Market Overview

Charah Solutions, Inc. Announces Third Quarter 2018 Financial Results and Provides 2018 Guidance

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Key Highlights

  • Third quarter 2018 revenue of $186 million, an increase of 56% year
    over year
  • Completed debt refinancing in September; to save approximately $8
    million of interest expense in 2019
  • Advancing roll-out of new technologies to improve competitive position
    and expand offerings
  • Growing pipeline with more than $3 billion in outstanding bids
  • Expecting strong fourth quarter 2018 financial results
  • Expect to become significantly cash flow positive in first half of 2019

Charah Solutions, Inc. (NYSE:CHRA), a leading provider of
mission-critical environmental and maintenance services to the power
generation industry, today announced financial results for its third
quarter ended September 30, 2018. The net loss of $17.4 million, or
$0.60 per diluted share, was primarily driven by a non-recurring $12.5
million loss on extinguishment of debt associated with its recent term
loan refinancing, of which $10.4 million was non-cash, and a $20 million
reserve, prior to any insurance recoveries, for outstanding legal
claims. Adjusted net income1 and Adjusted earnings per
diluted share1 were $7.6 million and $0.25, respectively.
Adjusted EBITDA1 was $32.6 million for the third quarter, a
57% increase from the year-ago period.

"In the third quarter, Charah Solutions reported solid financial results
and achieved several significant financial and strategic milestones that
we believe will position us for continued growth," said Charles Price,
President and Chief Executive Officer of Charah Solutions. "We recently
refinanced our debt, which we expect to result in substantial annual
interest savings; successfully deployed our MP618™ fly ash beneficiation
technology, which will enhance our competitive position by ensuring a
steady and reliable supply of fly ash for ready-mix concrete producers,
and are nearing completion of a new facility for grinding granulated
blast furnace slag from the steel industry. We see a robust pipeline of
opportunities across all segments and remain committed to capitalizing
on the growing need for environmental remediation, continually working
to increase our market share and expand our service offerings, as well
as executing on our technology deployment."

FINANCIAL HIGHLIGHTS FOR THE THIRD QUARTER 2018

For the three months ended September 30, 2018, revenue was $186.0
million, an increase of $67.1 million, or 56%, compared to the year-ago
period. Gross profit increased $3.6 million, or 15%, to $26.7 million
from $23.2 million in the third quarter of 2017. Gross profit as a
percentage of revenue, or gross margin, declined to 14.4% from 19.5% a
year ago primarily due to lower gross margin in the Company's
Environmental Solutions segment.

Environmental Solutions Segment: Environmental Solutions
generated revenue of $103.8 million, an increase of $37.9 million, or
58%, from the year-ago period. The increase was primarily attributable
to the acquisition of SCB in March 2018 as well as certain remediation
and compliance projects, including accelerated revenues from an expected
early contract completion in North Carolina. Gross profit increased $1.2
million, or 6%, to $19.9 million from $18.7 million in the third quarter
a year ago. Gross profit declined as a percentage of revenue to 19.1%
from 28.3% in the year-ago period primarily due to a change in the mix
of projects, weather-related impacts and the acquisition of SCB.

Maintenance & Technical Services Segment: Maintenance &
Technical Services generated revenue of $82.2 million, an increase of
$29.2 million, or 55%, from the same quarter a year ago. The increase
was primarily attributable to the addition of nuclear services
offerings, which did not have a full quarter of operations in the
year-ago period. Gross profit increased $2.4 million, or 53%, to $6.9
million from $4.5 million in the third quarter of 2017. Gross profit as
a percentage of revenue was 8.3%, in line with the 8.4% in the third
quarter of 2017. Revenues within the nuclear services business were
adversely affected by market pressures within the nuclear industry to
reduce costs through deferral of discretionary spending coupled with the
Company's increased efficiencies, resulting in shorter outages. Because
of the lower margins associated with nuclear services, the impact on
Adjusted EBITDA in the third quarter was modest and, for full year 2018,
is expected to be offset by positive variances in other businesses. The
Company expects the industry shift toward shorter nuclear outages to
continue.

