AP NEWS
Press release content from Business Wire. The AP news staff was not involved in its creation.
PRESS RELEASE: Paid content from Business Wire
Press release content from Business Wire. The AP news staff was not involved in its creation.

Charah Solutions, Inc. Reports Third Quarter 2019 Financial Results

November 13, 2019 GMT

LOUISVILLE, Ky.--(BUSINESS WIRE)--Nov 12, 2019--

Charah ® Solutions, Inc. (NYSE: CHRA) (“Charah Solutions” or the “Company”), a leading provider of environmental and maintenance services to the power generation industry, today announced financial results for the three and nine months ended September 30, 2019. Revenues for the third quarter of 2019 were $121.1 million with a net loss attributable to Charah Solutions, Inc. of $3.3 million, or $0.11 per basic share. Adjusted net loss and adjusted loss per basic share 1 were $2.9 million and $0.10, respectively. Adjusted EBITDA 1 was $5.6 million.

“Our third quarter results reflect meaningful improvement over the difficult second quarter and the return of a positive trajectory in operating performance. Consistent with our previous guidance, we realized improvements in our operating efficiency, a material reduction in our total debt balance and an increase in our margins over the second quarter,” said Scott Sewell, President and Chief Executive Officer of Charah Solutions. “Though our year-to-date 2019 results have been challenging compared to the prior year, we are continuing to win new business at a record pace as business development activities have resulted in approximately $385 million in new awards won year-to-date and more than $300 million in verbal awards are currently under negotiation. We expect additional success with current bid proposal developments during the remainder of 2019 and in 2020, as new business awards that had been previously delayed become realized. We remain extremely excited about our new award prospects and our ability to further grow our business.”

“We are committed to significantly reducing our debt further while maintaining a capitalization level that will enable us to take advantage of the abundance of coal ash remediation and beneficiation opportunities we anticipate,” said Mr. Sewell. “With our ability to provide custom solutions that combine our market-leading ash management capabilities and our proprietary beneficiation technologies, along with a regulatory environment increasingly conducive to our business, we believe we’re ideally positioned to expand our revenue-generating potential.”

 

Summary of Financial Results

 

 

Three Months Ended

 

September 30,

(Unaudited in thousands, except per share and margin data)

2019

 

2018

Revenue

$

121,113

 

 

$

186,002

 

Gross profit

13,859

 

 

26,706

 

Gross margin

11.4

%

 

14.4

%

Net loss attributable to Charah Solutions, Inc.

(3,313

)

 

(17,395

)

Loss per common share (basic / diluted)

$

(0.11

)

 

$

(0.60

)

Non-GAAP Financial Measures

 

 

 

Adjusted net (loss) income 1

(2,908

)

 

7,563

 

Adjusted (loss) income per diluted share 1

$

(0.10

)

 

$

0.25

 

Adjusted EBITDA 1

5,596

 

 

32,553

 

Adjusted EBITDA margin 1

4.6

%

 

17.5

%

 

(1) This is a non-GAAP financial measure; see explanation and reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure below.

Third Quarter 2019 Results

Revenue decreased $64.9 million, or 34.9%, for the three months ended September 30, 2019 to $121.1 million as compared to $186.0 million for the three months ended September 30, 2018, primarily due to project completions, delays in new project awards in the three months ended September 30, 2018, and reduced nuclear maintenance services. Gross profit decreased $12.8 million, or 48.1%, for the three months ended September 30, 2019 to $13.9 million as compared to $26.7 million for the three months ended September 30, 2018. Gross profit as a percentage of revenue, or gross margin, declined for the three months ended September 30, 2019 to 11.4% as compared to 14.4% for the three months ended September 30, 2018, primarily due to lower gross margin in the Company’s Environmental Solutions segment resulting, partially offset by an improvement in gross margin in the Company’s Maintenance and Technical Services segment.

Environmental Solutions Segment: Environmental Solutions segment revenue decreased $57.8 million, or 55.7%, for the three months ended September 30, 2019 to $46.0 million as compared to $103.8 million for the three months ended September 30, 2018, primarily driven by project completions within our remediation and compliance services component, including the completion of the Brickhaven project resulting from the deemed termination, and delays in new project awards in the three months ended September 30, 2018, partially offset by a net overall increase in revenue from our byproduct sales offerings. Gross profit decreased $13.1 million, or 65.8%, for the three months ended September 30, 2019 to $6.8 million as compared to $19.9 million for the three months ended September 30, 2018, primarily due to project completions within our remediation and compliance services component and one project-specific issue continuing from the first quarter of 2019, partially offset by a net overall increase in gross profit from byproduct sales. Gross margin declined to 14.8% from 19.1% in the third quarter of 2018.

