Excess of fair value of assets acquired over total consideration – deferred gain | $ (4,476) | |||||
Other Assumptions: | ||||||
Inflation rate | 2.50% | 2.50% | ||||
Weighted average rate applicable to our long-term asset retirement obligations | 7.45% | 7.35% |
Balance Sheet Items - Narrative (Details) - USD ($) $ in Thousands |
1 Months Ended | 3 Months Ended | ||||
---|---|---|---|---|---|---|
Oct. 01, 2022 |
Jun. 30, 2021 |
Mar. 31, 2021 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||
Land improvements | $ 18,870 | |||||
Demolition cost capitalized | 64 | $ 842 | ||||
Cost basis on scrap sold | 237 | 990 | ||||
Depreciation | $ 3,836 | $ 4,597 | ||||
Asset impairment charges | $ 10,484 | |||||
Long-lived assets impaired, fair value | $ 20,003 | |||||
Sale leaseback transaction, terms | 30 years | |||||
Discount rate | 3.90% | |||||
Non-current assets held for sale | $ 2,852 | |||||
Proceeds from sale of assets | $ 1,250 | |||||
Asset sale agreement, final payment to be received, term | 36 months |
Balance Sheet Items - Lease Receivable (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Lease receivable | $ 5,856 | $ 5,872 |
Less: current portion in prepaid expenses and other current assets | (68) | (68) |
Non-current portion in other assets | $ 5,788 | $ 5,804 |
Balance Sheet Items - Note Receivable (Details) - Notes Receivable - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Related Party Transaction [Line Items] | ||
Note receivable | $ 852 | $ 852 |
Less: current portion in prepaid expenses and other current assets | (500) | (500) |
Non-current portion in other assets | $ 352 | $ 352 |
Balance Sheet Items - Accrued Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accrued expenses | $ 18,553 | $ 17,022 |
Accrued payroll and bonuses | 3,971 | 5,732 |
Accrued interest | 3,420 | 2,853 |
Accrued preferred stock dividends | 677 | 689 |
Accrued liabilities | $ 26,621 | $ 26,296 |
Asset Retirement Obligations - Narrative (Details) $ in Thousands |
Mar. 31, 2023
USD ($)
numberOfFillSite
tract_of_real_property
|
Dec. 31, 2022
USD ($)
|
Mar. 31, 2022
USD ($)
|
Dec. 31, 2021
USD ($)
|
---|---|---|---|---|
Asset Retirement Obligation Disclosure [Abstract] | ||||
Number of structural sites owned and operated | numberOfFillSite | 2 | |||
Number of tracts of real property | tract_of_real_property | 8 | |||
Asset retirement obligation | $ | $ 58,639 | $ 68,561 | $ 33,969 | $ 42,413 |
Asset Retirement Obligations - Schedule of Asset Retirement Obligations (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Asset Retirement Obligation, Roll Forward Analysis [Roll Forward] | |||
Balance, beginning of period | $ 68,561 | $ 42,413 | |
Liabilities settled | (11,010) | (6,394) | |
Accretion | 1,047 | 401 | |
Loss (gain) on ARO settlement | 41 | (2,451) | |
Balance, end of period | 58,639 | 33,969 | |
Less: current portion | (30,301) | (24,776) | $ (37,982) |
Non-current portion | $ 28,338 | $ 9,193 | $ 30,579 |
Leases - Lease Assets and Liabilities (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Assets | ||
Operating lease assets | $ 29,797 | $ 32,748 |
Finance lease assets | 29,308 | 31,587 |
Total lease assets | 59,105 | 64,335 |
Current | ||
Operating lease, liability, current | 11,425 | 12,483 |
Finance lease, liability, current | 10,156 | 10,592 |
Non-current | ||
Operating lease, liability, noncurrent | 21,208 | 23,621 |
Finance lease, liability, noncurrent | 22,472 | 24,585 |
Total lease liabilities | $ 65,261 | $ 71,281 |
Finance Lease, Right-of-Use Asset, Statement of Financial Position [Extensible Enumeration] | Real estate, property and equipment, net | Real estate, property and equipment, net |
Leases - Narrative (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Leases [Abstract] | ||
Finance lease assets | $ 49,437 | $ 49,306 |
Finance lease asset, accumulated amortization | $ 20,129 | $ 17,719 |
Leases - Lease Costs (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2023
USD ($)
| |
Finance lease costs: | |
Amortization expense | $ 2,410 |
Interest expense | 635 |
Operating lease costs | 3,561 |
Short-term lease expense | 111 |
Total lease expense | $ 6,717 |
Leases - Lease Term and Discount Rate (Details) |
Mar. 31, 2023 |
---|---|
Weighted-average remaining term in years | |
Finance leases | 3 years 7 months 20 days |
Operating leases | 4 years 4 months 20 days |
Weighted-average discount rate | |
Finance leases | 7.35% |
Operating leases | 7.15% |
Leases - Other Information (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Cash paid amounts included in the measurement of lease liabilities: | ||
Operating cash flows used for operating leases | $ 4,080 | |
Operating cash flows used for finance leases | 634 | |
Financing cash flows used for finance leases | 2,680 | $ 1,884 |
Total | 7,394 | |
Right-of-use assets obtained in exchange for: | ||
New finance lease liabilities | 132 | $ 10,043 |
New operating lease liabilities | 0 | |
Total | $ 132 |
Contract Assets and Liabilities - Schedule of Asset and Liabilities (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Contract with Customer, Asset, after Allowance for Credit Loss, Current [Abstract] | |||
Costs and estimated earnings in excess of billings | $ 12,135 | $ 11,700 | |
Retainage | 11,255 | 9,281 | |
