UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10‑Q
____________________________
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number: 001-38523
____________________________
CHARAH SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
____________________________
Delaware
82-4228671
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
12601 Plantside Drive
Louisville, Kentucky
40299
(Address of principal executive offices)
(Zip Code)
 

Registrant’s telephone number, including area code: (502) 245-1353
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Common Stock, par value $0.01 per share
 
CHRA
 
New York Stock Exchange
____________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨
      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.
Large accelerated filer ¨
 
 
 
Accelerated filer ¨
Non-accelerated filer x
 
 
 
Smaller reporting company ¨
 
 
 
 
Emerging growth company x
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Exchange Act). Yes ¨ No x
As of August 1, 2020, the registrant had 29,985,763 shares of common stock outstanding.
 




CHARAH SOLUTIONS, INC.

QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020

TABLE OF CONTENTS
 
Page
 
 
 
 
 
 


i



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The information in this Quarterly Report on Form 10‑Q (this “Quarterly Report”) includes “forward‑looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements, other than statements of historical fact included in this Quarterly Report, regarding our strategy, future operations, financial position, estimated revenue and losses, projected costs, prospects, plans and objectives of management are forward‑looking statements. When used in this Quarterly Report, the words “may,” “will,” “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward‑looking statements. However, not all forward‑looking statements contain such identifying words. These forward‑looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. When considering forward‑looking statements, you should keep in mind the risk factors and other cautionary statements included in Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019, Part II, “Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in Part II, “Item 1A. Risk Factors” of this Quarterly Report and elsewhere herein. These forward‑looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.
Forward‑looking statements may include statements about:
the impacts from the COVID-19 pandemic on the Company’s business;
our business strategy;
our operating cash flows, the availability of capital and our liquidity;
our future revenue, income and operating performance;
our ability to sustain and improve our utilization, revenue and margins;
our ability to maintain acceptable pricing for our services;
our future capital expenditures;
our ability to finance equipment, working capital and capital expenditures;
competition and government regulations;
our ability to obtain permits and governmental approvals;
pending legal or environmental matters or liabilities;
environmental hazards;
industrial accidents;
business or asset acquisitions;
general economic conditions;
credit markets;
our ability to successfully develop our research and technology capabilities and to implement technological developments and enhancements;
uncertainty regarding our future operating results; and
plans, objectives, expectations and intentions, as well as any other statement contained in this Quarterly Report that are not statements of historical fact.
We caution you that these forward‑looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, the risks described under Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2019, Part II, “Item 1A. Risk Factors” of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and under Part II, “Item 1A. Risk Factors” of this Quarterly Report and elsewhere herein. Should one or more of the risks or uncertainties described occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward‑looking statements.
All forward‑looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary note. This cautionary note should also be considered in connection with any subsequent written or oral forward‑looking statements that we or persons acting on our behalf may issue. Except as otherwise required by applicable law, we disclaim any duty to update any forward‑looking statements, all of which are expressly qualified by the statements in this cautionary note, to reflect events or circumstances after the date of this Quarterly Report.

ii



PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CHARAH SOLUTIONS, INC.
Condensed Consolidated Balance Sheets
(in thousands, except par value amounts)
(Unaudited)
 
June 30, 2020
 
December 31, 2019
Assets
 
 
 
Current assets:
 
 
 
Cash
$
30,359

 
$
4,913

Restricted cash
14,268

 
1,215

Trade accounts receivable, net
56,790

 
50,570

Receivable from affiliates
72

 
390

Contract assets
19,733

 
20,641

Inventory
9,736

 
14,792

Income tax receivable
595

 
1,374

Prepaid expenses and other current assets
4,884

 
4,615

Total current assets
136,437

 
98,510

Property and equipment, net
75,155

 
85,294

Goodwill
74,213

 
74,213

Intangible assets, net
88,321

 
92,473

Equity method investments
4,851

 
5,078

Other assets
1,192

 
188

Total assets
$
380,169

 
$
355,756

 
 