Maintenance and Technical Services Segment: Maintenance and Technical Services revenue decreased $7.1 million, or 8.6%, for the three months ended September 30, 2019 to $75.1 million as compared $82.2 million for the three months ended September 30, 2018. The decrease was primarily attributable to fewer nuclear outages in the current period, partially offset by a net overall increase in revenue from our fossil services offerings. Gross profit for our Maintenance and Technical Services segment increased $0.2 million, or 3.2%, for the three months ended September 30, 2019 to $7.1 million as compared to $6.9 million for the three months ended September 30, 2018. The increase was primarily attributable to a net overall increase in gross profit from our fossil services offerings, partially offset by fewer nuclear outages in the current period. Gross margin rose to 9.4% from 8.3% in the third quarter of 2018. The increase in gross profit margin was primarily driven by an increase in revenue associated with our fossil service offerings that generate a higher gross profit.

Net loss attributable to Charah Solutions, Inc. decreased $14.1 million, or 81.0%, for the three months ended September 30, 2019 to $3.3 million as compared to $17.4 million for the three months ended September 30, 2018. The decrease was primarily attributable to lower general and administrative expenses and interest expense, net, partially offset by the decrease in gross profit as discussed above and the change in the income tax benefit of $4.6 million. The decrease in general and administrative expenses was primarily attributable to a reduction in non-recurring legal costs and expenses, including $20.0 million in reserves incurred in the prior period related to legal proceedings during the three months ended September 30, 2018, as disclosed in our Adjusted EBITDA reconciliation included herein, partially offset by increased transaction related expenses associated with the amendment to our senior secured credit facility. The decrease in interest expense, net was primarily attributable to the absence of $12.5 million of costs incurred in conjunction with the refinancing of our debt during the three months ended September 30, 2018, consisting of a $10.4 million non-cash write-off of debt issuance costs and a $2.1 million pre-payment penalty, and a reduction in the debt balances using cash received from the Brickhaven deemed termination payment received during the three months ended September 30, 2019. Adjusted EBITDA 1 decreased $27.0 million, or 82.8%, to $5.6 million for the three months ended September 30, 2019 as compared to $32.6 million for the three months ended September 30, 2018.

2019 and 2020 Guidance

We have tightened the ranges of our previous guidance for 2019 and affirmed our outlook for 2020. Our current expectations for 2019 reflect increased visibility in the full year outcome and our outlook for 2020 includes incremental revenue that is mostly represented by booked projects, contract renewals, verbal awards and only a modest amount of new prospective awards. Our current 2020 outlook is substantially represented by high confidence projections, while the potential for winning one or more large prospective contracts from current or future proposals provides upside to our outlook. Our current 2019 guidance has been revised as follows:

Our 2020 outlook has been affirmed as follows:

   

(1)

This is a non-GAAP financial measure; see explanation and reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure below.

   

(2)

The forward looking measures of 2019 and 2020 Adjusted EBITDA are non-GAAP financial measures that cannot be reconciled to net income as the most directly comparable GAAP financial measure without unreasonable effort primarily because of the uncertainties involved in estimating forward-looking measures.

Business Update

The addition of new work awards and a broader scope of nuclear outage services resulted in sequential improvements in revenue, gross profit, and adjusted EBITDA 1 over the second quarter. The pace of new awards in the third quarter of 2019 has quickened and we expect this upward trend to continue in the fourth quarter as more verbal awards and other outstanding bid proposals convert to signed contracts. Our success rate in winning awards year-to-date on the basis of the total value of project bid proposals is significantly higher than it was during the comparable period in 2018, with an average anticipated gross profit margin contribution slightly above year ago levels. We have signed approximately $385 million in new contracts year-to-date and are in exclusive negotiations on more than $300 million in additional contracts. A substantial majority of these contracts were awarded within our Environmental Solutions segment. The success achieved in winning new business through the first three quarters this year has nearly surpassed the all-time Company record for new contracts in a full calendar year. Though the timing of future awards is difficult to determine, we believe these recent accomplishments demonstrate we are well-positioned to benefit from the market momentum for responsibly recycling and remediating coal ash and capture a significant portion of a large market opportunity.

