Notes to Consolidated & Combined Financial Statements
(dollars in thousands except per share and unit data)
1. Nature of Business and Basis of Presentation
Organization
During 2016, Charah, Inc. converted from an S corporation to a limited liability company and changed its name to Charah, LLC, a Delaware limited liability company (“Charah”). In December 2016, Charah became a wholly owned subsidiary of CEP Holdings, Inc. In January 2017, Charah became a wholly owned subsidiary of Charah Sole Member LLC, which itself is a wholly owned subsidiary of Charah Management LLC, a Delaware limited liability company (“Charah Management”). Charah Management was a wholly owned subsidiary of CEP Holdings, Inc.
As noted in Note 3, on January 13, 2017, Charah Management completed a transaction with Bernhard Capital Partners Management, LP (BCP), a previously unrelated third party, pursuant to which BCP acquired a
76%
equity position of Charah Management. Our historical financial and operating information as of and for the year ended December 31, 2017 may not be comparable to the historical financial and operating information as of and for the year ended December 31, 2016.
Allied Power Management, LLC, a Delaware limited liability company (“Allied”), was formed and became a wholly owned subsidiary of Allied Power Holdings, LLC, a Delaware limited liability company (“Allied Power Holdings”), in May 2017. In July 2017, Allied became a wholly owned subsidiary of Allied Power Sole Member, LLC, which itself is a wholly owned subsidiary of Allied Power Holdings. Allied Power Holdings has been under common control with Charah Management since April 2017.
Charah Solutions, Inc. and subsidiaries (“Charah Solutions,” the “Company,” “we,” “us,” or “our”) was formed as a Delaware corporation in January 2018 and did not conduct any material business operations prior to the transactions described below other than certain activities related to its initial public offering, which was completed on June 18, 2018 (the “IPO”). Charah Solutions is a holding company, the sole material assets of which consist of membership interests in Charah Management and Allied Power Holdings. Through the Company’s ownership of Charah Management and Allied Power Holdings, the Company owns the outstanding equity interests in Charah and Allied, the subsidiaries through which Charah Solutions operates its businesses. The historical financial data presented herein as of
December 31, 2018
and for periods after the June 18, 2018 corporate reorganization is that of Charah and Allied on a consolidated basis, and on a combined basis for periods prior to the June 18, 2018 corporate reorganization described below.
References to “Successor” relate to the financial position and results of operations of Charah Solutions on a consolidated and combined basis for the year ended December 31, 2018, Charah and Allied Power Management on a combined basis for the period including and after January 13, 2017, and references to “Predecessor” relate to the financial position and results of operations of Charah for the period through January 12, 2017.
Corporate Reorganization
On June 18, 2018, pursuant to the terms of the reorganization transactions completed in connection with the IPO, (i) (a) Charah Holdings LP, a Delaware limited partnership (“Charah Holdings”) owned by Bernhard Capital Partners Management, LP and certain related affiliates (“BCP”), contributed all of its interests in Charah Management and Allied Power Holdings to the Company in exchange for
17,514,745
shares of common stock, (b) CEP Holdings, Inc., a Delaware corporation owned by Charles E. Price and certain affiliates (“CEP Holdings”), contributed all of its interests in Charah Management and Allied Power Holdings to the Company in exchange for
4,605,465
shares of common stock, (c) Charah Management Holdings LLC, a Delaware limited liability company (“Charah Management Holdings”), contributed all of its interests in Charah Management and Allied Power Holdings to the Company in exchange for
907,113
shares of common stock, and (d) Allied Management Holdings, LLC, a Delaware limited liability company (“Allied Management Holdings”), contributed all of its interests in Charah Management and Allied Power Holdings to the Company in exchange for
409,075
shares of common stock, (ii) each of Charah Management Holdings and Allied Management Holdings distributed the shares of common stock received by them pursuant to clause (i) to their respective members in accordance with the respective terms of their limited liability company agreements and (iii) Charah Holdings distributed a portion of the shares of common stock it received in clause (i) above to certain direct and indirect blocker entities which ultimately merged into the Company, with the Company surviving, and affiliates of BCP received shares of common stock as consideration in the mergers.
Description of Business Operations
The Company provides mission-critical environmental and maintenance services to the power generation industry, enabling our customers to address challenges related to the remediation of ash ponds and landfills at open and closed power plant
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
sites while continuously operating and providing necessary electric power to communities nationwide. Services offered include a suite of coal ash management and recycling, environmental remediation, and outage maintenance services. The Company also designs and implements solutions for complex environmental projects (such as coal ash pond closures) and facilitates coal ash recycling through byproduct sales and other beneficial use services. The Company has corporate offices in Kentucky, North Carolina, and Louisiana, and principally operates in the eastern and mid-central United States.
The accompanying consolidated and combined financial statements include the assets, liabilities, stockholders’ equity, members’ equity, and results of operations of the Company and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.
Under the Jumpstart Our Business Startups Act (the “JOBS Act”), the Company meets the definition of an “emerging growth company,” which allows the Company to have an extended transition period for complying with new or revised accounting standards pursuant to Section 107(b) of the JOBS Act. The Company intends to take advantage of all of the reduced reporting requirements and exemptions, including the longer phase-in periods for the adoption of new or revised financial accounting standards under Section 107 of the JOBS Act until the Company is no longer an emerging growth company. 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 prior to 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 prior to the end of such five-year period.
Unaudited Pro Forma Income Information
The unaudited pro forma income information gives effect to the corporate reorganization that occurred in connection with the closing of the IPO and the resulting legal entity of Charah Solutions, which is incorporated as a “C” Corporation. Prior to the corporate reorganization, the holding companies for Charah and Allied were limited liability companies and generally not subject to income taxes. The pro forma net income, therefore, includes an adjustment for income tax expense as if the holding companies for Charah and Allied had been “C” Corporations for all periods presented at an assumed combined federal, state and local effective income tax rate of
38%
for the years ended
December 31, 2017
and December 31, 2016, and
25%
for the periods from January 1, 2018 through June 17, 2018, plus the actual tax expense for the period from June 18, 2018 through
December 31, 2018
, excluding the tax related to the corporate reorganization. These rates approximate the calculated statutory tax rate for each period. The tax rate in the preceding sentence for the years ended
December 31, 2017
and December 31, 2016 does not reflect the impact of U.S. tax reform, which reduces the federal U.S. statutory tax rate from
35%
to
21%
, effective in 2018. The tax rates mentioned for the year ended
December 31, 2018
reflect the impact of U.S. tax reform.
2. Summary of Significant Accounting Policies
Management’s Use of Estimates
The preparation of consolidated and combined financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions, in particular estimates of legal reserves and costs to complete contracts in process, that affect the reported amounts in the consolidated and combined financial statements and accompanying notes. Actual results could differ from those estimates.
Balance Sheet Classification
The Company includes in current assets and liabilities retainage amounts payable, costs and estimated earnings in excess of billings, and billings in excess of costs and estimated earnings, which may extend beyond one year. A one-year time period is used as the basis for classifying all other assets and liabilities.
Cash
The Company maintains cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash.
Restricted Cash
Charah was required to establish an escrow account for the post closure care costs related to the structural fill sites. The post closure care costs are also covered by financial guarantee and performance bonds. During the period from January 13, 2017
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
to December 31, 2017 (Successor), the requirement to maintain the escrow account was removed and the cash was returned to Charah.
Trade Accounts Receivable
Trade accounts receivable consist of amounts due from customers. An allowance for doubtful accounts is recorded to the extent it is probable that a portion of a particular account will not be collected. Management determines the allowance for doubtful accounts by evaluating individual customer receivables and considering a customer’s financial condition, credit history, and the current economic conditions. Management believes all trade accounts receivable at
December 31, 2018
(Successor) and December 31, 2017 (Successor) are fully collectible; therefore, the consolidated and combined financial statements do not include an allowance for doubtful accounts.
Trade accounts receivable balances are considered past due based upon contract or invoice terms and are charged off when deemed uncollectible. The Company does not charge interest on customer accounts and generally does not require collateral on sales and services during the normal course of business. The Company has the right to file liens on the owner’s property with regards to certain construction contracts.
Inventory
Inventories, mainly comprising of ash for resale, are valued using the first-in, first-out (“FIFO”) method. Inventories are stated at the lower of cost or net realizable value.
Property and Equipment
Property and equipment are stated at cost. Construction-in-progress represents costs incurred on the construction of assets that have not been completed or placed in service as of the end of the year. Depreciation and amortization is provided principally by the straight-line method over the estimated useful lives of the assets as follows:
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Plant, machinery and equipment
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2 - 15 years
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Vehicles
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2 - 10 years
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Office equipment
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2 - 10 years
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Buildings and leasehold improvements
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5 - 40 years
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Repair and maintenance costs are expensed as incurred and expenditures for improvements are capitalized.
Structural Fill Sites
Cost Basis of Structural Fill Sites, Associated Site Improvement Costs, and Related Asset Retirement Obligation (ARO)
Prior to the BCP transaction (see Note 3), the acquisition cost of the structural fill sites was capitalized. As a result of the BCP transaction, the fair value of the site improvements related to the structural fill sites was recognized. The site improvement costs relate to items such as directly related engineering, liner material and installation, leachate collection systems, environmental monitoring equipment, on-site road and rail construction, and other infrastructure costs. The structural fill sites are a part of the Company’s Environmental Solutions segment.
Following is a description of our asset retirement activities and our related accounting:
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•
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Final capping and closure involves the installation of drainage and compacted soil layers and topsoil over areas where total airspace capacity has been consumed. Asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed (see Note 22). The liability is based on estimates of the discounted cash flows.
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•
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Post closure involves the maintenance and monitoring of the structural fill sites. Generally, we are required to maintain and monitor the structural fill sites for a
30
-year period. These maintenance and monitoring costs are recorded as an asset retirement obligation as airspace is consumed over the life of the structural fill sites. Post-closure obligations are recorded over the life of the structural fill sites on a units-of-consumption basis as airspace is consumed (see Note 22), based on estimates of the discounted cash flows associated with performing post-closure activities.
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CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
We develop 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 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. In those instances where we perform the work with internal resources, the incremental profit margin realized will be recognized as a component of operating income when the work is completed.
Once we have determined the final capping, closure, and post-closure costs, we inflate those costs to the expected time of payment and discount those expected future costs back to present value. During the year ended December 31, 2018 (Successor), the period from January 13, 2017 through December 31, 2017 (Successor), and the period from January 1, 2017 through January 12, 2017 (Predecessor), we inflated these costs in current dollars until the expected time of payment using an inflation rate of
3.0%
. We discounted these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is 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. As a result, the credit-adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each individual asset retirement obligation. The weighted average rate applicable to our long-term asset retirement obligations at December 31, 2018 was approximately
5.25%
.
We record the estimated fair value of final capping, closure, and post-closure liabilities for our structural fill sites based on the capacity consumed through the current period. Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing of future final capping, closure, 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 inflation rates or the estimated costs, timing, or extent of future final capping, closure, and post-closure activities typically result in both (i) a current adjustment to the recorded liability and structural fill site asset, and (ii) a change in liability and asset amounts to be recorded prospectively over the remaining permitted airspace. Any changes related to the capitalized and future cost of the structural fill assets are then recognized in accordance with our amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining capacity of the permitted airspace. Changes in such estimates associated with airspace that has been fully utilized results in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace amortization expense.