 
 
Liabilities, mezzanine equity and stockholders equity
 
 
 
Current liabilities:
 
 
 
Accounts payable
17,433

 
25,510

Contract liabilities
14,955

 
582

Notes payable, current maturities
38,721

 
34,873

Asset retirement obligation, current portion
5,845

 
9,944

Purchase option liability
7,110

 
7,110

Accrued liabilities
37,496

 
35,490

Other current liabilities
1,086

 
1,116

Total current liabilities
122,646

 
114,625

Deferred tax liabilities
1,492

 
1,492

Contingent payments for acquisitions
11,586

 
11,481

Asset retirement obligation
5,103

 
5,187

Line of credit
24,500

 
19,000

Notes payable, less current maturities
153,831

 
150,698

Other liabilities
1,000

 

Total liabilities
320,158

 
302,483

 
 
 
 
Commitments and contingencies (see Note 15)


 


 
 
 
 
Mezzanine equity
 
 
 
Series A Preferred Stock — $0.01 par value; 50,000 shares authorized, 26 shares issued and outstanding as of June 30, 2020; aggregate liquidation preference of $27,000 as of June 30, 2020
24,549

 

 
 
 
 
Stockholders equity
 
 
 
Retained losses
(50,788
)
 
(33,002
)
Common Stock — $0.01 par value; 200,000 shares authorized, 29,986 and 29,624 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively
300

 
296

Additional paid-in capital
85,380

 
85,187

Total stockholders equity
34,892

 
52,481

Non-controlling interest
570

 
792

Total equity
35,462

 
53,273

Total liabilities, mezzanine equity and stockholders equity
$
380,169

 
$
355,756

See accompanying notes to condensed consolidated financial statements.

1



CHARAH SOLUTIONS, INC.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(Unaudited)
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Revenue
$
133,145


$
120,936


$
297,776


$
284,194

Cost of sales
122,411


123,001


276,245


270,880

Gross profit (loss)
10,734


(2,065
)

21,531


13,314

General and administrative expenses
9,637


17,400


22,393


31,385

Operating income (loss)
1,097


(19,465
)

(862
)

(18,071
)
Interest expense, net
(4,826
)

(4,102
)

(8,456
)

(9,154
)
Loss on extinguishment of debt




(8,603
)


Income from equity method investment
326


663


622


1,217

Loss before income taxes
(3,403
)

(22,904
)

(17,299
)

(26,008
)
Income tax benefit


(5,628
)



(6,389
)
Net loss
(3,403
)

(17,276
)

(17,299
)

(19,619
)
Less income attributable to non-controlling interest
133


750


487


1,226

Net loss attributable to Charah Solutions, Inc.
(3,536
)

(18,026
)

(17,786
)

(20,845
)
Deemed and imputed dividends on Series A Preferred Stock
(167
)



(167
)


Series A Preferred Stock dividends
(858
)



(969
)


Net loss attributable to common stockholders
$
(4,561
)

$
(18,026
)

$
(18,922
)

$
(20,845
)
 







Loss per common share:







Basic
$
(0.15
)

$
(0.61
)

$
(0.64
)

$
(0.71
)
Diluted
$
(0.15
)

$
(0.61
)

$
(0.64
)

$
(0.71
)
 







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







Basic
29,927


29,559


29,785


29,374

Diluted
29,927


29,559


29,785


29,374















See accompanying notes to condensed consolidated financial statements.