General and administrative expense increased $12.7 million in the third
quarter to $32.6 million from $19.9 million in the year-ago period. The
increase was primarily attributable to a $20 million reserve associated
with pending litigation, which does not reflect any insurance recovery,
partially offset by a reduction in non-recurring startup and other costs
recorded in 2017. The Company recently received an offer by APTIM to
settle outstanding litigation, and is reviewing that proposal along with
its insurance carrier. The Company believes the $20 million reserve is
sufficient to address the APTIM matter and all other outstanding legal
claims.

Operating income (loss) decreased $9.1 million in the third quarter to
$(5.9) million from $3.2 million in the third quarter a year ago. The
decrease was attributable to higher general and administrative expense,
partially offset by higher gross profit.

Interest expense increased $15.5 million in the third quarter to $17.0
million from $1.5 million in the third quarter a year ago. Approximately
$12.5 million of the increase was attributable to a non-recurring loss
on extinguishment of debt in conjunction with the Company's term loan
refinancing, consisting of a prepayment penalty of $2.1 million and the
non-cash amortization of $10.4 million of deferred financing costs.

Net income (loss) attributable to Charah Solutions for the three months
ended September 30, 2018, was $(17.4) million, a decrease of $18.5
million from $1.1 million for the three months ended September 30, 2017.
The decrease was primarily attributable to the decrease in operating
income and increased interest expense.

Adjusted Net income attributable to the Company, which excludes $12.5
million of non-recurring interest expense and $20.8 million of
non-recurring and non-operating legal costs and accruals and transaction
costs, was $7.6 million for the three months ended September 30, 2018.
On the same basis, Adjusted earnings per diluted share for the three
months ended September 30, 2018 was $0.25.

Adjusted EBITDA for the third quarter of 2018 was $32.6 million, an
increase of $11.9 million or 57% from the year-ago period of $20.7
million. Adjusted EBITDA margin was 17.5%, in line with the 17.4% in the
third quarter of 2017.

1 Adjusted net income, Adjusted earnings per diluted share
and Adjusted EBITDA are non-GAAP financial measures and the
reconciliation is included below.

ADDITIONAL BUSINESS UPDATES

Technology Initiatives

Charah Solutions continues to invest in technologies to help serve
customers' evolving needs and achieved several milestones during the
third quarter of 2018.

Outside Albany, New York, the Company is near completion of its first
facility using proprietary new technologies for grinding granulated
blast furnace slag from the steel industry as well as natural pozzolans
to create supplementary cementitious materials (SCMs) for sale to
concrete product manufacturers throughout the Northeast. The Company
expects to expand its use of this technology by investing in several
additional facilities throughout the United States where fly ash is not
readily available.

The Company recently installed its MP618TM thermal fly ash
beneficiation technology at its terminal in Sulphur, Louisiana. This
technology increases the level of high-quality Class F fly ash that
Charah Solutions can provide to meet a number of construction projects
in the Greater Lake Charles and Sulphur region.

The Company also installed new fly ash storage silos at the Oklahoma
Construction Materials rail terminal near Oklahoma City to further
expand its MultiSource™ materials distribution network of more than 30
nationwide sourcing locations.

Term Loan Refinancing

In September 2018, the Company refinanced its term loan and revolving
credit facility, which is expected to reduce interest expense by
approximately $8 million in 2019. The refinancing also resulted in
enhanced financial flexibility and a modest increase in the Company's
liquidity.

Expected Early Completion of Brickhaven Contract

As a result of a change in North Carolina law, Duke Energy recently
determined that it would discontinue deliveries of ash to the Company's
Brickhaven site once the Riverbend closure-by-removal project is
completed, which is expected to occur in December 2018. As a result of
this decision, Charah Solutions accelerated revenues and expenses
related to this contract in the third quarter of 2018, which had a net
positive impact on both gross profit and Adjusted EBITDA. At this time,
in accordance with the contract, the Company expects to receive payment
in the first half of fiscal year 2019 for unrecovered project
development costs and expected site closure costs. Upon receipt, a
portion of the proceeds will be used for debt reduction.