Depreciation of Structural Fill Sites and Site Improvements
The depreciable basis of a structural fill site includes amounts previously expended and capitalized and projected asset retirement costs related to final capping, closure, and post-closure activities.
The value of the structural fill sites to the Company diminishes in direct correlation to the amount of airspace used for ash deposits. Depreciation is recorded on a units-of-consumption basis, applying expense as a rate per ton. The rate per ton is calculated by dividing the depreciable basis of the structural fill site by the number of tons expected to be placed into the structural fill sites. Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining permitted airspace at our structural fill sites. The remaining permitted airspace is determined by comparing the existing structural fill sites topography to the expected final structural fill sites topography.
Once the remaining permitted airspace is determined in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted capacity in tons. The AUF is established using the measured density obtained from previous surveys and is then adjusted to account for current and future expected compaction rates. The initial selection of the AUF is subject to a subsequent multi-level review by our engineering group, and the AUF used is reviewed on a periodic basis and revised as necessary.
After determining the costs and remaining permitted capacity at each of our structural fill sites, we determine the per ton rates that will be expensed as ash is received and deposited at the structural fill sites by dividing the costs by the corresponding number of tons. These rates per ton are updated annually, or more often, as significant facts change.
It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure, and post-closure activities, or our airspace utilization, could ultimately turn out to be significantly different from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove to be significantly different than actual results, lower
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
profitability may be experienced due to higher depreciation rates or higher expenses; or higher profitability may result if the opposite occurs. Most significantly, if it is determined that expansion capacity should no longer be considered in calculating the recoverability of a structural fill site asset, we may be required to recognize an asset impairment or to incur significantly higher depreciation expense.
Depreciation for the structural fill sites and site improvements for the year ended
December 31, 2018
(Successor), the period from January 13, 2017 through December 31, 2017 (Successor), the period from January 1, 2017 through January 12, 2017 (Predecessor), and the year ended December 31, 2016 (Predecessor) was
$33,956
,
$17,603
,
$90
, and
$2,182
, respectively.
The remaining capacity of the active structural fill site at December, 31, 2018 (Successor), December 31, 2017 (Successor), January 12, 2017 (Predecessor), and December 31, 2016 (Predecessor), was
5.0 million
tons (
41%
),
6.2 million
tons (
52%
),
9.2 million
tons (
77%
), and
9.3 million
tons (
78%
), respectively. The Company also owns an additional structural fill site with
8.0 million
tons (
100%
) of capacity. The Company anticipates commencing closure of both sites in 2019 prior to the capacity being fully utilized.
Equity Method Investment
In January 2016, Charah organized a joint venture with an unrelated third party. Charah has a
50%
interest in the joint venture, which is accounted for by the equity method.
Goodwill and Indefinite Lived Intangible Assets
Goodwill represents the excess purchase price over the estimated fair value of net assets acquired in a business combination. Our goodwill included in the consolidated and combined balance sheets as of December 31, 2018 (Successor) and 2017 (Successor) was
$74,213
and
$73,468
, respectively. Our intangible assets in the consolidated and combined balance sheets as of December 31, 2018 (Successor) and 2017 (Successor) include a
$34,330
trade name that is considered to have an indefinite life.
Goodwill and indefinite-lived intangible assets are not amortized, but instead are tested for impairment at least 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. Goodwill is tested at the reporting unit level. We may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value is greater than its carrying value. If a qualitative assessment is not performed, or if as a result of a qualitative assessment it is not more likely than not that the fair value exceeds its carrying value, then the fair value is compared to its carrying value. Fair value is typically estimated using an income approach based on discounted cash flows. However, when appropriate, we may also use a market approach. The income approach is based on the long-term projected future cash flows of the asset and reporting units. We discount the estimated cash flows to present value using a weighted average cost of capital that considers factors such as market assumptions, the timing of the cash flows, and the risks inherent in those cash flows. We believe that this approach is appropriate because it provides a fair value estimate based upon the reporting units’ expected long-term performance considering the economic and market conditions that generally affect our business. The market approach estimates fair value by measuring the aggregate market value of publicly traded companies with similar characteristics to our business as a multiple of their reported earnings. We then apply that multiple to the reporting units’ earnings to estimate their fair values. We believe that this approach may also be appropriate in certain circumstances because it provides a fair value estimate using valuation inputs from entities with operations and economic characteristics comparable to our reporting units. Fair value is computed using several factors, including projected future operating results, economic projections, anticipated future cash flows, comparable marketplace data, and the cost of capital. There are inherent uncertainties related to these factors and to our judgment in applying them in our analysis. However, we believe our methodology for estimating the fair value of our reporting units and the trade name is reasonable. If the carrying value exceeds its fair value, the asset is written down to its implied fair value.
We evaluate the indefinite-lived trade name each reporting period to determine whether events and circumstances continue to support an indefinite useful life.
During 2017, we performed our annual impairment tests as of October 31st and determined there was no impairment based upon a qualitative assessment. For the period from October 31, 2017 to December 31, 2017, there were no indicators of impairment.
During 2018, we changed the date of the annual impairment tests to October 1st. We performed a quantitative assessment and determined there was no impairment as of October 1, 2018. For the period from October 1, 2018 to December 31, 2018, there were no indicators of impairment. If actual future results are not consistent with our assumptions and estimates, we may be required to record impairment charges in the future.
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
Definite Lived Intangible Assets
As of
December 31, 2018
(Successor) and December 31, 2017 (Successor), definite lived intangible assets include customer relationships, technology, non-compete and other agreements, SCB trade name (Note 3), and a rail easement. These assets are amortized on a straight-line basis over their estimated useful lives as shown in the table below.
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Definite Lived Intangible
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Useful Life
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Customer relationships
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10 years
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Technology
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10 years
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Non-compete agreement
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2 years
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SCB trade name
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5 years
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Rail easement
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2 years
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Purchase Option Liability
In the BCP transaction (see Note 3), Charah recorded the fair value of a bargain purchase liability for an option held by a customer and a third party for the structural fill sites. The purchase option liability is calculated as the difference between the estimated fair value of the structural fill sites at the date the option will most likely be exercised, and the option price to be paid by the customer or third party. The purchase options are exercisable after completion of work at the structural fill sites. The bargain purchase option is amortized over the structural fill sites’ estimated useful lives. The following table reflects activity related to the bargain purchase liability:
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Fair value of liability recognized at January 13, 2017 (Successor)
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$
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29,883
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Amortization in the period from January 13, 2017 to December 31, 2017 (Successor)
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(4,639
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)
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Balance, December 31, 2017 (Successor)
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25,244
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Amortization in the year ended December 31, 2018 (Successor)
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(15,227
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)
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Balance, December 31, 2018 (Successor)
|
$
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10,017
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Fair Value Disclosure
Long-term debt bears interest at variable rates and book value approximates fair value, and is considered to be level 2 in the fair value hierarchy. The interest rate swap (within other liabilities at December 31, 2017 and within other assets at December 31, 2018) is considered to be level 2 in the fair value hierarchy. The Company did not have any recurring or non-recurring level 3 fair value measurements as of December 31, 2018 (Successor) or December 31, 2017 (Successor) other than the application of business combination accounting as described in Note 3 and the application of stock-based compensation accounting as described in Note 12. There have been no transfers between levels of the fair value hierarchy during the year ended December 31, 2018 (Successor), the period from January 13, 2017 through December 31, 2017 (Successor), or the period from January 1, 2017 through January 12, 2017 (Predecessor).
Revenue Recognition
Revenue from management contracts is recognized when the ash is hauled to the landfill, or the management services are provided. Revenue from the sales of ash is recognized when it is delivered to the customer. Certain contracts contain minimum quantity and quality standards that if not met will reduce the amount of revenue recognized. When applicable, revenue is recorded net of sales tax.
Revenue and Cost Recognition on Construction Contracts
During the year ended December 31, 2018 (Successor), the period from January 13, 2017 through December 31, 2017 (Successor), the period from January 1, 2017 through January 12, 2017 (Predecessor), and the year ended December 31, 2016 (Predecessor), we recognized approximately
34%
,
45%
,
51%
and
66%
, respectively, of our total revenues using the percentage-of-completion method. Accounting for these contracts involves management judgment in estimating total contract revenue and cost. Contract revenues are largely determined by negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders and price adjustment clauses (such as inflation or index-based clauses). Contract costs are incurred
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
over a period of time, which can be several years, and the estimation of these costs requires management judgment. Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends and other economic projections. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, and asset utilization. We have processes during which management reviews the progress and performance of our contracts. As part of this process, management reviews information including any outstanding key contract matters, progress toward completion and the related project timeline, and the related changes in estimates of revenues and costs. Anticipated losses on long-term contracts are recognized when such losses become evident. As of December 31, 2018 (Successor) and December 31, 2017 (Successor), accruals for anticipated losses on long-term contracts were
$677
and
$0
, respectively.
Revenue from contract claims is recognized when invoiced. Revenue from contract change orders is recognized when it is probable that the change order will be approved, the amount can be reasonably estimated, and the work has been completed.
The asset, “Costs and estimated earnings in excess of billings” represents revenue recognized in excess of amounts billed on uncompleted contracts. The liability, “Billings in excess of costs and estimated earnings” represents billings in excess of revenue recognized. As a result of the BCP transaction and the push down of fair values to Charah, the costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings amounts at January 13, 2017 were reduced to
$0
.
Freight Costs
Freight costs charged to customers are included in revenue. Costs incurred by the Company for freight are included in cost of sales.
Income Taxes
Charah Solutions is a “C” Corporation under the Internal Revenue Code of 1986, as amended (the “Code”), and, as a result, is subject to U.S. federal, state and local income taxes. In connection with the IPO, predecessor flow-through entities for income tax purposes were contributed to the Company by their owners and became indirect subsidiaries of the Company. Prior to the contribution to the Company and its conversion to a taxable corporation, the predecessor entities passed through their taxable income to their owners for U.S. federal, state, and local income tax purposes, and thus these entities were not subject to such income taxes, except for franchise tax at the state level (at less than 1% of modified pre-tax earnings). Accordingly, the financial data attributable to the predecessor entities prior to the contribution on June 18, 2018 contains no provision for U.S. federal income taxes or income taxes in any state or locality, other than franchise taxes.
As of June 18, 2018, the Company became subject to U.S. federal, state and local income taxes, and as a result of the conversion, and in accordance with Accounting Standards Codification (“ASC”) Topic 740,
Income Taxes
, the Company established a beginning net deferred tax liability of
$1.5 million
and recognized a corresponding amount of income tax expense.