Gross profit in the maintenance and technical services segment for the three months ended September 30, 2019 was higher than in the year ago period due to higher gross profit in the fossil services business, but revenue declined in relation to the three months ended September 30, 2018, primarily as a result of fewer nuclear refueling outages and reductions in the scope of nuclear work. A substantial portion of our nuclear services operations is driven by scheduled nuclear maintenance outages, which are typically planned for every 12 to 24 months.

Within our byproduct sales offerings, which is a part of our environmental solutions segment, we realized a net overall increase in year-over-year revenues. However, the roll-out of our technology initiatives, including our MP618 thermal beneficiation technology and our grinding technology, has been slower than previously anticipated, resulting in a lower than expected contribution to operating results. Customer interest in our MP618 technology has been strong, and contracts are currently under discussion.

We continue to see a growing trend in coal ash regulation toward more prescriptive approaches that dictate the means and methods for ash pond closures at the state level than are required at the federal level. States like Kentucky, South Carolina, North Carolina, Virginia, Oklahoma, Missouri, Indiana, and Illinois have already developed their own rules for coal ash management and some utility customers in other states are proceeding with coal ash closure plans more proactively, which we expect will contribute to the anticipated growth in new work awards in the coming quarters. At the federal level, the EPA has recently released proposed amendments to its 2015 Coal Combustion Residuals (CCR) regulations that would reclassify clay-lined and soil-lined surface impoundments as “unlined” and bring forward the deadline for unlined or failing CCR units to stop receiving ash and initiate closure to August 31, 2020 from October 31, 2020. These recent examples and others demonstrate our expectation for regulatory and public policy trends to increasingly drive customer needs for creative remediation solutions, including where beneficiation, or recycling of ash, plays a significant role.

CONFERENCE CALL

Charah Solutions will host a conference call at 8:30 a.m. ET on Wednesday, November 13 to discuss the third quarter results. Information contained within this press release will be referenced and should be considered in conjunction with the call.

Participants may access the conference call live via webcast on the Investors section of the Charah Solutions website at ir.charah.com. To participate via telephone, please dial (877) 273-7219 within the United States or (647) 689-5395 outside the United States, approximately 15 minutes prior to the scheduled start time. The conference ID for the call is 9276529.

A webcast replay will be available on the Investor Relations section of the Charah Solutions website at ir.charah.com after 11:30 a.m. ET on Wednesday, November 13, 2019. In addition, an audio replay will be available for one week following the call and will be accessible by dialing (800) 585-8367 within the United States or (416) 621-4642 outside the United States. The replay ID is 9276529.

A supplementary presentation will also be available on the Investors section of the Charah Solutions website at ir.charah.com.

ABOUT CHARAH SOLUTIONS, INC.

With 30 years of experience, Charah ® Solutions, Inc. is a leading provider of environmental and maintenance services to the power generation industry, with operations in fossil fuel and nuclear power generation sites across the country. Based in Louisville, Kentucky, Charah Solutions assists utilities with all aspects of managing and recycling ash byproducts generated from the combustion of coal in the production of electricity as well as routine power plant maintenance and outage services for the fossil fuel and nuclear power generation industry. The company also designs and implements solutions for ash pond management and closure, landfill construction, fly ash and slag sales, and structural fill projects. Charah Solutions is the partner of choice for solving customers’ most complex environmental challenges, and as an industry leader in quality, safety, and compliance, the company is committed to reducing greenhouse gas emissions for a cleaner energy future. For more information, please visit https://charah.com/.

FORWARD-LOOKING STATEMENTS

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this press release that address activities, events or developments that the Company expects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “should,” “could,” and similar terms and phrases. These statements are based on certain assumptions made by the Company based on management’s experience and perception of historical trends, current conditions, anticipated future developments and other factors believed to be appropriate. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company, which may cause actual results to differ materially from those implied or expressed by the forward-looking statements.

Any forward-looking statement speaks only as of the date on which such statement is made and the Company undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law.