2



CHARAH SOLUTIONS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
(Unaudited)

 
For the Three Months Ended June 30, 2019
 
Mezzanine Equity
 
 
Permanent Equity
 
Preferred Stock (Shares)
 
Preferred Stock (Amount)
 
 
Common Stock (Shares)
 
Common Stock (Amount)
 
Additional Paid-In Capital
 
Retained
Losses
 
Total
 
Non-Controlling
Interest
 
Total
Balance, March 31, 2019

 
$

 
 
29,554,588

 
$
296

 
$
83,083

 
$
6,595

 
$
89,974

 
$
699

 
90,673

Net (loss) income

 

 
 

 

 

 
(18,026
)
 
(18,026
)
 
750

 
(17,276
)
Distributions

 

 
 

 

 

 

 

 
(426
)
 
(426
)
Share-based compensation expense

 

 
 

 

 
799

 

 
799

 

 
799

Shares issued under share-based compensation plans

 

 
 
31,577

 

 

 

 

 

 

Taxes paid related to net settlement of shares

 

 
 

 

 
(201
)
 

 
(201
)
 

 
(201
)
Balance, June 30, 2019

 
$

 
 
29,586,165

 
$
296

 
$
83,681

 
$
(11,431
)
 
$
72,546

 
$
1,023

 
$
73,569

 
For the Three Months Ended June 30, 2020
 
Mezzanine Equity
 
 
Permanent Equity
 
Preferred Stock (Shares)
 
Preferred Stock (Amount)
 
 
Common Stock (Shares)
 
Common Stock (Amount)
 
Additional Paid-In Capital
 
Retained
Losses
 
Total
 
Non-Controlling
Interest
 
Total
Balance, March 31, 2020
26,000

 
$
23,513

 
 
29,616,882

 
$
296

 
$
85,794

 
$
(47,252
)
 
$
38,838

 
$
568

 
$
39,406

Net (loss) income

 

 
 

 

 

 
(3,536
)
 
(3,536
)
 
133

 
(3,403
)
Distributions

 

 
 

 

 

 

 

 
(131
)
 
(131
)
Share-based compensation expense

 

 
 

 

 
738

 

 
738

 

 
738

Shares issued under share-based compensation plans

 

 
 
426,852

 
4

 
(4
)
 

 

 

 

Taxes paid related to net settlement of shares

 

 
 
(57,971
)
 

 
(123
)
 

 
(123
)
 

 
(123
)
Issuance of Series A Preferred Stock, net of issuance costs

 
750

 
 

 

 

 

 

 

 

Deemed and imputed dividends on Series A Preferred Stock

 
286

 
 

 

 
(167
)
 
 
 
(167
)
 

 
(167
)
Series A Preferred Stock dividends

 

 
 

 

 
(858
)
 

 
(858
)
 

 
(858
)
Balance, June 30, 2020
26,000

 
$
24,549

 
 
29,985,763

 
$
300

 
$
85,380

 
$
(50,788
)
 
$
34,892

 
$
570

 
$
35,462












See accompanying notes to condensed consolidated financial statements.

3



CHARAH SOLUTIONS, INC.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except share amounts)
(Unaudited)

 
For the Six Months Ended June 30, 2019
 
Mezzanine Equity
 
 
Permanent Equity
 
Preferred Stock (Shares)
 
Preferred Stock (Amount)
 
 
Common Stock (Shares)
 
Common Stock (Amount)
 
Additional Paid-In Capital
 
Retained
Losses
 
Total
 
Non-Controlling
Interest
 
Total
Balance, December 31, 2018

 
$

 
 
29,082,988

 
$
291

 
$
82,880

 
$
9,414

 
$
92,585

 
$
805

 
$
93,390

Net (loss) income

 

 
 

 

 

 
(20,845
)
 
(20,845
)
 
1,226

 
(19,619
)
Distributions

 

 
 

 

 

 

 

 
(1,008
)
 
(1,008
)
Share-based compensation expense

 

 
 

 

 
1,007

 

 
1,007

 

 
1,007

Shares issued under share-based compensation plans

 

 
 
531,830

 
5

 
(5
)
 

 

 

 

Taxes paid related to net settlement of shares

 

 
 
(28,653
)
 

 
(201
)
 

 
(201
)
 

 
(201
)
Balance, June 30, 2019

 
$

 
 
29,586,165

 
$
296

 
$
83,681

 
$
(11,431
)
 