Income taxes are accounted for in accordance with ASC Topic 740. Income tax expense, or benefit, is calculated using the asset and liability method under which deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
The Company assesses its deferred tax assets each quarter to determine whether the assets are more likely than not (probability of more than 50%) realizable under ASC Topic 740. The Company is required to record a valuation allowance for any portion of the tax assets that, based on the assessment, are not more likely than not realizable. The assessment considers, among other things, earnings in prior periods, forecasts of future taxable income, statutory carryforward periods, and tax planning strategies, to the extent feasible. The realization of deferred tax assets depends in large part on the generation of future taxable income during the periods in which the differences become deductible. The value of the deferred tax assets will also depend on applicable income tax rates. Judgment is required in determining the future tax consequences of events that have been recognized in the financial statements. Differences between anticipated and actual outcomes of these future tax consequences could have material impact on the financial statements. Changes in existing tax laws and tax rates also affect actual tax results and the valuation of deferred tax assets over time.
Business Segments
The Company operates in two business segments:
Environmental Solutions (ES)
. The Environmental Solutions segment includes remediation and compliance services, as well as byproduct sales. Remediation and compliance services are associated with customers’ need for multi-year environmental
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
improvement and sustainability initiatives, whether driven by proactive engagement by power generation customers, by regulatory requirements or by consumer expectations and standards. Byproduct sales support both power generation customers’ desire to profitably recycle recurring volumes of coal combustion residuals and ultimate end customers’ need for high-quality, cost-effective raw material substitutes.
Maintenance and Technical Services (M&TS).
The Maintenance and Technical Services segment includes fossil services and nuclear services. Fossil services are the recurring and mission-critical management of coal ash and the routine maintenance, outage services and staffing solutions for coal-fired power generation facilities. Nuclear services, which we market under the Allied Power brand name, include routine maintenance, outage services, facility maintenance, and staffing solutions for nuclear power generation facilities.
Stock/Share-Based Compensation Plans
Prior to December 31, 2016 (Predecessor), Charah had a Deferred Stock Plan (the “Plan”) for the benefit of certain key employees. Charah accounted for the Plan as a liability-classified plan. The Plan was terminated in December 2016, all units became 100% vested and were converted into shares of non-voting common stock.
In 2017, Charah Management and Allied Power Management each issued certain Series C member interests to employees. Additionally, certain employees of Allied Power Management were granted Series B member interests in both Charah Management and Allied Power Management.
The unvested Series C Profits Interests at June 18, 2018 were canceled as a result of the corporate reorganization that occurred upon the closing of the IPO. In connection with the corporate reorganization that occurred upon the closing of the IPO, the Series C Profits Interests were replaced by shares that are subject to time-based vesting conditions, as well as performance vesting conditions. The Company has issued further shares under the Charah Solutions, Inc. 2018 Omnibus Incentive Plan subject to time-based and performance vesting conditions.
The Company accounts for its stock/share-based compensation plans as equity-classified plans, in accordance with the fair value recognition provisions of ASC Topic 718, Compensation-Stock Compensation. The Company utilizes the Black-Scholes model, which requires the input of subjective assumptions. These assumptions include estimating (i) the volatility of the common stock price over the expected term, (ii) the expected term, and (iii) expected dividends. Where the vesting of the stock is also based upon performance measures, management determines the likelihood of meeting such measures. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amounts recognized on the consolidated and combined statements of operations.
Stock based compensation expense is recognized in general and administrative expenses.
Recently Adopted Accounting Pronouncements
In January 2017, the FASB issued ASU 2017-01,
Business Combinations (Topic 805): Clarifying the Definition of a Business
, which provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 requires entities to use a screen test to determine when an integrated set of assets and activities is not a business or if the integrated set of assets and activities needs to be further evaluated against the framework. The Company adopted the new standard effective January 1, 2018 on a prospective basis. The new standard did not have a material impact on our consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09,
Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting
, to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC Topic 718. The Company adopted the new standard effective January 1, 2018 on a prospective basis. The new standard did not have a material impact on our consolidated financial statements.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09,
Revenue from Contracts with Customers (Topic 606)
, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The core principle of ASC Topic 606 is to recognize revenues when a customer obtains control of a good or service, in an amount that reflects the consideration to which an entity is expected to be entitled for those goods or services. Additionally, the standard requires enhanced qualitative and quantitative disclosures regarding customer contracts. The standard will replace most existing revenue recognition guidance in GAAP when
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
it becomes effective and permits the use of either a full retrospective or modified retrospective with cumulative effect transition method.
To assess the impact of the standard, we utilized internal resources to lead the implementation effort and supplemented them with external resources. The Company’s adoption activities were performed over three phases: (i) assessment, (ii) design, and (iii) implementation using a cross-functional team that included accounting, operational and information technology personnel.
Based on our work to date, we believe we have identified all material contract types, revenues and costs that may be impacted by implementing ASC Topic 606. Generally, the Company believes the majority of its contracts will have similar performance obligations under ASC Topic 606 as compared with the units of account previously identified. We have identified certain contracts where the timing of revenue recognition will change under ASC Topic 606. Prior to the adoption of ASC Topic 606, revenue recorded for certain contracts with fluctuating rates per unit matched the amount that was billed to the customer. In accordance with the standard, for contracts with fluctuating rates per unit that are not directly related to changes in the Company’s effort to perform under the contract, the Company will recognize revenue based on the stand-alone selling price per unit, calculated as the average rate per unit over the term of those contractual rates. This will at times create a contract asset or liability for the difference between the revenue recognized and the amount billable/billed to the customer.
Effective January 1, 2019, we adopted the requirements of ASC Topic 606 to all contracts using the modified retrospective with cumulative effect transition method. Accordingly, we will recognize the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings for the year ended December 31, 2019. The comparative information will not be restated and will continue to be reported under the accounting standards in effect for the comparative periods. Based upon our current assessment of the impact from the adoption of ASC Topic 606, we estimate a decrease of approximately
$300
to the opening balance of retained earnings as of January 1, 2019, with an associated decrease in the contract asset balance “costs and estimated earnings in excess of billings.”
The Company is in the process of completing the necessary changes to our systems, processes and internal controls in order to meet the standard's revised reporting and disclosure requirements.
In February 2016, the FASB issued ASU 2016-02,
Leases (Topic 842)
, requiring all leases to be recognized on the balance sheet as a right-of-use asset and a lease liability, unless the lease is a short-term lease (generally a lease with a term of twelve months or less). At the commencement date of the lease, the Company will recognize: 1) a lease liability for Company’s obligation to make payments under the lease agreement, measured on a discounted basis; and 2) a right-of-use asset that represents the Company’s right to use, or control the use of, the specified asset for the lease term. The ASU originally required recognition and measurement of leases at the beginning of the earliest period presented using a modified retrospective transition method. In July 2018, the FASB issued ASU 2018-11, which provided an additional (and optional) transition method that permits application of the updated standard at the adoption date with recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The updated standard will be effective for the Company for the year ending December 31, 2020, with early adoption permitted. The Company has not yet selected a transition method and is currently evaluating the effect that the new standard will have on its consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15,
Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments
. This update addresses specific cash flow issues, including debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, and proceeds from the settlement of insurance claims. The guidance is effective for the Company for the year ending December 31, 2019. The Company is currently evaluating the effect that the new standard will have on its consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18,
Statement of Cash Flows (Topic 230)
. This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Upon adopting the ASU, amounts generally described as restricted cash and restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU 2016-18 will be effective for the Company for the year ending December 31, 2019, with early adoption permitted. The Company is currently evaluating the effect that the new standard will have on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04,
Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment
. The ASU simplifies the measurement of goodwill impairment by eliminating the requirement that an entity compute the implied fair value of goodwill based on the fair values of its assets and liabilities to measure impairment. Instead, goodwill impairment will be measured as the difference between the fair value of the reporting unit and the carrying value of the
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
reporting unit. The ASU also clarifies the treatment of the income tax effect of tax-deductible goodwill when measuring goodwill impairment loss. The Company will be required to adopt ASU 2017-04 as of January 1, 2020. ASU 2017-04 must be applied prospectively, with early adoption permitted. The Company is currently evaluating the effect that the new standard will have on its consolidated financial statements.
3. Business Combination
On January 13, 2017, Charah Management completed a transaction with BCP, a previously unrelated third party pursuant to which BCP acquired a
76%
equity position in Charah Management. The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805,
Business Combinations
. The purchase price was allocated to the assets acquired and liabilities assumed based on the estimated fair value at the date of acquisition, as summarized below.
By the application of “push-down” accounting, Charah’s assets and liabilities were accordingly adjusted to fair value.
|
|
|
|
|
Net working capital
|
$
|
26,704
|
|
Net operating assets/liabilities
|
9,679
|
|
Property, plant and equipment
|
107,876
|
|
Rail easement
|
110
|
|
Purchase option liability
|
(29,883
|
)
|
Trade name intangible assets
|
34,330
|
|
Customer relationship intangible assets
|
78,200
|
|
Goodwill
|
73,468
|
|
Total purchase price
|
$
|
300,484
|
|
On March 30, 2018, Charah Management completed a transaction with SCB Materials International, Inc. and affiliated entities (“SCB”), a previously unrelated third party, pursuant to which Charah acquired certain assets and liabilities of SCB for a purchase price of
$35,000
, with
$20,000
paid at closing and
$15,000
to be paid over time in conjunction with certain performance metrics. The contract also contained various mechanisms for a working capital true-up. The acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805,
Business Combinations
. As of
December 31, 2018
(Successor), the allocation of purchase price for the acquisition is preliminary (as summarized below); fair value estimates of identifiable assets acquired and liabilities assumed are based on management’s estimates, judgments and assumptions and are subject to change until finalized. Goodwill, if any, will be allocated to the Environmental Solutions segment. The total amount of goodwill that is expected to be deductible for tax purposes is
$2,025
.
In November 2018, the
$15,000
to be paid over time was reduced by
$3,300
. The present value of the future payments, using a discount rate of
2.50%
was determined to be
$11,014
. The Company expects the future payments to occur in 2020 and beyond. The allocation of purchase price for the acquisition has been reflected in the table below.
|
|
|
|
|
Cash acquired
|
$
|
17
|
|
Net working capital, excluding cash
|
21,255
|
|
Property, plant and equipment
|
5,300
|
|
Trade name intangible assets
|
694
|
|
Customer relationship intangible assets
|
742
|
|
Technology
|
1,972
|
|
Non-compete and other agreements
|
289
|
|
Goodwill
|
745
|
|
Total purchase price
|
$
|
31,014
|
|
From the date of acquisition, revenue and earnings from the acquired business of
$45,828
and
$1,609
, respectively, were included in the consolidated statement of operations for the year ended
December 31, 2018
(Successor).
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
The following unaudited information presents the pro forma consolidated revenue and net income for the periods indicated as if the acquisition had been included in the consolidated results of operations beginning January 1, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
Predecessor
|
|
For the year ended December 31, 2018
|
|
Period from January 13, 2017 through December 31, 2017
|
|
Period from
January 1,
2017 through
January 12,
2017
|
Pro forma revenue
|
$
|
757,285
|
|
|
$
|
496,687
|
|
|
$
|
11,158
|
|
Pro forma net (loss) income attributable to Charah Solutions, Inc.
|
$
|
(7,972
|
)
|
|
$
|
18,877
|
|
|
$
|
(5,447
|
)
|
The above unaudited pro forma results have been calculated by combining the historical results of the Company and the acquired business as if the acquisition had occurred as of the beginning of the fiscal year prior to the acquisition date, and then adjusting the income tax provisions as if they had been calculated on the resulting consolidated and combined results. The pro forma results include estimates for additional depreciation related to the fair value of property, plant and equipment and intangible asset amortization.