NON-GAAP FINANCIAL MEASURES

Adjusted net (loss) income and Adjusted (loss) earnings per basic/diluted share are not financial measures determined in accordance with GAAP. Charah Solutions defines Adjusted net (loss) income as net (loss) income attributable to Charah Solutions plus, on a post-tax basis, non-recurring legal and start-up costs and expenses, and transaction-related expenses and other items. Adjusted (loss) earnings per basic/diluted share is calculated using Adjusted net (loss) income.

Adjusted EBITDA and Adjusted EBITDA margin are not financial measures determined in accordance with GAAP. Charah Solutions defines Adjusted EBITDA as net (loss) income before interest expense, income taxes, depreciation and amortization, equity-based compensation, non-recurring legal and start-up costs and expenses, Brickhaven termination revenue reversal, and transaction-related expenses and other items. Adjusted EBITDA margin represents the ratio of Adjusted EBITDA to total revenues.

Management believes Adjusted EBITDA and Adjusted EBITDA margin are useful performance measures because they allow for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. Management excludes the items listed above from net loss in arriving at Adjusted EBITDA because these amounts are either non-recurring or can vary substantially within Charah Solutions’ industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net loss determined in accordance with GAAP. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are reflected in Adjusted EBITDA. Charah Solutions’ presentation of Adjusted EBITDA should not be construed as an indication that the Company’s results will be unaffected by the items excluded from Adjusted EBITDA. Charah Solutions’ computations of Adjusted EBITDA may not be identical to other similarly titled measures of other companies. Charah Solutions uses Adjusted EBITDA margin to measure the success for the Company’s business in managing its cost base and improving profitability. A reconciliation between Adjusted EBITDA to net loss, Charah Solutions’ most directly comparable financial measure calculated and presented in accordance with GAAP, along with a calculation of the Company’s Adjusted EBITDA margin is included in the supplemental financial data attached to this press release.

Free cash flow is not a financial measure determined in accordance with GAAP. We define free cash flow as cash flows from operating activities, less cash used for capital expenditures, net of proceeds. We exclude capital expenditures because we consider them to be a necessary component of our ongoing operations. We consider free cash flow to be a measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for investing in our business and strengthening our balance sheet, but it is not intended to represent the amount of cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from this measure.

The Company uses non-GAAP measures internally as a key performance measure of the results of operations for purposes of evaluating performance. These measures facilitate comparison of operating performance between periods and help investors to better understand the operating results of the Company by excluding certain items that may not be indicative of the Company’s core business or operating results. The Company believes the use of these measures enables management and investors to evaluate and compare, from period to period, the Company’s operating performance in a meaningful and consistent manner. The non-GAAP measures are a supplemental measure of our performance that is not required by, or presented in accordance with, GAAP, and should not be considered as an alternative to, or more meaningful than, net income or earnings per basic/diluted share (as determined in accordance with GAAP) as a measure of our operating results.

 

CHARAH SOLUTIONS, INC.

Condensed Consolidated Balance Sheets

(dollars in thousands except per share data)

(Unaudited)

 

 

September 30,
2019

 

December 31,
2018

 

 

 

 

Assets

 

 

 

Current assets:

 

 

 

Cash

$

7,586

 

 

$

6,900

 

Trade accounts receivable

68,072

 

 

60,742

 

Receivable from affiliates

598

 

 

894

 

Costs and estimated earnings in excess of billings

11,550

 

 

86,710

 

Inventory

15,487

 

 

25,797

 

Income tax receivable

2,860

 

 

 

Prepaid expenses and other current assets

5,781

 

 

5,133

 

Total current assets

111,934

 

 

186,176

 

Property and equipment:

 

 

 

Plant, machinery and equipment

73,808

 

 

74,896

 

Structural fill site improvements

55,760

 

 

55,760

 

Vehicles

19,455

 

 

17,407

 

Office equipment

2,537

 

 

1,623

 

Buildings and leasehold improvements

262

 

 

262

 

Structural fill sites

7,110

 

 

7,110

 

Construction in progress

10,636

 

 

3,488

 

Total property and equipment

169,568

 

 

160,546

 

Less accumulated depreciation

(83,994

)

 

(71,605

)

Property and equipment, net

85,574

 

 

88,941

 

Other assets:

 

 

 

Trade names, net

34,816

 

 

34,920

 

Customer relationships, net

57,977

 

 

63,898

 

Technology, net

1,702

 

 

1,853

 

Non-compete and other agreements, net

72

 

 

180

 

Other intangible assets, net

 

 

22

 

Goodwill

74,213

 

 

74,213

 

Other assets

 

 

891

 

Deferred tax asset

10,250

 

 

2,747

 

Equity method investments

5,294

 

 

5,060

 

Total assets

$

381,832

 

 

$

458,901

 

CHARAH SOLUTIONS, INC.