2018 GUIDANCE

In the fourth quarter of 2018, the Company expects to recognize
additional accelerated revenues and expenses related to the expected
early completion of the Brickhaven contract. The net impact is expected
to be positive for EBITDA. The Company expects revenues from its nuclear
services business to continue to be affected by the industry pressures
previously described, although the impact on EBITDA is expected to be
minimal and offset in other areas. In view of these factors affecting
the fourth quarter, the Company is providing guidance for the full year
2018 of revenues in the range of $720 million to $730 million, Net
income (loss) attributable to Charah Solutions in the range of $(5)
million to $2 million and Adjusted EBITDA in the range of $98 million to
$105 million.

The Company has not provided a reconciliation of its Net income (loss)
guidance for 2018 to its Adjusted EBITDA guidance for 2018 because of
the difficulty of making accurate forecasts and projections without
unreasonable efforts with respect to certain components of Net income
that are typically not included in Adjusted EBITDA.

CONFERENCE CALL

Charah Solutions will host a conference call at 8:30 a.m. ET today 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
Investor Relations 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 3296197 or "Charah Earnings."

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
Tuesday, November 13, 2018. 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 3296197.

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

ABOUT CHARAH SOLUTIONS

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 coal-fired and nuclear power
generation sites across the country. Based in Louisville, Kentucky,
Charah 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 coal and nuclear energy providers. 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 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 www.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. Without limiting the generality of the
foregoing, forward-looking statements contained in this press release
specifically include the expectations of plans, strategies, and
objectives and the anticipated financial and operating results of the
Company. 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. These include the timing of planned capital expenditures,
availability of acquisitions, economic and competitive conditions, the
condition of the capital markets generally, as well as the Company's
ability to access them and uncertainties regarding environmental
regulations or litigation and other legal or regulatory developments
affecting the Company's business and other important factors that could
cause actual results to differ materially from those projected as
described in the Company's reports filed with the Securities and
Exchange Commission.

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 income (loss) and Adjusted earnings per diluted share are
not financial measures determined in accordance with GAAP. Charah
defines Adjusted Net income (loss) as Net income (loss) attributable to
Charah Solutions plus, on a post-tax basis, certain legacy expenses,
amounts from a non-acquired business line, write-off of debt issuance
costs, prepayment penalties, non-recurring legal and start-up costs,
transaction-related expenses and other items. Adjusted earnings per
diluted share is based on Adjusted Net income (loss).

Adjusted EBITDA and Adjusted EBITDA margin are not financial measures
determined in accordance with GAAP. Charah defines Adjusted EBITDA as
net income before interest expense, income taxes, depreciation and
amortization, equity-based compensation, elimination of certain legacy
expenses, amounts from a non-acquired business line, non-recurring legal
and start-up costs, 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 income in arriving at Adjusted
EBITDA because these amounts are either non-recurring or can vary
substantially within Charah's 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 income 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's 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's computations of Adjusted EBITDA may not be identical to
other similarly titled measures of other companies. Charah 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 income, Charah's most directly comparable
financial measure calculated and presented in accordance with GAAP,
along with the Company's Adjusted EBITDA margin is included in the
supplemental financial data attached to this press release.

   
CHARAH SOLUTIONS, INC.
 
Condensed Consolidated & Combined Balance Sheets
(dollars in thousands unless otherwise indicated)
(Unaudited)
 