The pro forma results reflect elimination of
$682
of direct acquisition costs that were incurred in the year ended
December 31, 2018
(since for purposes of the pro forma presentation they have been reflected in 2017 instead of in 2018). For all periods presented, historical depreciation and amortization expense of the acquired business was adjusted to reflect the acquisition date fair value amounts of the related tangible and intangible assets. No other material pro forma adjustments were deemed necessary, either to conform the acquisition to the Company’s accounting policies or for any other situation. The pro forma information is not necessarily indicative of the results that would have been achieved had the transactions occurred on the date indicated or that may be achieved in the future.
4. Equity Method Investments
The Company has an investment in a company that provides ash management and remarketing services to the electric utility industry. The Company accounts for its investment under the equity method of accounting because we have significant influence over the financial and operating policies of the company. The Company had a receivable due from the equity method investment of
$108
and
$61
at
December 31, 2018
(Successor) and December 31, 2017 (Successor), respectively.
Summarized balance sheet information of our equity method investment entity as of:
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
December 31,
2017
|
Current assets
|
$
|
2,619
|
|
|
$
|
1,946
|
|
Noncurrent assets
|
508
|
|
|
764
|
|
Total assets
|
$
|
3,127
|
|
|
$
|
2,710
|
|
Current liabilities
|
607
|
|
|
298
|
|
Equity of Charah
|
5,060
|
|
|
5,006
|
|
Equity of joint venture partner
|
(2,540
|
)
|
|
(2,594
|
)
|
Total liabilities and members’ equity
|
$
|
3,127
|
|
|
$
|
2,710
|
|
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
Summarized financial performance of our equity method investment entity is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
For the year ended December 31, 2018
|
|
Period from January 13, 2017 through December 31, 2017
|
|
|
Period from
January 1
2017, through
January 12,
2017
|
|
For the year ended December 31, 2016
|
Operating Data
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
11,076
|
|
|
$
|
7,573
|
|
|
|
$
|
300
|
|
|
$
|
11,384
|
|
Net income
|
$
|
4,813
|
|
|
$
|
1,632
|
|
|
|
$
|
96
|
|
|
$
|
5,405
|
|
The Company’s share of net income
|
$
|
2,407
|
|
|
$
|
816
|
|
|
|
$
|
48
|
|
|
$
|
2,703
|
|
The following table reflects our proportional ownership activity in our investment account:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
For the year ended December 31, 2018
|
|
Period from January 13, 2017 through December 31, 2017
|
|
|
Period from
January 1
2017, through
January 12,
2017
|
|
For the year ended December 31, 2016
|
|
|
|
Opening balance
|
$
|
5,006
|
|
|
$
|
5,289
|
|
|
|
$
|
5,241
|
|
|
$
|
—
|
|
Contributions
|
—
|
|
|
—
|
|
|
|
—
|
|
|
3,378
|
|
Distributions
|
(2,353
|
)
|
|
(1,099
|
)
|
|
|
—
|
|
|
(840
|
)
|
Share of net income
|
2,407
|
|
|
816
|
|
|
|
48
|
|
|
2,703
|
|
Closing balance
|
$
|
5,060
|
|
|
$
|
5,006
|
|
|
|
$
|
5,289
|
|
|
$
|
5,241
|
|
5. Receivable from Affiliates and Related Party Transactions
The Company rents their corporate office, housing at work sites and a condo from Price Real Estate, LLC (“Price Real Estate”), an entity owned by a stockholder of the Company. The lease for the corporate office is a triple net lease through May 31, 2020, requiring monthly payments of
$37
as of December 31, 2018, increasing by the consumer price index each year on June 1. Other property is rented on a month-to-month basis. Rental expense of
$459
,
$438
,
$15
and
$638
was incurred during the year ended December 31, 2018 (Successor), for the period from January 13, 2017 through December 31, 2017 (Successor), for the period from January 1, 2017 through January 12, 2017 (Predecessor), and for the year ended December 31, 2016 (Predecessor), respectively. The Company had a receivable due from Price Real Estate of
$0
and
$0
at December 31, 2018 (Successor) and December 31, 2017 (Successor), respectively. The Company had a payable due to Price Real Estate of
$0
and
$0
at December 31, 2018 (Successor) and December 31, 2017 (Successor), respectively.
PriceFlight, LLC (“PriceFlight”), an entity owned by a stockholder of the Company, provides flight services to the Company. Expenses to PriceFlight for flight services amounted to
$1,208
,
$685
,
$21
, and
$708
during the year ended December 31, 2018 (Successor), for the period from January 13, 2017 through December 31, 2017 (Successor), for the period from January 1, 2017 through January 12, 2017 (Predecessor), and for the year ended December 31, 2016 (Predecessor), respectively. The Company had a receivable due from PriceFlight of
$0
and
$0
at December 31, 2018 (Successor) and December 31, 2017 (Successor), respectively. The Company had a payable due to PriceFlight of
$77
and
$3
at December 31, 2018 (Successor) and December 31, 2017 (Successor), respectively.
Management determined that Price Real Estate and PriceFlight are variable interest entities. The Company has variable interests in them through the common ownership and contractual agreements discussed above. The Company is not considered to be the primary beneficiary. Management considers the likelihood to be remote that the Company will be required to make future funds available to Price Real Estate and PriceFlight. However, were the Company required to make funds available the maximum exposure to the Company would be any excess of the debt obligations of Price Real Estate and PriceFlight over the fair value of their respective assets.
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
Brown & Root Industrial Services, LLC (“B&R”), an entity
50%
owned by BCP, our majority stockholder, provides subcontracted construction services at one of our remediation and compliance service sites. Expenses to B&R for these services amounted to
$19,401
,
$98
,
$0
, and
$0
during the year ended December 31, 2018 (Successor), for the period from January 13, 2017 through December 31, 2017 (Successor), for the period from January 1, 2017 through January 12, 2017 (Predecessor), and for the year ended December 31, 2016 (Predecessor), respectively. The Company had no receivables outstanding from B&R at December 31, 2018 (Successor) and December 31, 2017 (Successor). The Company had payables due to B&R of
$4,919
and
$98
at December 31, 2018 (Successor) and December 31, 2017 (Successor), respectively.
6. Goodwill and Intangible Assets
The Company’s intangible assets consist of the following as of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
Definite-lived intangibles
|
|
|
|
|
|
|
|
|
Customer relationships
|
$
|
78,942
|
|
|
$
|
(15,044
|
)
|
|
$
|
78,200
|
|
|
$
|
(7,168
|
)
|
Rail easement
|
110
|
|
|
(88
|
)
|
|
110
|
|
|
(23
|
)
|
Technology
|
2,003
|
|
|
(150
|
)
|
|
—
|
|
|
—
|
|
Non-compete and other agreements
|
289
|
|
|
(109
|
)
|
|
—
|
|
|
—
|
|
SCB trade name
|
694
|
|
|
(104
|
)
|
|
—
|
|
|
—
|
|
Total
|
$
|
82,038
|
|
|
$
|
(15,495
|
)
|
|
$
|
78,310
|
|
|
$
|
(7,191
|
)
|
|
|
|
|
|
|
|
|
Indefinite-lived intangibles
|
|
|
|
|
|
|
|
|
Charah trade name
|
$
|
34,330
|
|
|
|
|
$
|
34,330
|
|
|
|
Goodwill
|
74,213
|
|
|
|
|
73,468
|
|
|
|
Total
|
$
|
108,543
|
|
|
|
|
|
$
|
107,798
|
|
|
|
Amortization expense was
$8,304
,
$7,191
,
$0
, and
$1
for the year ended
December 31, 2018
(Successor), the period from January 13, 2017 through
December 31, 2017
(Successor), the period from January 1, 2017 through January 12, 2017 (Predecessor), and the year ended December 31, 2016 (Predecessor) respectively.
As of December 31, 2018, total estimated amortization expense of the Company’s definite-lived intangible assets for each of the next five years and thereafter is as follows:
|
|
|
|
|
For the Year Ending December 31,
|
|
2019
|
$
|
8,399
|
|
2020
|
8,269
|
|
2021
|
8,233
|
|
2022
|
8,233
|
|
2023
|
8,129
|
|
Thereafter
|
25,280
|
|
Total
|
$
|
66,543
|
|
7. Credit Agreement
In January 2017, Charah entered into a
$110,000
revolving credit facility (the “Charah Revolving Credit Facility”) with a bank with a maturity date of January 13, 2022. The agreement also provided for additional borrowings starting at
$38,000
that reduced to
$0
as of December 31, 2017. Interest was calculated using the LIBOR rate plus the Applicable Rate (as defined in the Charah Revolving Credit Facility). The Applicable Rate was based upon the consolidated leverage ratio and ranged from
1.75%
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
to
3.50%
. If certain stipulated criteria were met, the outstanding principal and accrued interest on the credit facility could be prepaid without penalty. The debt was repaid in full in October 2017.
In January 2017, Charah also entered into a
$13,000
equipment line scheduled to term out every
six
months or once the maximum borrowings had been reached. The debt was repaid in full in October 2017.
In August 2017, Allied entered into a
$20,000
revolving credit facility (the “Allied Revolving Credit Facility”) with a bank, with its immediate parent company, its subsidiaries, and Charah serving as guarantors. Availability under the Allied Revolving Credit Facility was limited to a borrowing base. Interest was calculated using the LIBOR rate plus the Applicable Margin (as defined in the Allied Revolving Credit Facility). Based on the consolidated leverage ratio, the Applicable Rate (as defined in the Allied Revolving Credit Facility) ranged from
1.50%
to
3.00%
. The agreement was set to mature on August 17, 2019. A total of
$6,000
was borrowed against the revolving credit facility in September 2017. The debt was repaid in full in October 2017.
In October 2017, Charah entered into a credit agreement with a bank providing for a revolving credit facility (the “Credit Facility”) with a principal amount of up to
$45,000
. The interest rates per annum applicable to the loans under the Credit Facility were based on a fluctuating rate of interest measured by reference to, at the Company’s election, either (i) an adjusted LIBOR plus a
2.00%
borrowing margin, or (ii) an alternative base rate plus a
1.00%
borrowing margin. Customary fees were payable in respect of the Credit Facility and included (i) commitment fees in an annual amount equal to
0.50%
of the daily unused portions of the Credit Facility, and (ii) a
2.00%
fee on outstanding letters of credit. The Credit Facility had a maturity date of October 25, 2022. There were
no
amounts drawn on the Credit Facility as of
December 31, 2017
. The Credit Facility was terminated in September 2018 and all amounts outstanding thereunder were repaid.