$
72,546

 
$
1,023

 
$
73,569

 
For the Six Months Ended June 30, 2020
 
Mezzanine Equity
 
 
Permanent Equity
 
Preferred Stock (Shares)
 
Preferred Stock (Amount)
 
 
Common Stock (Shares)
 
Common Stock (Amount)
 
Additional Paid-In Capital
 
Retained
Losses
 
Total
 
Non-Controlling
Interest
 
Total
Balance, December 31, 2019

 
$

 
 
29,622,835

 
$
296

 
$
85,187

 
$
(33,002
)
 
$
52,481

 
$
792

 
$
53,273

Net (loss) income

 

 
 

 

 

 
(17,786
)
 
(17,786
)
 
487

 
(17,299
)
Distributions

 

 
 

 

 

 

 

 
(709
)
 
(709
)
Share based compensation expense

 

 
 

 

 
1,470

 

 
1,470

 

 
1,470

Shares issued under share-based compensation plans

 

 
 
426,852

 
4

 
(4
)
 

 

 

 

Taxes paid related to the net settlement of shares

 

 
 
(63,924
)
 

 
(137
)
 

 
(137
)
 

 
(137
)
Issuance of Series A Preferred Stock, net of issuance costs
26,000

 
24,263

 
 

 

 

 

 

 

 

Deemed and imputed dividends on Series A Preferred Stock

 
286

 
 

 

 
(167
)
 
 
 
(167
)
 

 
(167
)
Series A Preferred Stock dividends

 

 
 

 

 
(969
)
 

 
(969
)
 

 
(969
)
Balance, June 30, 2020
26,000

 
$
24,549

 
 
29,985,763

 
$
300

 
$
85,380

 
$
(50,788
)
 
$
34,892

 
$
570

 
$
35,462












See accompanying notes to condensed consolidated financial statements.

4



CHARAH SOLUTIONS, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
Six Months Ended
 
June 30,
 
2020
 
2019
Cash flows from operating activities:
 
 
 
Net loss
$
(17,299
)
 
$
(19,619
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 

Depreciation and amortization
13,274

 
11,635

Loss on extinguishment of debt
8,603

 

Paid-in-kind interest on long-term debt
1,663

 

Amortization of debt issuance costs
214

 
342

Deferred income tax benefit

 
(6,389
)
Loss on sale of fixed assets
281

 
1,305

Income from equity method investment
(622
)
 
(1,217
)
Distributions received from equity investment
849

 
1,059

Non-cash share-based compensation
1,470

 
1,007

(Gain) loss on interest rate swap
(30
)
 
1,796

Interest accreted on contingent payments for acquisition
105

 
135

Increase (decrease) in cash due to changes in:
 
 

Trade accounts receivable
(6,220
)
 
13,036

Contract assets and liabilities
15,280

 
(4,857
)
Inventory
4,975

 
3,491

Accounts payable
(7,887
)
 
4,452

Asset retirement obligation
(4,183
)
 
(5,120
)
Other assets and liabilities
(1,245
)
 
(4,484
)
Net cash provided by (used in) operating activities
9,228

 
(3,428
)
 
 
 

Cash flows from investing activities:
 
 

Proceeds from the sale of equipment
155

 
1,507

Purchases of property and equipment
(1,604
)
 
(11,491
)
Net cash used in investing activities
(1,449
)
 
(9,984
)
 
 
 

Cash flows from financing activities:
 
 

Net proceeds from line of credit
5,500

 
15,375

Proceeds from long-term debt
15,781

 
9,994

Principal payments on long-term debt
(12,435
)
 
(8,067
)
Payments of debt issuance costs
(1,543
)
 

Taxes paid related to net settlement of shares
(137
)
 
(201
)
Net proceeds from issuance of convertible Series A Preferred Stock
24,263

 

Distributions to non-controlling interest
(709
)
 
(1,008
)
Net cash provided by financing activities
30,720

 
16,093

Net increase in cash, cash equivalents and restricted cash
38,499

 
2,681

Cash, cash equivalents and restricted cash, beginning of period
6,128

 
6,900

Cash, cash equivalents and restricted cash, end of period
$
44,627

 
$
9,581





See accompanying notes to condensed consolidated financial statements.