September 30, December 31,
2018 2017
 
Assets
Current assets:
Cash $ 3,981 $ 32,264
Trade accounts receivable 74,782 47,227
Receivable from affiliates 260 38
Costs and estimated earnings in excess of billings ("CIE") 62,549 7,959
Inventory 24,557 1,666
Prepaid expenses and other current assets 6,416   4,644  
Total current assets 172,545 93,798
Property and equipment:
Plant, machinery and equipment 73,816 42,565
Structural fill site improvements 55,760 55,760
Vehicles 15,630 16,478
Office equipment 1,473 638
Buildings and leasehold improvements 285 240
Structural fill sites 7,110   7,110  
Total property and equipment 154,074 122,791
Less accumulated depreciation and amortization (57,231 ) (22,861 )
Property and equipment, net 96,843 99,930
Other assets:
Trade name, net 34,900 34,330
Customer relationship, net 66,523 71,032
Technology, net 2,026
Non-compete and other agreements, net 1,265
Other intangible assets, net 69 87
Goodwill 73,468 73,468
Other assets 2,659
Deferred tax asset 3,076
Equity method investments 5,389   5,006  
Total assets $ 458,763   $ 377,651  
Liabilities and stockholders' and members' equity
Current liabilities:
Accounts payable $ 19,928 $ 15,247
Billings in excess of costs and estimated earnings ("BIE") 4,599 15,882
Notes payable, current maturities 20,766 19,996
Accrued payroll and bonuses 34,197 16,036
Asset retirement obligation 8,906 1,072
Purchase option liability, current portion 18,178 5,061
Accrued expenses 33,135 7,959
Other liabilities   198  
Total current liabilities 139,709 81,451
Long-term liabilities:
Purchase option liability, less current portion 20,183
Contingent earnout liability 12,037
Line of credit 5,106
Notes payable, less current maturities 214,596   227,698  
Total liabilities 371,448 329,332
Commitments and contingencies
Stockholders' and members' equity
Retained earnings 4,946 18,316
Common Stock - Charah Solutions, Inc.—$0.01 par value; 200,000,000
shares authorized, 29,082,988 shares issued and outstanding
291
Additional paid in capital - Charah Solutions, Inc. 81,202
Members' interest—Charah, LLC Series A, no par, 200,000,000 members'
interest authorized (104,109,890 issued and outstanding) as of
December 31, 2017. Series B, no par, 100,000,000 members' interest
authorized (35,199,063 issued and outstanding) as of December 31,
2017
19,718
Members' interest—Allied Power Management, LLC, Series A, no par,
200,000,000 members' interest authorized (7,210,555 issued and
outstanding) as of December 31, 2017. Series B, no par, 100,000,000
members' interest authorized (2,437,855 issued and outstanding) as
of December 31, 2017
  9,687  
Total stockholders' and members' equity 86,439 47,721
Non-controlling interest 876   598  
Total equity 87,315   48,319  
Total liabilities and equity $ 458,763   $ 377,651  
 
   
CHARAH SOLUTIONS, INC.
 
Condensed Consolidated & Combined Statements of Income
(dollars in thousands unless otherwise indicated)
(Unaudited)
 
Successor Predecessor
      Period from Period from
Three Three January 13, January 1,
Months Months Nine Months 2017 2017
Ended Ended Ended through through
September September September September January 12,
30, 2018 30, 2017 30, 2018 30, 2017 2017
Revenue $ 186,002 $ 118,911 $ 537,254 $ 252,280 $ 9,130
Cost of sales 159,296   95,757   460,901   192,903   7,301  
Gross profit 26,706 23,154 76,353 59,377 1,829
General and administrative expenses 32,625   19,942   65,944   33,921   3,170  
Operating income (loss) (5,919 ) 3,212 10,409 25,456 (1,341 )
Interest expense (17,034 ) (1,549 ) (26,708 ) (4,332 ) (4,181 )
Income from equity method investment 786   184   2,072   660   48  
Income (loss) before income taxes (22,167 ) 1,847 (14,227 ) 21,784 (5,474 )
Income tax expense (benefit) (5,667 )

-

  (2,761 )

-

 