In September 2018, the Company entered into a new syndicated credit agreement (the “Syndicated Credit Facility”) that includes a revolving loan not to exceed
$50,000
, a term loan of
$205,000
(see also Note 8), and a commitment to loan up to
$25,000
that expires in March 2020. All amounts loaned under the Syndicated Credit Facility mature in September 2023. The interest rates per annum applicable to the loans under the Syndicated Credit Facility are based on a fluctuating rate of interest measured by reference to, at the Company’s election, either (i) the Eurodollar rate, currently the LIBOR rate, or (ii) an alternative base rate. Various margins are added to the interest rate selected by the Company based upon the Company’s consolidated net leverage ratio. Customary fees are payable in respect of the Syndicated Credit Facility and include (i) commitment fees (
0.25%
to
0.35%
) for unused portions of the Syndicated Credit Facility, and (ii) fees on outstanding letters of credit (
1.30%
to
2.10%
). The loans are secured by essentially all assets of the Company. The loans are subject to certain financial covenants.
The revolving loan provides a principal amount of up to
$50,000
, reduced by outstanding letters of credit (
$12,531
outstanding as of
December 31, 2018
). As of
December 31, 2018
(Successor),
$19,799
was outstanding on the revolving loan.
8. Notes Payable
The following table summarizes the major components of debt at each balance sheet date and provides maturities and interest rate ranges for each major category as of
December 31, 2018
(Successor) and December 31, 2017 (Successor):
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
December 31, 2017
|
Various equipment notes entered into in November 2017, payable in monthly installments ranging from $5 to $24, including interest at 5.2%, maturing in December 2022 through December 2023. The notes are secured by equipment with a net book value of $4,464 as of December 31, 2018 (Successor).
|
$
|
4,949
|
|
|
$
|
5,910
|
|
Various equipment notes entered into in 2018, payable in monthly installments ranging from $1 to $39, including interest ranging from 5.61% to 6.80%, maturing in March 2023 through May 2025. The notes are secured by equipment with a net book value of $11,791 as of December 31, 2018 (Successor).
|
12,293
|
|
|
—
|
|
In June 2018, the Company entered into a $12,000 non-revolving credit note with a bank. The credit note will convert to a term loan on April 10, 2019, with a maturity date of April 10, 2024. Interest on borrowings prior to the conversion date is calculated using a floating rate equal to 2% in excess of LIBOR. At the conversion date, interest can be either calculated based on the aforementioned rate or at a fixed rate equal to 2% in excess of the 5-year Swap Rate in effect at the conversion date, based on the Company’s preference. The note is secured by equipment with a net book value of $8,038 as of December 31, 2018 (Successor).
|
8,299
|
|
|
—
|
|
A $10,000 equipment line with a bank, entered into in December 2017, secured by all equipment purchased with the proceeds of the loan. Interest is calculated on any outstanding amounts using a fixed rate of 4.5%. The equipment line converted to a term loan in September 2018, with a maturity date of June 22, 2023. The term loan is secured by equipment with a net book value of $8,445 as of December 31, 2018 (Successor).
|
9,563
|
|
|
3,244
|
|
A credit agreement with a bank, entered into in October 2017, providing for a senior secured term loan B facility with an initial commitment of $250,000 (the “Term Loan”). The interest rates per annum applicable to the loans under the Term Loan were based on a fluctuating rate of interest measured by reference to, at the Company’s election, either (i) LIBOR plus a 6.25% borrowing margin, or (ii) an alternative base rate plus a 5.25% borrowing margin. The principal amount of the Term Loan amortized at a rate of 7.5% per annum with all remaining outstanding amounts under the Term Loan due on the Term Loan maturity date. A portion of the IPO proceeds was used to prepay scheduled principal payments which would otherwise have been required through June 2020. The Term Loan had a scheduled maturity date of October 25, 2024. The Term Loan was secured by substantially all the assets of the Company and was subject to certain financial covenants. The loan was repaid in full in September 2018.
|
—
|
|
|
250,000
|
|
A term loan entered into in September 2018 as part of the Syndicated Credit Facility (see also Note 7). The interest rate applicable to the term loan is based on a fluctuating rate of interest measured by reference to, at the Company’s election, either (i) the Eurodollar rate, currently the LIBOR rate, or (ii) an alternative base rate (see also Note 7). Principal payments of $2,563 are required quarterly through September 2020, $3,844 through September 2022, and $5,125 through September 2023. The remaining outstanding amounts will be due in September 2023. The term loan is secured by substantially all the assets of the Company and is subject to certain financial covenants.
|
202,438
|
|
|
—
|
|
Total
|
237,542
|
|
|
259,154
|
|
Less debt issuance costs
|
(3,252
|
)
|
|
(11,460
|
)
|
|
234,290
|
|
|
247,694
|
|
Less current maturities
|
(23,268
|
)
|
|
(19,996
|
)
|
Notes payable due after one year
|
$
|
211,022
|
|
|
$
|
227,698
|
|
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
Included in interest expense, net in the consolidated statements of operations for the year ended December 31, 2018 (Successor) was
$12.5 million
of costs incurred in conjunction with the refinance of our term loan, consisting of a
$10.4 million
non-cash write-off of debt issuance costs and a
$2.1 million
prepayment penalty.
In January 2017, Charah entered into a
$14,000
term note, payable to a bank in quarterly principal payments of
$811
through July 2021 at which point all outstanding principal, accrued interest, and fees would have been due. Interest was calculated using the LIBOR rate plus the Applicable Rate. This note was repaid in full in October 2017.
In January 2017, Charah entered into a
$42,000
equipment loan split into
eight
notes with payoff terms between
24
and
60
months.
Seven
having an interest rate of
5.25%
and
one
having an interest rate of
4.83%
. The notes were repaid in full in October 2017.
Future maturities of notes payable at December 31 are as follows:
|
|
|
|
|
For the Year Ending December 31,
|
|
2019
|
$
|
23,268
|
|
2020
|
16,508
|
|
2021
|
20,626
|
|
2022
|
22,195
|
|
2023
|
152,914
|
|
Thereafter
|
2,031
|
|
Total
|
$
|
237,542
|
|
9. Interest Rate Swap
In order to manage interest rate risk in a cost-efficient manner, the Company entered into an interest rate swap in December 2017 whereby the Company agreed to exchange with the counterparty, at specified intervals, the difference between fixed and variable interest amounts calculated by reference to a notional amount. The interest rate swap is not designated for hedge accounting. The change in fair value of the interest rate swap is immediately recognized in earnings, within interest expense, net.
As of both
December 31, 2018
(Successor) and
December 31, 2017
(Successor), the notional amount of the interest rate swap was
$150,000
. A fair value asset of
$891
was recorded in the consolidated balance sheet within other assets as of
December 31, 2018
(Successor) and a fair value liability of
$198
was recorded in the combined balance sheet within other liabilities as of
December 31, 2017
(Successor). The total amount of gain subtracted from interest expense, net for the year ended December 31, 2018 (Successor) was
$1,089
. The total amount of loss added to interest expense, net for the period from January 13, 2017 through December 31, 2017 was
$198
. There was no impact in the period from January 1, 2017 through January 12, 2017 (Predecessor) or the year ended December 31, 2016 (Predecessor).
10. Costs and Estimated Earnings on Uncompleted Contracts
Costs and estimated earnings on uncompleted contracts as of:
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
December 31,
2017
|
Costs incurred on uncompleted contracts
|
$
|
314,700
|
|
|
$
|
151,963
|
|
Estimated earnings
|
96,176
|
|
|
53,356
|
|
Total costs and earnings
|
410,876
|
|
|
205,319
|
|
Less billings to date
|
(325,518
|
)
|
|
(213,242
|
)
|
Costs and estimated earnings in excess of billings
|
$
|
85,358
|
|
|
$
|
(7,923
|
)
|
The net balance in process is classified on the consolidated and combined balance sheets as of:
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
|
|
|
|
|
|
|
|
|
|
December 31,
2018
|
|
December 31,
2017
|
Costs and estimated earnings in excess of billings
|
$
|
86,710
|
|
|
$
|
7,959
|
|
Billings in excess of costs and estimated earnings
|
(1,352
|
)
|
|
(15,882
|
)
|
Net balance in process
|
$
|
85,358
|
|
|
$
|
(7,923
|
)
|
The increase in costs and estimated earnings in excess of billings in 2018 was primarily attributable to the early completion of the significant Brickhaven ash remediation contract, which accelerated revenues and expenses related to this contract into 2018.
11. Distributions to Stockholders and Members
Prior to the Company’s June 18, 2018 corporate reorganization, the Company made certain distributions to stockholders and members to cover their tax liabilities. During the year ended
December 31, 2018
(Successor), the period from January 13, 2017 through
December 31, 2017
(Successor), the period from January 1, 2017 through January 12, 2017 (Predecessor), and the year ended December 31, 2016 (Predecessor), the Company made distributions of
$686
,
$136,085
,
$20,660
, and
$25
, respectively, a portion of which was used to pay for income taxes.
12. Stock/Unit-Based Compensation
Effective January 1, 2009, Charah established the Plan, whereby certain key employees were issued units that settle in shares of non-voting common stock upon the occurrence of certain specified events. Units issued under the Plan were classified as liabilities, due to a call option which allowed Charah to repurchase the non-voting common stock immediately after settlement of the units for an amount other than the fair value of the non-voting common stock. Compensation cost was recognized for issued units based upon the fair value of the units at the end of each reporting period and the percentage of requisite service rendered by the employees holding the units.
The Plan was terminated in December 2016 and all units became
100%
vested and were converted into shares of non-voting common stock that did not continue past the date of the investment by BCP on January 13, 2017.
Units of the Plan had a value based on the value of one share of Charah’s non-voting common stock. Participant units vested at the rate of
20%
per year of service, and become fully vested and non-forfeitable after the completion of
five
years of service from the issuance of the units. Benefits under the Plan were settled in shares of non-voting common stock, based upon the ratio of
one
unit’s value to the value of one share of non-voting common stock as of the date of issuance of the unit. Participants were required to enter into a shareholder agreement which restricted the transfer of units and non-voting common stock issued under the Plan.
For the year ended December 31, 2016 (Predecessor), the Company recognized compensation cost of
$7,352
, which was recognized as general and administrative expenses in the combined statement of income.
At inception of the Plan,
62,500
units were authorized. During 2016, Charah issued
9,840
units. In December 2016, all units became
100%
vested. The
52,515
units issued and vested were converted into
49,860
shares of non-voting common stock based on the ratio described above. The
49,860
shares of non-voting common stock were valued at
$34,554
, based on the purchase price associated with the transaction with BCP in January 2017 (See Note 3), of which in 2016 Charah paid
$15,666
, and the remaining
$18,888
was recorded as a current liability at December 31, 2016 (Predecessor). Charah paid the remaining
$18,888
in January 2017.
The Limited Liability Company Agreement for Charah Management provided for the issuance of up to
1,000
Series C profits interests (the “Charah Series C Profits Interests”). In 2017, Charah Management adopted the Charah Series C Profits Interest Plan and issued
650
of such units to employees. The Charah Series C Profits Interests participated in distributions to Charah members based on specified rates of return being realized to the Charah Series A and Charah Series B membership interests. The Charah Series C Profits Interest Plan is no longer in place following our corporate reorganization and the IPO. The Charah Series C Profits Interests would have vested ratably in each of the first
five
anniversaries of their grant date with vesting accelerated upon a change of control. There were
540
Charah Series C Profits Interests unvested at June 18, 2018, which were canceled as a result of the corporate reorganization that occurred upon the closing of the IPO (see further discussion below). The Charah Series C Profits Interests were valued based upon a contingent claims analysis to allocate the total implied equity value as of the valuation date amongst the various equity securities classes, with breakpoints estimated considering relative seniority, liquidation preferences, and conversion features. An assumed volatility of
30%
based upon a comparable public company analysis was used in the
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
determination of fair value. The weighted–average grant date fair value of the Charah Series C Profits Interests granted during 2017 was
$3,198
per unit, resulting in
$2,100
of total compensation costs, which was expected to vest over
five
years.