Condensed Consolidated Balance Sheets

(dollars in thousands except per share data)

(Unaudited)

 

 

September 30,
2019

 

December 31,

2018

Liabilities and stockholders’ equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

29,575

 

 

$

24,821

 

Billings in excess of costs and estimated earnings

393

 

 

1,352

 

Notes payable, current maturities

60,565

 

 

23,268

 

Accrued payroll and bonuses

23,373

 

 

15,480

 

Asset retirement obligation, current portion

13,738

 

 

14,704

 

Purchase option liability

7,110

 

 

10,017

 

Accrued expenses

20,735

 

 

22,473

 

Other liabilities

1,207

 

 

 

Total current liabilities

156,696

 

 

112,115

 

Long-term liabilities:

 

 

 

Contingent payments for acquisitions

11,417

 

 

11,214

 

Asset retirement obligation, less current portion

4,029

 

 

11,361

 

Line of credit

10,215

 

 

19,799

 

Notes payable, less current maturities

128,550

 

 

211,022

 

Total liabilities

310,907

 

 

365,511

 

Commitments and contingencies (see Note 11)

 

 

 

Stockholders’ equity:

 

 

 

Retained (losses) earnings

(14,744

)

 

9,414

 

Common Stock, $0.01 par value; 200,000,000 shares authorized; 29,622,835 and 29,082,988 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively

296

 

 

291

 

Additional paid-in capital

84,340

 

 

82,880

 

Total stockholders’ equity

69,892

 

 

92,585

 

Non-controlling interest

1,033

 

 

805

 

Total equity

70,925

 

 

93,390

 

Total liabilities and equity

$

381,832

 

 

$

458,901

 

CHARAH SOLUTIONS, INC.

Condensed Consolidated & Combined Statements of Operations

(dollars in thousands except per share data)

(Unaudited)

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2019

 

2018

 

2019

 

2018

Revenue

$

121,113

 

 

$

186,002

 

 

$

405,307

 

 

$

537,254

 

Cost of sales

107,254

 

 

159,296

 

 

378,134

 

 

460,901

 

Gross profit

13,859

 

 

26,706

 

 

27,173

 

 

76,353

 

General and administrative expenses

14,096

 

 

32,625

 

 

45,481

 

 

65,944

 

Operating (loss) income

(237

)

 

(5,919

)

 

(18,308

)

 

10,409

 

Interest expense, net

(3,833

)

 

(17,034

)

 

(12,987

)

 

(26,708

)

Income from equity method investment

667

 

 

786

 

 

1,884

 

 

2,072

 

Loss before income taxes

(3,403

)

 

(22,167

)

 

(29,411

)

 

(14,227

)

Income tax benefit

(1,100

)

 

(5,667

)

 

(7,489

)

 

(2,761

)

Net loss

(2,303

)

 

(16,500

)

 

(21,922

)

 

(11,466

)

Less income attributable to non-controlling interest

1,010

 

 

895

 

 

2,236

 

 

1,904

 

Net loss attributable to Charah Solutions, Inc.

$

(3,313

)

 

$

(17,395

)

 

$

(24,158

)

 

$

(13,370

)

 

 

 

 

 

 

 

 

Loss per common share:

 

 

 

 

 

 

 

Basic

$

(0.11

)

 

$

(0.60

)

 

$

(0.82

)

 

$

(0.52

)

Diluted

$

(0.11

)

 

$

(0.60

)

 

$

(0.82

)

 

$

(0.52

)

 

 

 

 

 

 

 

 

Weighted-average shares outstanding used in loss per common share:

 

 

 

 

 

 

 

Basic

29,604,500

 

 

29,082,988

 

 

29,451,873

 

 

25,776,720

 

Diluted

29,604,500

 

 

29,082,988

 

 

29,451,873

 

 

25,776,720

 

 

 

 

 

 

 

 

 

Pro forma net loss information:

 

 

 

 

 

 

 

Net loss attributable to Charah Solutions, Inc. before provision for income taxes

$

(4,413

)

 

$

(23,062

)

 

$

(31,647

)

 

$

(16,131

)

Pro forma provision for income taxes

(1,100

)

 

(5,667

)

 

(7,489

)

 

(4,358

)

Pro forma net loss attributable to Charah Solutions, Inc.