-

 
Net income (loss) (16,500 ) 1,847 (11,466 ) 21,784 (5,474 )
Less income attributable to non-controlling interest 895   790   1,904   1,862   54  
Net income (loss) attributable to Charah Solutions, Inc. $ (17,395 ) $ 1,057   $ (13,370 ) $ 19,922   $ (5,528 )
Basic earnings (losses) per share $ (0.60 ) $ 0.04 $ (0.52 ) $ 0.84 N/A
Diluted earnings (losses) per share $ (0.60 ) $ 0.04 $ (0.52 ) $ 0.81 N/A
Pro forma net income (loss) information:
Net income (loss) attributable to Charah Solutions, Inc. before
provision for income taxes
$ (23,062 ) $ 1,057 $ (16,131 ) $ 19,922 $ (5,528 )
Pro forma provision for income taxes (5,667 ) 402   (4,358 ) 7,570   (2,101 )
Pro forma net income (loss) attributable to Charah Solutions, Inc. $ (17,395 ) $ 655   $ (11,773 ) $ 12,352   $ (3,427 )
 
   
CHARAH SOLUTIONS, INC.
 
Condensed Consolidated & Combined Statements of Cash Flows
(dollars in thousands unless otherwise indicated)
(Unaudited)
 
Successor Predecessor
  Period
from

Period from

January 1
Nine Months

January 13,

2017,
Ended

2017 through

through
September 30,

September 30,

January 12,
2018

2017

2017
Cash flows from operating activities:
Net income (loss) $ (11,466 ) $ 21,784 $ (5,474 )
Adjustments to reconcile net income to net cash provided by (used
in) operating activities:
Depreciation and amortization 33,898 19,601 763
Amortization of debt issuance costs 11,460 555

-

Deferred income tax benefit (3,076 )

-

-

Loss on sale of assets 749 458 123
Income from equity method investment (2,072 ) (660 ) (48 )
Distributions received from equity investment 1,689 933

-

Non-cash share-based compensation 2,449 2,344

-

Payment related to deferred stock plan

-

(18,888 )

-

Gain on interest rate swap (2,857 )

-

-

Increase (decrease) in cash due to changes in:
Trade accounts receivable (21,706 ) (26,096 ) (3,977 )
Receivable from affiliates (222 ) (77 )

-

Costs and estimated earnings in excess of billing (54,590 ) (6,501 ) 2,185
Inventory (4,480 ) (635 ) 278
Prepaid expenses and other current assets (1,642 ) (2,707 ) 71
Accounts payable 4,192 (135 ) 4,380
Billings in excess of costs and estimated earnings (11,283 ) 11,813 6
Accrued payroll and bonuses 18,161 23,323 (318 )
Asset retirement obligation 7,834 199

-

Accrued expenses 22,458   5,514   (2,407 )
Net cash (used in) provided by operating activities (10,504 ) 30,825 (4,418 )
Cash flows from investing activities:
Proceeds from the sale of equipment 1,297 780

-

Purchases of property and equipment (14,948 ) (7,591 )

-

Payments for business acquisitions, net of cash received (19,983 )

-

-

Purchase of intangible assets (31 )

-

-

Decrease in restricted cash

-

  3,358  

-

 
Net cash used in investing activities (33,665 ) (3,453 )

-

 
Cash flows from financing activities:
Net proceeds (payments) on line of credit 5,106 (43,801 ) 4,605
Proceeds from long-term debt 214,330 153,578 298
Principal payments on long-term debt (251,563 ) (137,005 ) (440 )
Payments of offering costs (8,916 )

-

-

Proceeds from note payable to related party, net

-

25,230

-

Issuance of common stock 59,241

-

-

Distributions to non-controlling interest (1,626 ) (1,764 )

-

Distributions to members (686 ) (16,085 )

-

 
Net cash provided by (used in) financing activities 15,886   (19,847 ) 4,463  
Net (decrease) increase in cash (28,283 ) 7,525 45
Cash, beginning of period 32,264   1,046   1,001  
Cash, end of period $ 3,981   $ 8,571   $ 1,046  
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 19,244 $ 5,959 $ 104
 
   
CHARAH SOLUTIONS, INC.
 