During the year ended
December 31, 2018
(Successor), the period from January 13, 2017 through
December 31, 2017
(Successor), and the period from January 1, 2017 through January 12, 2017 (Predecessor), compensation expense of
$214
,
$311
, and
$0
, respectively, was recognized related to the Charah Series C Profits Interests.
The Limited Liability Company Agreement for Allied provided for the issuance of up to
1,000
Allied Series C profits interests (the “Allied Series C Profits Interests”). In 2017, Allied adopted the Allied Series C Profits Interest Plan and issued
550
of such units to employees. The Allied Series C Profits Interest Plan is no longer in place following our corporate reorganization and the IPO. The Allied Series C Profits Interests participated in distributions to Allied members based upon specified rates of return being realized to the Allied Series A and Allied Series B membership interests. The Allied Series C Profits Interests vested immediately upon grant. The Allied Series C Profits Interests were valued based upon a contingent claims analysis to allocate the total implied equity value as of the valuation date amongst the various equity securities classes, with breakpoints estimated considering relative seniority, liquidation preferences, and conversion features. An assumed volatility of
32.5%
based upon a comparable public company analysis was used in the determination of fair value. The weighted average grant date fair value of the Allied Series C Profits Interests granted during 2017 was
$69
per unit. During the year ended December 31, 2018 (Successor), the period from January 13, 2017 through December 31, 2017 (Successor), and the period from January 1, 2017 through January 12, 2017 (Predecessor), compensation expense of
$0
,
$38
, and
$0
, respectively, was recognized related to the Allied Series C Profits Interests.
In conjunction with the funding of the investment in Allied Power Holdings in July 2017, select individuals, including members of the management team at Allied, were given the opportunity to invest in, via an aggregator entity, Allied Management Holdings, alongside, and on the same basis as, the existing investment group. In exchange for their investment, common equity interests (Series B) in both Allied Power Holdings and Charah Management were issued. For those members of management,
1.9 million
Charah Management LLC Series B Membership Interests and
0.1 million
Allied Power Management LLC Series B Membership Interests were granted as a deemed contribution and a portion was invested via a cash contribution. All rights under these membership interests were fully vested at the time of the grant. There was
$2,080
of compensation expense recorded in the period from January 13, 2017 through December 31, 2017 (Successor) related to these Series B membership interest grants.
No
compensation expense was recognized during the year ended
December 31, 2018
(Successor) and the period from January 1, 2017 through January 12, 2017 (Predecessor).
In connection with the corporate reorganization that occurred upon the closing of the IPO, the holders of Charah Series C Profits Interests and Allied Series C Profits Interests received
1,215,956
shares of common stock (the “Management Reorganization Consideration”) in exchange for the contribution to the Company of their Charah Series C Profits Interests and Allied Series C Profits Interests. Of these shares,
303,993
vested immediately and
911,963
shares are subject to time-based vesting conditions, as well as performance vesting conditions, based on specified EBITDA targets and achievement of certain safety metrics, which will be determined at future dates. In addition,
272,708
shares of common stock were issued under the Charah Solutions, Inc. 2018 Omnibus Incentive Plan (see further discussion below). Of these shares,
68,176
shares vested immediately and
204,532
shares are subject to the same time-based vesting conditions and performance vesting conditions as the shares issued in accordance with the Management Reorganization Consideration. The fair value of the awards was calculated initially as
$12
per share, and will be updated thereafter for changes at each reporting period until the performance targets are approved by the Company’s board of directors. The fair value of the awards is recognized over the required service period for each grant. As of December 31, 2018 (Successor), none of the shares subject to time-based and performance vesting conditions were vested.
Upon the closing of the IPO, the board of directors of 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 stockholders. The Company has reserved
3,006,582
shares of common stock for issuance under the 2018 Plan, and all future equity awards described above will be issued pursuant to the 2018 Plan. In June 2018, the Company issued
44,198
shares under the 2018 Plan that vest after
one
year. The fair value of the awards was calculated as
$12
per share, which will be recognized over the one-year vesting period. In August 2018, the Company issued
45,004
shares under the 2018 Plan that vest after one year. The fair value of the awards was calculated as
$7.67
per share, which will be recognized over the
one
-year vesting period. As of December 31, 2018 (Successor), none of the shares were vested.
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
Restricted stock awards for the year ended December 31, 2018 (Successor):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted Average Grant Date Fair Value
|
|
Weighted Average Remaining Contractual Terms (Years)
|
|
Aggregate Intrinsic Value
|
Granted to replace Charah and Allied Series C Profits Interests
|
|
1,215,996
|
|
|
$
|
12.00
|
|
|
|
|
|
Granted
|
|
361,910
|
|
|
11.46
|
|
|
|
|
|
Forfeited
|
|
(6,994
|
)
|
|
12.00
|
|
|
|
|
|
Vested
|
|
(372,169
|
)
|
|
12.00
|
|
|
|
|
|
Outstanding as of December 31, 2018
|
|
1,198,743
|
|
|
$
|
11.84
|
|
|
0.77
|
|
$
|
10,009
|
|
During the year ended
December 31, 2018
(Successor),
$3,913
of compensation expense was recognized related to the shares issued in accordance with the Management Reorganization Consideration and the 2018 Plan. As of
December 31, 2018
(Successor), total unrecognized stock-based compensation expense related to non-vested awards, net of estimated forfeitures, was approximately
$1,840
, and is expected to be recognized over a weighted average period of approximately
1.36
years. The total fair value of awards vested was
$4,466
for the year ended December 31, 2018 (Successor).
13. Defined Contribution Retirement Plan
Charah and Ash Management Services (“AMS”) provide a defined contribution employee benefit plan (the “Charah and AMS 401(k) Plan”) qualified under Section 401(k) of the Code to employees who have completed 90 days of service and have attained age 18. Participants may contribute up to the lesser of 90% of eligible compensation or the maximum allowed under the Code. Charah and AMS make safe harbor contributions to participant accounts equal to 3% of the participant’s annual compensation, commencing the quarter after the employee completes one year of service. Charah and AMS may also make discretionary contributions, and the contributions may vary from year to year, for employees who have met one year of employment. Participants are immediately vested in their elective contributions and safe harbor contributions. Participants are vested in discretionary contributions after completing six years of service. During the year ended
December 31, 2018
(Successor), the period from January 13, 2017 through December 31, 2017 (Successor), the period from January 1, 2017 through January 12, 2017 (Predecessor), and the year ended December 31, 2016 (Predecessor), Charah and AMS contributed
$932
,
$861
,
$29
, and
$759
, respectively to the Charah and AMS 401(k) Plan.
Allied provides a defined contribution employee benefit plan (the “Allied 401(k) Plan”) qualified under Section 401(k) of the Code to employees who have completed one year of eligibility service and have attained age 21, commencing the quarter following the anniversary of one year of eligibility service. Participants may contribute up to the lesser of 100% of eligible compensation or the maximum allowed under the Code. Allied makes safe harbor contributions to participant accounts equal to (i) 100% of the employee contributions that are not in excess of 3% of employee compensation, plus (ii) 50% of the amount of the employee contributions that exceed 3% of employee compensation but that do not exceed 5% of employee compensation, commencing with an employee’s eligibility for participation in the plan. Allied may also make discretionary matching contributions. Participants are immediately vested in their elective contributions and safe harbor contributions as well as the discretionary matching contributions. During the year ended
December 31, 2018
(Successor) and for the period from June 1, 2017 (inception) through December 31, 2017, Allied contributed
$770
and
$258
, respectively, to the Allied 401(k) Plan.
14. Commitments and Contingencies
In July 2017, APTIM Corp. sued Allied and certain of its employees and affiliated entities in the U.S. District Court for the Northern District of Illinois, alleging, among other things, misappropriation of alleged trade secrets, civil conspiracy, and tortious interference with their contractual and business relations. APTIM and its alleged predecessors in interest also had initiated judicial and arbitral proceedings in Louisiana against Dorsey “Ron” McCall, our Senior Vice President and Board Member, alleging breaches of his employment agreement. On December 12, 2018, all parties to the foregoing proceedings executed two settlement and mutual release agreements, pursuant to which the parties reached an omnibus settlement of all claims, lawsuits and proceedings.
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
We are party to a lawsuit filed against North Carolina by a certain environmental advocacy group alleging that the issuance by the state of certain permits associated with our Brickhaven clay mine reclamation site exceeded the state’s power. Although the state’s authority to issue the bulk of the permits (i.e. the allowance to reclaim the original site with coal ash) was upheld, the portion of the permits that allows us to “cut and prepare” an additional portion of the site was held by the North Carolina Superior Court to exceed the relevant agency’s statutory authority. The North Carolina Superior Court’s decision was reversed and remanded back to the North Carolina Office of Administrative Hearing. The Court stayed the action and ordered the parties to mediate. The parties have been unable to reach a resolution during the mediation. The stay expires on April 5, 2019.
Allied, and its affiliate, Allied Power Resources, LLC, have been named in a collective action lawsuit filed in the U.S. District Court for the Northern District of Illinois, alleging violations of the Fair Labor Standards Act, and which includes related class claims alleging violations of the Illinois Minimum Wage Law and Pennsylvania Minimum Wage Act for failure to pay overtime. This case is one of a series filed against companies in the oil, gas, and energy industries in Illinois and Texas. The parties mediated this case in November 2018 and reached a settlement, contingent upon Court approval. The parties are currently negotiating a settlement agreement and related documents to be submitted to the Court for approval.
In addition to the above matters, we are from time to time party to various claims and legal proceedings which have arisen in the ordinary course of our business. With respect to 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 claims and legal proceedings, we do not believe that the ultimate disposition 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.
Included in general and administrative expense in the consolidated statements of operations for the year ended December 31, 2018 (Successor) was approximately
$20.0 million
related to legal settlements. We believe the amounts 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.