5



 
Six Months Ended
 
June 30,
 
2020
 
2019
Supplemental disclosures of cash flow information:
 
 
 
Cash paid during the period for interest
$
7,703

 
$
4,889

Cash refunded during the period for taxes
779

 

 
 
 
 
Non-cash investing and financing transactions:
 
 
 
Changes in property and equipment included in accounts payables and accrued expenses
$
676

 
$

Sale of equipment through the issuance of a note receivable
1,450

 

Series A Preferred Stock dividends payable included in accrued expenses
850

 

Shares issued under share-based compensation plans
4

 

Supplemental Disclosures
As of June 30, 2020, included in the line of credit were gross proceeds from the Revolving Loan of $61,988 and gross payments on the Revolving Loan of $56,488.


























See accompanying notes to condensed consolidated financial statements.

6



CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements
(in thousands, except per share data)
(Unaudited)
1. Nature of Business and Basis of Presentation
Organization
Charah Solutions, Inc. (together with its 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 reorganization transactions described below other than certain activities related to the initial public offering (the “IPO”), which was completed on June 18, 2018. Charah Solutions is a holding company, the sole material assets of which consist of membership interests in Charah Management LLC, a Delaware limited liability company (“Charah Management”), and Allied Power Holdings, LLC, a Delaware limited liability company (“Allied Power Holdings”). Through the Company’s ownership of Charah Management and Allied Power Holdings, the Company owns the outstanding equity interests in Charah, LLC, a Kentucky limited liability company (“Charah”), and Allied Power Management, LLC, a Delaware limited liability company (“Allied”), the subsidiaries through which Charah Solutions operates its businesses.
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, 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) above 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 coal ash ponds and landfills at open and closed power plant sites while continuously operating and providing necessary electric power to communities nationwide. Services offered include a suite of 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.
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.
Basis for Presentation
The Company’s fiscal year ends December 31. The accompanying unaudited condensed consolidated financial statements include the assets, liabilities, stockholders’ equity and results of operations of the Company and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q. In the opinion of management, all adjustments considered necessary for a fair presentation have been included, which consist of normal recurring adjustments. Certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated and combined financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019.