Non-GAAP Reconciliation: Net Income to Adjusted EBITDA
(dollars in thousands unless otherwise indicated)
(Unaudited)
 
Successor(1) Predecessor(2)
   

Nine
Months
Ended
September
30,
2018

 

Period
from
January
13, 2017
through
September
30,
2017

Period from
January 1,
2017
through
January
12,

2017

Three Months Ended
September 30,
2018 2017
(in thousands)
Net income (loss) attributable to Charah Solutions, Inc. $ (17,395 ) $ 1,057 $ (13,370 ) $ 19,922 $ (5,528 )
Interest expense 17,034 1,549 26,708 4,332 4,181
Income tax benefit (5,667 )

-

(2,761 )

-

-

Depreciation and amortization 16,763 6,802 33,898 19,601 763
Elimination of certain non-recurring and non-operating legal costs
and accruals(3)
20,033 5,426 25,202 5,445

-

Elimination of certain non-recurring startup costs(4)

-

3,464 1,480 3,911

-

Equity-based compensation 1,046 2,203 2,449 2,344

-

Transaction related expenses and other items 739   177   2,308   453   162  
Adjusted EBITDA $ 32,553   $ 20,678   $ 75,914   $ 56,008   $ (422 )
Adjusted EBITDA margin(5) 17.5% 17.4% 14.1% 22.2% (4.6)%
 
(1)   The successor columns represent the combined financial information
of Charah and Allied for the period from January 13, 2017 through
September 30, 2017 and January 1, 2018 through September 30, 2018 as
applicable, as reflected in our financial statements included
elsewhere in this Quarterly Report. The predecessor and successor
columns together represent our accounting Predecessor for purposes
of this Quarterly Report.
(2) The predecessor column represents the financial information of
Charah for the period from January 1, 2017 through January 12, 2017
as reflected in our audited financial statements included elsewhere
in this Quarterly Report. The predecessor and successor columns
together represent our accounting Predecessor for purposes of this
Quarterly Report.
(3) Represents non-recurring legal costs and accruals associated with
outstanding legal claims, which amounts are not representative of
legal costs that we historically incur in the ordinary course of our
business.
(4) Represents non-recurring start-up costs associated with the startup
of Allied and our nuclear services offerings, including the setup of
financial operations systems and modules, pre-contract expenses to
obtain initial contracts and the hiring of operational staff.
Because these costs are associated with the initial setup of the
Allied business to initiate the operations involved in our nuclear
services offerings, these costs are non-recurring in the normal
course of our business.
(5) Adjusted EBITDA margin is a non-GAAP measure that represents the
ratio of Adjusted EBITDA to total revenues. We use Adjusted EBITDA
margin to measure the success of our businesses in managing our cost
base and improving profitability.
 
 
CHARAH SOLUTIONS, INC.
 
Non-GAAP Reconciliation: Net Income to Adjusted Earnings and
Adjusted Earnings per Diluted Share
(dollars in thousands unless otherwise indicated)
(Unaudited)
 
Three Months Ended
September 30, 2018
Net income (loss) attributable to Charah Solutions, Inc. $(17,395)
Income tax benefit (5,667)
Loss on extinguishment of debt(1) 12,451
Elimination of certain non-recurring and non-operating legal costs
and accruals(2)
20,033
Transaction related expenses and other items(3) 739
Adjusted income before income taxes attributable to Charah
Solutions, Inc.
10,161
Adjusted income tax expense(4) (2,560)
Adjusted net income attributable to Charah Solutions, Inc. 7,601
Weighted average diluted share count $ 30,264
Adjusted earnings per diluted share $ 0.25
 
(1)   Represents non-recurring costs associated with our term loan
refinancing.
(2) Represents non-recurring legal costs and accruals associated with
outstanding legal claims, which amounts are not representative of
legal costs that we historically incur in the ordinary course of our
business.
(3) Represents non-recurring start-up costs associated with the startup
of Allied and our nuclear services offerings, including the setup of
financial operations systems and modules, pre-contract expenses to
obtain initial contracts and the hiring of operational staff.
Because these costs are associated with the initial setup of the
Allied business to initiate the operations involved in our nuclear
services offerings, these costs are non-recurring in the normal
course of our business.
(4) Represents the statutory tax rate of 25.19%, multiplied by adjusted
income before income taxes attributable to Charah Solutions, Inc.

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