15. Multiemployer Pension Plan
AMS contributes to union-sponsored multiemployer retirement defined benefit pension plans (the “multiemployer plans”) under the terms of collective bargaining agreements that cover its union-represented employees. The risks of participating in the multiemployer plans are different from single-employer plans in the following aspects:
|
|
•
|
Assets contributed to the multiemployer plans by one employer may be used to provide benefits to employees of other participating employers.
|
|
|
•
|
If a participating employer stops contributing to the multiemployer plans, the unfunded obligations of the multiemployer plans may be borne by the remaining participating employers.
|
|
|
•
|
If AMS chooses to stop participating in the multiemployer plans, AMS may be required to pay the multiemployer plans an amount based on the underfunded status of the multiemployer plans, referred to as a withdrawal liability.
|
The primary multiemployer plan to which AMS made contributions for the year ended December 31, 2018 (Successor), the period from January 13, 2017 through December 31, 2017 (Successor), the period from January 1, 2017 through January 12, 2017 (Predecessor), and the year ended December 31, 2016 (Predecessor), is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employer Identification Number (“EIN”). The most recent Pension Protection Act zone status available in 2018 is for the respective multiemployer plan’s year-end within those years, unless otherwise noted. The zone status is based on information that AMS received from the multiemployer plans and is certified by the respective multiemployer plan’s actuary. Among other factors, multiemployer plans in the red zone (critical) are generally less than 65% funded, multiemployer plans in the yellow zone (endangered) are less than 80% funded, and multiemployer plans in the green zone (neither critical and declining, critical, or endangered) are at least 80% funded. The “FIP/RP Status Pending/Implemented” column indicates multiemployer plans for which a financial improvement plan (“FIP”) or a rehabilitation plan (“RP”) is either pending or has been implemented. The last column lists the expiration dates of the collective bargaining agreements to which the multiemployer plans are subject.
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
|
|
|
|
|
|
|
Pension
|
|
FIP/RP
|
|
Year ended December 31, 2018
|
|
Period from
January 13,
2017 through
December 31,
2017
|
|
|
Period from
January 1
2017 through
January 12,
2017
|
|
Year ended December 31, 2016
|
|
|
|
Expiration
Date of
|
Pension Fund
|
|
EIN/Pension
Plan Number
|
|
Protection
Act Zone
Status
|
|
Status
Pending/
Implemented
|
|
Contributions
to Funds by
AMS
|
|
Contributions
to Funds by
AMS
|
|
|
Contributions
to Funds by
AMS
|
|
Contributions
to Funds by
AMS
|
|
Surcharge
Imposed
|
|
Collective
Bargaining
Agreement
|
Central states, southeast and southwest areas pension plan
|
|
36-6044243
|
|
Red - Critical and declining
|
|
Progress under FIP or RP
|
|
$
|
34
|
|
|
$
|
59
|
|
|
|
$
|
—
|
|
|
$
|
78
|
|
|
No
|
|
Continuous with notice period by either party
|
Employer Teamsters Locals 175 & 505 pension trust fund
|
|
55-6021850
|
|
Red - Critical
|
|
Progress under FIP or RP
|
|
$
|
92
|
|
|
$
|
—
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Yes
|
|
2021
|
16. Business Segment and Related Information
The Company has identified the following reportable segments, Environmental Solutions and Maintenance and Technical Services, as each met the quantitative threshold of generating revenues equal to or greater than 10% of the combined revenue of all operating segments.
The accounting policies applied to determine the segment information are the same as those described in the summary of significant accounting policies. Management evaluates the performance of each segment based on segment gross profit, which is calculated as revenues less cost of sales. For the year ended
December 31, 2018
(Successor), the period from January 13, 2017 through
December 31, 2017
(Successor), the period from January 1, 2017 through January 12, 2017 (Predecessor), and the year ended December 31, 2016 (Predecessor), there were no intersegment revenues or other intersegment transactions. Segment assets are also evaluated by management based on each segment’s investment in property and equipment. Assets (other than property and equipment and goodwill) are not allocated to segments.
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
Summarized financial information with respect to the reportable segments is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
|
|
|
For the year ended December 31, 2018
|
ES
|
|
M&TS
|
|
All
Other
|
|
Total
|
Revenue
|
$
|
343,105
|
|
|
$
|
397,357
|
|
|
$
|
—
|
|
|
$
|
740,462
|
|
Segment gross profit
|
69,464
|
|
|
28,264
|
|
|
—
|
|
|
97,728
|
|
Segment depreciation and amortization expense
|
27,943
|
|
|
6,394
|
|
|
7,971
|
|
|
42,308
|
|
Expenditures for segment assets
|
11,728
|
|
|
10,284
|
|
|
24
|
|
|
22,036
|
|
Period from January 13, 2017 through December 31, 2017
|
ES
|
|
M&TS
|
|
All
Other
|
|
Total
|
Revenue
|
$
|
232,581
|
|
|
$
|
188,658
|
|
|
$
|
—
|
|
|
$
|
421,239
|
|
Segment gross profit
|
64,433
|
|
|
17,898
|
|
|
—
|
|
|
82,331
|
|
Segment depreciation and amortization expense
|
23,169
|
|
|
2,361
|
|
|
189
|
|
|
25,719
|
|
Expenditures for segment assets
|
6,107
|
|
|
6,583
|
|
|
—
|
|
|
12,690
|
|
Predecessor
|
|
|
|
|
|
|
|
Period from January 1, 2017 through January 12, 2017
|
ES
|
|
M&TS
|
|
All
Other
|
|
Total
|
Revenue
|
$
|
7,451
|
|
|
$
|
1,679
|
|
|
$
|
—
|
|
|
$
|
9,130
|
|
Segment gross profit
|
1,412
|
|
|
417
|
|
|
—
|
|
|
1,829
|
|
Segment depreciation and amortization expense
|
688
|
|
|
70
|
|
|
5
|
|
|
763
|
|
Expenditures for segment assets
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
For the year ended December 31, 2016
|
ES
|
|
M&TS
|
|
All
Other
|
|
Total
|
Revenue
|
$
|
218,051
|
|
|
$
|
47,017
|
|
|
$
|
—
|
|
|
$
|
265,068
|
|
Segment gross profit
|
51,282
|
|
|
10,558
|
|
|
—
|
|
|
61,840
|
|
Segment depreciation and amortization expense
|
10,228
|
|
|
5,263
|
|
|
110
|
|
|
15,601
|
|
Expenditures for segment assets
|
6,668
|
|
|
3,044
|
|
|
353
|
|
|
10,065
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
|
|
|
As of December 31, 2018
|
ES
|
|
M&TS
|
|
All
Other
|
|
Total
|
Segment property and equipment, net
|
$
|
47,467
|
|
|
$
|
41,155
|
|
|
$
|
319
|
|
|
$
|
88,941
|
|
Segment goodwill
|
57,591
|
|
|
16,622
|
|
|
—
|
|
|
74,213
|
|
As of December 31, 2017
|
ES
|
|
M&TS
|
|
All
Other
|
|
Total
|
Segment property and equipment, net
|
$
|
75,764
|
|
|
$
|
23,725
|
|
|
$
|
441
|
|
|
$
|
99,930
|
|
Segment goodwill
|
56,846
|
|
|
16,622
|
|
|
—
|
|
|
73,468
|
|
The following is a reconciliation of segment gross profit to net (loss) income:
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
For the year ended December 31, 2018
|
|
Period from January 13, 2017 through December 31, 2017
|
|
|
Period from
January 1,
2017
through
January 12,
2017
|
|
For the year ended December 31, 2016
|
|
|
|
|
|
Segment gross profit
|
$
|
97,728
|
|
|
$
|
82,331
|
|
|
|
$
|
1,829
|
|
|
$
|
61,840
|
|
General and administrative expenses
|
(76,752
|
)
|
|
(48,495
|
)
|
|
|
(3,170
|
)
|
|
(35,170
|
)
|
Interest expense, net
|
(32,226
|
)
|
|
(14,146
|
)
|
|
|
(4,181
|
)
|
|
(6,244
|
)
|
Income from equity method investment
|
2,407
|
|
|
816
|
|
|
|
48
|
|
|
2,703
|
|
Income tax benefit
|
2,427
|
|
|
—
|
|
|
|
—
|
|
|
—
|
|
Net (loss) income
|
$
|
(6,416
|
)
|
|
$
|
20,506
|
|
|
|
$
|
(5,474
|
)
|
|
$
|
23,129
|
|
The following is a reconciliation of segment assets to total assets:
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018
|
|
As of December 31, 2017
|
Segment property and equipment, net
|
$
|
88,941
|
|
|
$
|
99,930
|
|
Segment goodwill
|
74,213
|
|
|
73,468
|
|
Non-segment assets
|
295,747
|
|
|
204,253
|
|
Total assets
|
$
|
458,901
|
|
|
$
|
377,651
|
|
Summarized financial information with respect to the types of revenue recognized are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
|
|
|
|
|
For the year ended December 31, 2018
|
Products
|
|
Percentage of Completion
|
|
Services
|
|
Total
|
Revenue
|
$
|
80,851
|
|
|
$
|
255,410
|
|
|
$
|
404,201
|
|
|
$
|
740,462
|
|
Period from January 13, 2017 through December 31, 2017
|
Products
|
|
Percentage of Completion
|
|
Services
|
|
Total
|
Revenue
|
$
|
22,865
|
|
|
$
|
196,833
|
|
|
$
|
201,541
|
|
|
$
|
421,239
|
|
Predecessor
|
|
|
|
|
|
|
|
Period from January 1, 2017 through January 12, 2017
|
Products
|
|
Percentage of Completion
|
|
Services
|
|
Total
|
Revenue
|
$
|
885
|
|
|
$
|
6,377
|
|
|
$
|
1,868
|
|
|
$
|
9,130
|
|
For the year ended December 31, 2016
|
Products
|
|
Percentage of Completion
|
|
Services
|
|
Total
|
Revenue
|
$
|
28,114
|
|
|
$
|
176,496
|
|
|
$
|
60,458
|
|
|
$
|
265,068
|
|
17. Income Taxes
The Company is a “C” Corporation under the Code and, as a result, will be subject to U.S. federal, state, and local income taxes. The Company’s subsidiaries previously operated as partnerships for income tax purposes. Prior to the contribution of assets and liabilities to the Company on June 18, 2018, the subsidiaries passed through their taxable income to their owners for U.S federal and other state and local income tax purposes and, thus, the subsidiaries were not subject to U.S. federal income taxes or other state or local income taxes, except for franchise tax at the state level. Accordingly, the financial data attributable prior to the contribution on June 18, 2018 contains no provision for U.S. federal income taxes or income taxes in any state or locality other than franchise taxes.
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
The Company has determined its opening balance for deferred income tax assets and liabilities to be a net deferred tax liability of
$1,508
based on the future tax effects of temporary differences between the financial statement value and tax basis of assets and liabilities contributed to the Company upon conversion as a taxable corporation on June 18, 2018. In accordance with ASC Topic 740, the tax effects have been recorded as a separate item of income tax expense.
The components of the provision for income taxes for the year ended December 31, 2018 (Successor) is as follows:
|
|
|
|
|
Current income tax expense:
|
|
Federal
|
$
|
—
|
|
State
|
568
|
|
|
568
|
|
Deferred income tax benefit:
|
|
Federal
|
(1,279
|
)
|
State
|
(1,716
|
)
|
|
(2,995
|
)
|
|
|
Total income tax benefit
|
$
|
(2,427
|
)
|
Pre-tax book loss for the period June 18, 2018 to December 31, 2018 (Successor) was
$16,588
including income attributable to non-controlling interest of
$1,627
, which is not subject to income tax at the Company level. The Company’s effective income tax rate on consolidated book income for the period is
14.6%
. The Company’s foreign subsidiary’s book income was insignificant and there was no current or deferred foreign income tax expense for the year ended December 31, 2018 (Successor).