$

(3,313

)

 

$

(17,395

)

 

$

(24,158

)

 

$

(11,773

)

CHARAH SOLUTIONS, INC.

Condensed Consolidated & Combined Statements of Cash Flows

(dollars in thousands)

(Unaudited)

 

 

Nine Months Ended

 

September 30,

 

2019

 

2018

Cash flows from operating activities:

 

 

 

Net loss

$

(21,922

)

 

$

(11,466

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

Depreciation and amortization

17,034

 

 

33,898

 

Amortization of debt issuance costs

520

 

 

11,460

 

Deferred income tax benefit

(7,503

)

 

(3,076

)

Loss on sale of fixed assets

1,732

 

 

749

 

Income from equity method investment

(1,884

)

 

(2,072

)

Distributions received from equity investment

1,650

 

 

1,689

 

Non-cash share-based compensation

1,666

 

 

2,449

 

Loss (gain) on interest rate swap

2,098

 

 

(2,857

)

Interest accreted on contingent earnout liability

203

 

 

 

Changes in cash due to changes in:

 

 

 

Trade accounts receivable

(7,330

)

 

(21,706

)

Costs and estimated earnings in excess of billings

75,160

 

 

(54,590

)

Inventory

10,310

 

 

(4,480

)

Accounts payable

4,754

 

 

4,192

 

Billings in excess of costs and estimated earnings

(959

)

 

(11,283

)

Asset retirement obligation

(8,298

)

 

7,834

 

Other current assets and liabilities

2,944

 

 

38,755

 

Net cash provided by (used in) operating activities

70,175

 

 

(10,504

)

 

 

 

 

Cash flows from investing activities:

 

 

 

Proceeds from the sale of equipment

1,672

 

 

1,297

 

Purchases of property and equipment

(13,672

)

 

(14,948

)

Payments for business acquisitions, net of cash received

 

 

(19,983

)

Purchase of intangible assets

 

 

(31

)

Net cash used in investing activities

(12,000

)

 

(33,665

)

 

 

 

 

Cash flows from financing activities:

 

 

 

Net (payments) proceeds on line of credit

(9,584

)

 

5,106

 

Proceeds from long-term debt

16,907

 

 

214,330

 

Principal payments on long-term debt

(62,603

)

 

(251,563

)

Repurchases of shares

(201

)

 

 

Payments of offering costs

 

 

(8,916

)

Issuance of common stock

 

 

59,241

 

Distributions to non-controlling interest

(2,008

)

 

(1,626

)

Distributions to members

 

 

(686

)

Net cash (used in) provided by financing activities

(57,489

)

 

15,886

 

Net increase (decrease) in cash

686

 

 

(28,283

)

Cash, beginning of period

6,900

 

 

32,264

 

Cash, end of period

$

7,586

 

 

$

3,981

 

 

 

 

 

Supplemental disclosures of cash flow information:

 

 

 

Cash paid during the year for interest

$

8,562

 

 

$

19,244

 

Cash paid during the year for taxes

$

91

 

 

$

 

CHARAH SOLUTIONS, INC.

Segment Results

(dollars in thousands)

 

 

Three Months Ended

 

 

 

 

 

September 30,

 

Change

 

2019

 

2018

 

$

 

%

 

(dollars in thousands)

Revenue:

 

 

 

 

 

 

 

Environmental Solutions

$

 

46,013

 

 

$

 

103,848

 

 

$

 

(57,835

)

 

(55.7

)%

Maintenance and Technical Services

 

75,100

 

 

 

82,154

 

 

 

(7,054

)

 

 

(8.6

)%

Total revenue

 

121,113

 

 

 

186,002

 

 

 

(64,889

)

 

 

(34.9

)%

Cost of sales

 

107,254

 