Total contract assets | 23,390 | 20,981 | |
Contract with Customer, Liability [Abstract] | |||
Billings in excess of costs and estimated earnings | 8,505 | 8,160 | |
Deferred revenue | 486 | 258 | |
Total contract liabilities | 8,991 | $ 8,418 | |
Revenue recognized | $ 8,198 | $ 5,772 |
Contract Assets and Liabilities - Activity (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Costs incurred on uncompleted contracts | $ 304,007 | $ 344,692 |
Estimated earnings | 10,640 | 20,267 |
Total costs and estimated earnings | 314,647 | 364,959 |
Less billings to date | (311,017) | (361,419) |
Net balance in process | $ 3,630 | $ 3,540 |
Contract Assets and Liabilities - Balance Sheet Classification (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Revenue from Contract with Customer [Abstract] | ||
Costs and estimated earnings in excess of billings | $ 12,135 | $ 11,700 |
Billings in excess of costs and estimated earnings | (8,505) | (8,160) |
Net balance in process | 3,630 | 3,540 |
Long-term contracts, loss accrual | $ 8 | $ 120 |
Stock-Based Compensation - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Common Stock | 2018 Omnibus Incentive Plan | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Number of shares authorized to be issued (in shares) | 5,007,000 | |
Restricted Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | $ 453 | $ 571 |
Unrecognized compensation cost | $ 1,115 | |
Compensation cost not yet recognized, period for recognition | 1 year 3 months 29 days | |
Performance Stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Compensation expense | $ 299 | $ 220 |
Unrecognized compensation cost | $ 722 | |
Compensation cost not yet recognized, period for recognition | 1 year 7 months 9 days |
Commitment and Contingencies (Details) - USD ($) $ in Thousands |
1 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2022 |
Dec. 31, 2022 |
|
Loss Contingencies [Line Items] | ||
Revenue reversal due to legal investigation | $ 2,476 | |
Aggregate costs to remediate, threshold | $ 13,600 | |
Minimum | ||
Loss Contingencies [Line Items] | ||
Potential amount due to fraudulent transactions | 1,140 | |
Maximum | ||
Loss Contingencies [Line Items] | ||
Potential amount due to fraudulent transactions | $ 2,670 |
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Income Tax Disclosure [Abstract] | |||
Income tax expense | $ 115 | $ 78 | |
Effective tax rate | (3.90%) | ||
Change in deferred tax assets valuation allowance, percent | 28.10% | ||
Estimated state statutory rate | 4.10% | ||
Deferred tax liabilities | $ 894 | $ 819 |
Loss Per Share - Calculation of EPS (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Numerator: | ||
Net loss attributable to Charah Solutions, Inc. | $ (6,086) | $ (12,040) |
Deemed and imputed dividends on Series A Preferred Stock | (126) | (149) |
Series A Preferred Stock dividends | (677) | (2,090) |
Net loss attributable to common stockholders | (6,889) | (14,279) |
Net loss attributable to common stockholders | $ (6,889) | $ (14,279) |
Denominator: | ||
Weighted-average shares outstanding (in shares) | 3,380 | 3,341 |
Dilutive share-based awards (in shares) | 0 | 0 |
Total weighted average shares outstanding, including dilutive shares (in shares) | 3,380 | 3,341 |
Net loss attributable to common stockholders per common share | ||
Basic (in dollars per share) | $ (2.04) | $ (4.27) |
Diluted (in dollars per share) | $ (2.04) | $ (4.27) |
Loss Per Share - Antidilutive Securities (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive restricted and performance stock units (in shares) | 3,221 | 1,311 |
Anti-dilutive restricted and performance stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive restricted and performance stock units (in shares) | 154 | 130 |
Anti-dilutive Series A Preferred Stock convertible into common stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Anti-dilutive restricted and performance stock units (in shares) | 3,067 | 1,181 |
Loss Per Share - Reverse Stock Split (Details) |
Dec. 29, 2022
$ / shares
shares
|
Mar. 31, 2023
$ / shares
shares
|
Dec. 31, 2022
$ / shares
shares
|
Dec. 30, 2022
shares
|
---|---|---|---|---|
Earnings Per Share [Abstract] | ||||
Stock split ratio, common stock | 0.10 | |||
Common stock, par value (in dollars per share) | $ / shares | $ 0.01 | $ 0.01 | $ 0.01 | |
Common stock, shares outstanding (in shares) | shares | 33,889,000 | 3,379,605 | 3,379,605 | 3,389,000 |
Subsequent Events (Details) - USD ($) $ / shares in Units, $ in Thousands |
Apr. 16, 2023 |
Mar. 31, 2023 |
Dec. 31, 2022 |
Dec. 29, 2022 |
---|---|---|---|---|
Subsequent Event [Line Items] | ||||
Common stock, par value (in dollars per share) | $ 0.01 | $ 0.01 | $ 0.01 | |
Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Common stock, par value (in dollars per share) | $ 0.01 | |||
Common stock, conversion upon merger, Cash amount to be received per share | $ 6.00 | |||
Equity contribution commitment from third party | $ 88,054 | |||
Series A Preferred Stock | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Preferred stock, redemption amount | 40,061 | |||
Series B Preferred Stock | Subsequent Event | ||||
Subsequent Event [Line Items] | ||||
Preferred stock, redemption amount | $ 30,000 |
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