7

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

Seasonality of Business
Based on historical trends, we expect our operating results to vary seasonally. Nuclear power generators perform turnaround and outages in the off-peak months when demand is lower and generation capacity is less constrained. As a result, our nuclear services offerings may have higher revenue volume in the spring and fall months. Variations in normal weather patterns can also cause changes in the consumption of energy, which may influence the demand and timing of associated services for our fossil services offerings. Inclement weather can impact construction-related activities associated with pond and landfill remediation, which affects the timing of revenue generation for our remediation and compliance services. Our byproduct sales are also seasonally impacted during winter months when the utilization of cement and cement products is generally lower.
Business Combinations
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 Solutions 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 with the allocation of the purchase price for the acquisition finalized as of March 31, 2019 with the recognized goodwill allocated to the Environmental Solutions segment. In November 2018, the $15,000 to be paid over time was reduced by $3,300. As of June 30, 2020, the present value of these future payments using a discount rate of 2.50% was determined to be $11,586. The Company expects the future payments to occur in 2021 and beyond.
2. Impact of the COVID-19 Pandemic
In March 2020, the World Health Organization categorized the disease caused by a novel coronavirus (“COVID-19”) as a pandemic and the President of the United States declared the COVID-19 pandemic to be a national emergency. The Company is a mission-critical contractor to the power generation industry, which has been identified as part of the Department of Homeland Security’s Critical Infrastructure Sector.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which includes modifications to the limitation on business interest expense and net operating loss carryforward provisions and provides a payment delay of certain employer payroll taxes during 2020. The Company estimates the payment of approximately $9,700 of employer payroll taxes otherwise due in 2020 will be delayed with 50% due by December 31, 2021 and the remaining 50% due by December 31, 2022. The CARES Act is not expected to have a material impact on the Company’s consolidated financial statements.
Our commitment to safety is a core value and an integral component of our culture. As the COVID-19 pandemic continues within the United States and around the world, our highest priority remains the safety of our employees and customers. Our business was built on an unwavering commitment to safety. To that end, we have taken immediate action to protect our employees, our customers, and our business. The mission-critical nature of our and our customers’ operations made it imperative to quickly initiate a series of contingency plans to ensure business continuity for our customers, the vast majority of whom are highly-regulated and who must continue operating to provide safe and reliable power to the country. In March 2020, as a response to the ongoing COVID-19 pandemic, we established a COVID-19 task force to oversee the Company’s initiatives, procedures and responses to addressing the potential impact of COVID-19. We have implemented measures to manage through possible service interruptions, and we are maintaining real-time communication across our entire organization and with our customers. As of August 11, 2020, we have not had any work stoppages.
With respect to our business operations, we have not observed any significant slowdown in activity on existing job sites as a result of the COVID-19 pandemic at this time and are in continuous communication with our utility customers. We have a shared commitment to partner with them in keeping all employees safe by abiding with their health and hygiene policies and aligning with their health risk mitigation procedures. In April 2020, we implemented a series of preemptive cost cutting and cost savings initiatives across the company including reductions in employee compensation, reductions in cash-based retainers to our Board of Directors, reduced hiring and significantly reducing discretionary spending including travel restrictions. In addition, we are implementing applicable benefits of the CARES Act.
3. Recent Accounting Pronouncements
Recently Adopted Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“ASC 606”), which provides a five-step framework to determine when and how revenue is recognized. We adopted ASC 606 on January 1, 2019, using the modified-retrospective method. Our financial results for annual reporting periods beginning January 1, 2019 and for interim reporting periods beginning January 1, 2020 are presented under the new accounting standard, while financial results for prior periods will continue to be reported in accordance with our historical accounting policy.
Revenue is measured based on the amount of consideration specified in a contract with a customer. Revenue is recognized when our performance obligations under the terms of the contract are satisfied which generally occurs with the transfer of control of the goods or services to the customer.

8

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

The adoption of ASC 606 had no impact on cash provided by or used in operating, investing, or financing activities on our accompanying unaudited condensed consolidated statement of cash flows and no impact on our unaudited condensed consolidated statement of comprehensive income. The impact of adoption on our unaudited condensed consolidated balance sheet as of June 30, 2020 was as follows:
 
 
 
Balances Without
 
Effect of Change
 
As Reported
 
Adoption of ASC 606
 
Higher / (Lower)
Assets
 
 
 
 
 
Accounts receivable, net
$
56,790

 
$
60,555

 
$
(3,765
)
Contract assets
19,733

 
15,968

 
3,765

 
 
 
 
 
 
Liabilities
 
 
 
 
 
Contract liabilities
14,955

 
14,490

 
465

 
 
 
 
 
 
Equity
 
 
 
 
 
Retained losses
$
(50,788
)
 
$
(50,323
)
 
$
(465
)
The impact of adoption on our unaudited statement of operations for the three months ended June 30, 2020 was as follows:
 
 
 
Balances Without
 
Effect of Change
 
As Reported
 
Adoption of ASC 606
 
Higher / (Lower)
Statement of Operations
 
 
 
 
 
Revenue
$
133,145

 
$
133,185

 
$
(40
)
Loss before income taxes
(3,403
)
 
(3,363
)
 
(40
)
Net loss
(3,403
)
 
(3,363
)
 
(40
)
The impact of adoption on our unaudited statement of operations for the six months ended June 30, 2020 was as follows:
 
 
 
Balances Without
 
Effect of Change
 
As Reported
 
Adoption of ASC 606
 
Higher / (Lower)
Statement of Operations
 
 
 
 
 