A reconciliation of income tax benefit based on the federal statutory income tax rate of 21% to the actual income tax benefit for the year ended December 31, 2018 (Successor) is as follows:
|
|
|
|
|
Income tax benefit at the federal statutory rate (21%)
|
$
|
(1,857
|
)
|
State income tax benefit, net of federal tax benefit
|
(907
|
)
|
Income tax expense upon conversion to corporation
|
1,818
|
|
Non-controlling interest
|
(522
|
)
|
Stock compensation
|
374
|
|
Income prior to conversion
|
(1,446
|
)
|
Other
|
113
|
|
Benefit from income taxes
|
$
|
(2,427
|
)
|
The Company accounts for income taxes in accordance with ASC Topic 740, which requires an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and tax basis of assets and liabilities existing at each balance sheet date using enacted tax rates for the years in which taxes are expected to be paid or recovered.
The components of the Company’s deferred tax assets and liabilities as of December 31, 2018 (Successor) are as follows:
|
|
|
|
|
Fixed assets, including land
|
$
|
(9,641
|
)
|
Asset retirement obligation
|
6,489
|
|
Purchase option liability
|
2,494
|
|
Accrued bonus
|
1,622
|
|
Other accrued expenses and reserves
|
2,636
|
|
Prepaid expenses
|
(885
|
)
|
Loss carryovers
|
850
|
|
Intangible assets
|
(818
|
)
|
Deferred tax asset, net
|
$
|
2,747
|
|
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
Each quarter we assess our tax assets to determine whether all or any portion of the assets is not more likely than not realizable under ASC Topic 740. We are required to establish a valuation allowance for any portion of the assets we conclude is not more likely than not realizable. As of December 31, 2018 (Successor), no valuation allowance was recorded.
The Company classifies any interest and penalties related to income taxes assessed as part of income tax expense. The Company has concluded that there are no significant uncertain tax positions requiring recognition in the financial statements, nor has the Company been assessed interest or penalties by any major tax jurisdiction to any open tax periods.
The Company’s income tax returns for the year ended December 31, 2018 (Successor) will be its initial tax returns filed with the U.S. federal, state and local governments. The examination of prior period tax returns filed for partnerships, the interests of which were contributed to the Company in the reorganization, could impact the Company’s tax expense and balance sheet tax accounts.
The Company acquired a foreign subsidiary at formation, and the subsidiary is subject to examination in its local country for prior calendar years. The Company is not aware of any potential adjustments for prior years and any such adjustment is not expected to be material to the financial statements.
18. Operating Leases
The Company leases buildings, vehicles and equipment under various non-cancellable agreements classified as operating leases, which expire through December 2026 and require various minimum annual rentals.
Future minimum lease payments, including the related party leases (see Note 5), are as follows:
|
|
|
|
|
For the Year Ending December 31,
|
Operating Leases
|
|
2019
|
$
|
4,462
|
|
2020
|
3,549
|
|
2021
|
1,285
|
|
2022
|
451
|
|
2023
|
451
|
|
Thereafter
|
1,316
|
|
Total
|
$
|
11,514
|
|
The total rent expense, excluding the related party leases (see Note 5), included in the consolidated and combined statements of operations for the year ending
December 31, 2018
(Successor), the period from January 13, 2017 through December 31, 2017 (Successor), the period from January 1, 2017 through January 12, 2017 (Predecessor), and the year ended December 31, 2016 (Predecessor) was
$6,150
,
$5,574
,
$179
, and
$4,900
, respectively.
19. Members’ Equity
During 2016,
49,860
shares of non-voting common stock were issued in accordance with the Deferred Stock Plan (see Note 12).
Charah, LLC’s voting and non-voting shares at January 12, 2017 (Predecessor) were cancelled in connection with the BCP transaction (see Note 3) and Series A and Series B members’ interests were issued. Charah, LLC had
200,000,000
Series A members’ interests authorized, of which
104,109,890
were issued and outstanding as of December 31, 2017 (Successor). The Series A members’ interests were issued between January 13, 2017 and December 31, 2017 (Successor) in connection with the BCP transaction in exchange for BCP’s investment of
$104.1 million
. Charah, LLC had
100,000,000
Series B members’ interests authorized, of which
35,199,063
were issued and outstanding as of December 31, 2017. The Series B members’ interests were issued between January 13, 2017 and December 31, 2017 (Successor) in connection with the BCP transaction in exchange for an investment of
$32.8 million
from members of Charah, LLC’s management and
$2.4 million
with the formation of Allied Power Management, LLC, as described below. Series A and Series B both participated in distributions.
Allied Power Management, LLC had
200,000,000
Series A members’ interests authorized, of which
7,210,555
were issued and outstanding as of December 31, 2017 (Successor). The Series A members’ interests were issued between January 13, 2017 and December 31, 2017 (Successor) in exchange for an investment of
$7.2 million
. Allied Power Management, LLC had
100,000,000
Series B members’ interests authorized, of which
2,437,855
were issued and outstanding as of December 31, 2017
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
(Successor). The Series B members’ interests were issued between January 13, 2017 and December 31, 2017 (Successor). The Series B members’ interests were issued in connection with the formation of Allied Power Management, LLC in exchange for an investment of
$2.4 million
by the existing members of Charah, LLC and members of Allied Power Management, LLC, with the purpose of creating common ownership of the two entities. Series A and Series B both participated in distributions.
Upon the IPO, the Series A and Series B shares were exchanged for shares in Charah Solutions (see Note 1).
20. Earnings (Loss) Per Share
Basic earnings (loss) per share is computed by dividing net income (loss) attributable to the Company’s stockholders by the weighted average number of shares outstanding during the period. Diluted earnings (loss) per share reflects all potential dilutive ordinary shares outstanding during the period and is computed by dividing net income (loss) available 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. For the periods prior to the IPO, the average number of ordinary shares outstanding used to calculate basic and diluted earnings (loss) per share was based on the ordinary shares that were outstanding at the time of the IPO.
As a result of the net loss per share for the year ended
December 31, 2018
(Successor), the inclusion of all potentially dilutive shares would be anti-dilutive. Therefore, dilutive shares (in thousands) of
1,020
were excluded from the computation of the weighted average shares for diluted net loss per share for the year ended December 31, 2018 (Successor).
Basic and diluted earnings (loss) per share is determined using the following information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor
|
|
|
Predecessor
|
|
For the year ended December 31, 2018
|
|
Period from January 13, 2017 through December 31, 2017
|
|
|
Period from
January 1,
2017
through
January 12,
2017
|
|
For the year ended December 31, 2016
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to Charah Solutions, Inc.
|
$
|
(8,902
|
)
|
|
$
|
18,316
|
|
|
|
$
|
(5,528
|
)
|
|
$
|
20,931
|
|
|
|
|
|
|
|
|
|
|
Denominator (in thousands):
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
26,610
|
|
|
23,710
|
|
|
|
N/A
|
|
|
N/A
|
|
Dilutive share-based awards
|
—
|
|
|
822
|
|
|
|
N/A
|
|
|
N/A
|
|
Total weighted average shares outstanding, including dilutive shares
|
26,610
|
|
|
24,532
|
|
|
|
N/A
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per share
|
$
|
(0.33
|
)
|
|
$
|
0.77
|
|
|
|
N/A
|
|
|
N/A
|
|
Diluted (loss) earnings per share
|
$
|
(0.33
|
)
|
|
$
|
0.75
|
|
|
|
N/A
|
|
|
N/A
|
|
21. Major Customers
The Company derived approximately
46%
and
35%
of its consolidated and combined revenue from
two
customers during the year ended December 31, 2018 (Successor), approximately
32%
and
49%
from
two
customers during the period from January 13, 2017 through December 31, 2017 (Successor), and approximately
68%
and
70%
from
one
customer during the period from January 1, 2017 through January 12, 2017 (Predecessor) and the year ended December 31, 2016 (Predecessor), respectively. Accounts receivable from the
two
customers at December 31, 2018 (Successor) and December 31, 2017 (Successor) were
$35,106
and
$30,556
, respectively.
22. Asset Retirement Obligation
The Company owns and operates
two
structural fill sites that will have continuing maintenance and monitoring requirements subsequent to their closure. As of December 31, 2018 (Successor) and December 31, 2017 (Successor), the Company has accrued approximately
$26,065
and
$1,072
, respectively, for the asset retirement obligation.
The following table reflects the activity for the asset retirement obligation:
CHARAH SOLUTIONS, INC.
Notes to Consolidated & Combined Financial Statements, continued
(dollars in thousands except per share and unit data)
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
Opening balance
|
$
|
1,072
|
|
|
$
|
865
|
|
Obligations incurred
|
24,673
|
|
|
154
|
|
Interest accretion
|
320
|
|
|
53
|
|
Ending balance
|
26,065
|
|
|
1,072
|
|
Less current portion
|
(14,704
|
)
|
|
(1,072
|
)
|
Non-current portion
|
$
|
11,361
|
|
|
$
|
—
|
|
23. Quarterly Financial Data (Unaudited)
The following table summarizes the unaudited quarterly results of operations for the year ended December 31, 2018 (Successor), the period from January 13, 2017 through December 31, 2017 (Successor), and the period from January 1, through January 12, 2017 (Predecessor):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
Second Quarter
|
Third Quarter
|
Fourth Quarter
|
2018
|
Revenue
|
$
|
155,529
|
|
$
|
195,723
|
|
$
|
186,002
|
|
$
|
203,208
|
|
Operating income (loss)
|
4,717
|
|
11,612
|
|
(5,919
|
)
|
10,566
|
|
Net income (loss) attributable to Charah Solutions, Inc.
|
806
|
|
3,220
|
|
(17,395
|
)
|
4,467
|
|
Basic earnings (loss) per share
|
0.03
|
|
0.13
|
|
(0.60
|
)
|
0.15
|
|
Diluted earnings (loss) per share
|
0.03
|
|
0.13
|
|
(0.60
|
)
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2017 through January 12, 2017
|
|
|
January 13, 2017 through March 31, 2017
|
Second Quarter
|
Third Quarter
|
Fourth Quarter
|
2017
|
|
|
|
|
|
|
|
Revenue
|
$
|
9,130
|
|
|
|
$
|
58,965
|
|
$
|
74,404
|
|
$
|
118,911
|
|
$
|
168,959
|
|
Operating (loss) income
|
(1,341
|
)
|
|
|
9,214
|
|
13,031
|
|
3,212
|
|
8,379
|
|
Net (loss) income attributable to Charah Solutions, Inc.
|
(5,528
|
)
|
|
|
8,095
|
|
10,771
|
|
1,057
|
|
(1,607
|
)
|
Basic earnings (loss) per share
|
N/A
|
|
|
|
0.34
|
|
0.45
|
|
0.04
|
|
(0.07
|
)
|
Diluted earnings (loss) per share
|
N/A
|
|
|
|
0.33
|
|
0.44
|
|
0.04
|
|
(0.07
|
)
|
Basic and diluted earnings (loss) per common share for each of the quarters presented above is based on the respective weighted average number of common and dilutive potential common shares outstanding for each quarter, and the sum of the quarters may not necessarily be equal to the full year basic and diluted earnings per common share amounts.