 

 

159,296

 

 

 

(52,042

)

 

 

(32.7

)%

Gross Profit:

 

 

 

 

 

 

 

Environmental Solutions

 

6,789

 

 

 

19,852

 

 

 

(13,063

)

 

 

(65.8

)%

Maintenance and Technical Services

 

7,070

 

 

 

6,854

 

 

 

216

 

 

 

3.2

%

Total gross profit

 

13,859

 

 

 

26,706

 

 

 

(12,847

)

 

 

(48.1

)%

General and administrative expenses

 

14,096

 

 

 

32,625

 

 

 

(18,529

)

 

 

(56.8

)%

Operating loss

 

(237

)

 

 

(5,919

)

 

 

5,682

 

 

 

(96.0

)%

Interest expense, net

 

(3,833

)

 

 

(17,034

)

 

 

13,201

 

 

 

77.5

%

Income from equity method investment

 

667

 

 

 

786

 

 

 

(119

)

 

 

(15.1

)%

Loss before taxes

 

(3,403

)

 

 

(22,167

)

 

 

18,764

 

 

 

(84.6

)%

Income tax benefit

 

(1,100

)

 

 

(5,667

)

 

 

4,567

 

 

 

(80.6

)%

Net loss

 

(2,303

)

 

 

(16,500

)

 

 

14,197

 

 

 

(86.0

)%

Less income attributable to non-controlling interest

 

1,010

 

 

 

895

 

 

 

115

 

 

 

12.8

%

Net loss attributable to Charah Solutions, Inc.

$

 

(3,313

)

 

$

 

(17,395

)

 

$

 

14,082

 

 

 

(81.0

)%

CHARAH SOLUTIONS, INC.

Non-GAAP Reconciliation: Net Loss to Adjusted EBITDA

(dollars in thousands)

 

We define Adjusted EBITDA as net loss attributable to Charah Solutions, Inc. before interest expense, net, income taxes, depreciation and amortization, equity-based compensation, non-recurring legal and start-up costs and expenses, the Brickhaven contract deemed termination revenue reversal, and transaction-related expenses and other items. Adjusted EBITDA margin represents the ratio of Adjusted EBITDA to total revenues. We believe Adjusted EBITDA and Adjusted EBITDA margin are useful performance measures because they allow for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure.

 
The following represents a reconciliation of net loss, our most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted EBITDA.
 

 

Three Months Ended

 

September 30,

 

2019

 

2018

 

(dollars in thousands)

Net loss attributable to Charah Solutions, Inc.

$

(3,313

)

 

$

(17,395

)

Interest expense, net

3,833

 

 

17,034

 

Income tax benefit

(1,100

)

 

(5,667

)

Depreciation and amortization

5,399

 

 

16,763

 

Elimination of certain non-recurring legal costs and expenses (1)

(1,485

)

 

20,033

 

Equity-based compensation

659

 

 

1,046

 

Transaction-related expenses and other items (2)

1,603

 

 

739

 

Adjusted EBITDA

$

5,596

 

 

$

32,553

 

Adjusted EBITDA margin (3)

 

4.6

%

 

 

17.5

%  

  

 

(1)

Represents non-recurring legal costs and expenses, which amounts are not representative of those that we historically incur in the ordinary course of our business. Negative amounts represent insurance recoveries related to these matters.

  

 

(2)

Represents SCB transaction expenses, executive severance costs, IPO-related costs and other miscellaneous items.

  

 

(3)

Adjusted EBITDA margin is a non-GAAP financial measure that represents the ratio of Adjusted EBITDA to total revenues. We use Adjusted EBITDA margin to measure the success of our businesses in managing our cost base and improving profitability.

CHARAH SOLUTIONS, INC.

Non-GAAP Reconciliation: Net Loss to Adjusted Net (Loss) and

Adjusted (Loss) Income per Diluted Share

(dollars in thousands)

 
We define Adjusted net (loss) income as net (loss) income attributable to Charah Solutions, Inc. plus, on a post-tax basis, non-recurring legal costs and expenses, non-recurring start-up costs and expenses, and transaction-related expenses and other items. Adjusted (loss) earnings per basic/diluted share is based on Adjusted net (loss) income.
 

The following represents a reconciliation of net loss, our most directly comparable financial measure calculated and presented in accordance with GAAP, to Adjusted net (loss) income.

 

 

Three Months Ended

 

September 30,

 

2019

 

2018

 

(dollars in thousands)

Net loss attributable to Charah Solutions, Inc.

$

(3,313

)

 

$

(17,395

)

Income tax benefit

(1,100

)

 

(5,667

)

Loss on extinguishment of debt (1)

 

 

12,451

 

Elimination of certain non-recurring legal costs and expenses (2)

(1,485

)

 

20,033

 

Transaction-related expenses and other items (3)

1,603

 

 

739

 

Adjusted (loss) income before income taxes attributable to Charah Solutions, Inc.

$

(4,295

)

 

$

10,161

 

Adjusted income tax provision (4)

(1,387

)

 

2,598

 

Adjusted net (loss) income attributable to Charah Solutions, Inc.

$

(2,908

)

 

$

7,563

 

Weighted average basic / diluted share count (5)

29,605

 

 

30,264

 

Adjusted (loss) income per diluted share

$

(0.10

)

 

$

0.25

 

  

 

(1)

Represents non-recurring costs associated with our term loan refinancing.

  

 

(2)

Represents non-recurring legal costs and expenses, which amounts are not representative of those that we historically incur in the ordinary course of our business. Negative amounts represent insurance recoveries related to these matters.

  

 

(3)

Represents SCB transaction expenses, executive severance costs, IPO-related costs, expenses associated with the amendment to the Credit Facility and other miscellaneous items.

  

 

(4)

Represents the effective income tax rate of 32.3% and 25.5% for three months ended September 30, 2019 and September 30, 2018, respectively, multiplied by adjusted (loss) income before income taxes attributable to Charah Solutions, Inc.

  

 

(5)

As a result of the adjusted net loss per share for the three months ended September 30, 2019, the inclusion of all potentially dilutive shares would be anti-dilutive. Therefore, dilutive shares (in thousands) of 1,510 were excluded from the computation of the weighted-average shares for diluted adjusted net loss per share for the three months ended September 30, 2019.

CHARAH SOLUTIONS, INC.

Non-GAAP Reconciliation: Cash Flows from Operating Activities

to Free Cash Flow

(dollars in thousands)

 

We define free cash flow as cash flows from operating activities, less cash used for capital expenditures, net of proceeds. We exclude capital expenditures because we consider them to be a necessary component of our ongoing operations. We consider free cash flow to be a measure that provides useful information to management and investors about the amount of cash generated by the business that can be used for investing in our business and strengthening our balance sheet, but it is not intended to represent the amount of cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from this measure.

 

The following represents a reconciliation of net cash provided by (used in) in operating activities to free cash flow, our most directly comparable financial measure calculated and presented in accordance with GAAP. The presentation of free cash flow is not meant to be considered in isolation or as an alternative to net cash provided by (used in) operating activities as a measure of liquidity.

 

 

Nine Months Ended

 

September 30,

 

2019

 

2018

Net cash provided by (used in) operating activities

$

70,175

 

 

$

(10,504

)

Capital expenditures, net of proceeds:

 

 

 

Maintenance and growth (1)

(4,431

)

 

(13,651

)

Technology

(7,569

)

 

 

Total capital expenditures

(12,000

)

 

(13,651

)

Free cash flow

$

58,175

 

 

$

(24,155

)

  

 

(1)

Proceeds of $1,672 and $1,297 were included in maintenance and growth capital expenditures for the nine months ended September 30, 2019 and 2018, respectively.

 

View source version on businesswire.com:https://www.businesswire.com/news/home/20191112006156/en/

CONTACT: Investor Contact

Tony Semak, Head of Investor Relations

Charah Solutions, Inc.

ir@charah.com

(502) 245-1353Media Contact

Katrina Gallagher

PriceWeber Marketing

media@charah.com

(502) 472-6003

KEYWORD: UNITED STATES NORTH AMERICA KENTUCKY

INDUSTRY KEYWORD: COAL ENERGY ENVIRONMENT NUCLEAR UTILITIES

SOURCE: Charah Solutions, Inc.

Copyright Business Wire 2019.

PUB: 11/12/2019 07:00 PM/DISC: 11/12/2019 07:01 PM

http://www.businesswire.com/news/home/20191112006156/en