Revenue
$
297,776

 
$
297,736

 
$
40

Loss before income taxes
(17,299
)
 
(17,339
)
 
40

Net loss
(17,299
)
 
(17,339
)
 
40

In January 2017, the FASB issued ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. This ASU simplifies the measurement of goodwill impairment by eliminating the requirement that an entity compute the implied fair value of goodwill based on the fair values of its assets and liabilities to measure impairment. Instead, goodwill impairment will be measured as the difference between the fair value of the reporting unit and the carrying value of the reporting unit. This ASU also clarifies the treatment of the income tax effect of tax-deductible goodwill when measuring goodwill impairment loss. In October 2019, the FASB delayed the effective date for implementation of ASU No.2017-04. The Company adopted ASU No. 2017-04 as of April 1, 2020. The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU No. 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 12 months or less). At the commencement date of the lease, the Company will recognize: (i) a lease liability for the Company’s obligation to make payments under the lease agreement, measured on a discounted basis; and (ii) 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. This 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 No. 2018-11, which provided an additional (and optional) transition method that permits application of this ASU at the adoption date with recognition of a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In June 2020, the FASB issued ASU No. 2020-05 and delayed the effective date of this ASU, extending the effective date for non-public business entities, and making the ASU effective for the Company for the fiscal year ending December 31, 2022, and interim periods within the fiscal year ending December 31, 2023, with early adoption permitted. The Company has not yet selected a transition method and is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements.

9

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) - Measurement of Credit Losses on Financial Instruments, which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. The new model will apply to: (1) loans, accounts receivable, trade receivables, and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income, and (4) beneficial interests in securitized financial assets. The amendments contained in this ASU will be applied through a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is adopted. In November 2018, the FASB issued ASU No. 2018-19, which amended the effective date of ASU No. 2016-13 and clarified that receivables arising from operating leases are not within the scope of Subtopic 326-20. In October 2019, the FASB delayed the effective date of this ASU, extending the effective date for non-public business entities and making the ASU effective for the Company for the fiscal year ending December 31, 2023, and interim periods therein, with early adoption permitted. The Company is currently evaluating the effect that the adoption of this ASU will have on its consolidated financial statements.
In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes. This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The ASU will be effective for annual reporting periods beginning after December 15, 2021 and interim periods in fiscal years beginning after December 15, 2022 and early adoption is permitted. The Company is still assessing the impact of ASU No. 2019-12 on its consolidated financial statements.
4. Revenue
We disaggregate our revenue from customers by type of service and by geographic region as we believe it best depicts how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. See details in the tables below.
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Environmental Solutions
 
 
 
 
 
 
 
Product sales
$
21,400

 
$
24,890

 
$
43,161

 
$
47,402

Construction contracts
15,347

 
11,900

 
30,194

 
46,207

Services
1,115

 
160

 
1,172

 
1,724

Total Environmental Solutions
37,862

 
36,950

 
74,527

 
95,333

 
 
 
 
 
 
 
 
Maintenance and Technical Services
 
 
 
 
 
 
 
Services
95,283

 
83,986

 
223,249

 
188,861

Total Maintenance and Technical Services
95,283

 
83,986

 
223,249

 
188,861

Total revenue
$
133,145

 
$
120,936

 
$
297,776

 
$
284,194

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Environmental Solutions
 
 
 
 
 
 
 
United States
$
37,651

 
$
36,950

 
$
73,681

 
$
95,333

Foreign
211

 

 
846

 

Total Environmental Solutions
37,862

 
36,950

 
74,527

 
95,333

 
 
 
 
 
 
 
 
Maintenance and Technical Services
 
 
 
 
 
 
 
United States
95,283

 
83,986

 
223,249

 
188,861

Total Maintenance and Technical Services
95,283

 
83,986

 
223,249

 
188,861

Total revenue
$
133,145

 
$
120,936

 
$
297,776

 
$
284,194

As of June 30, 2020, the Company had remaining performance obligations with an aggregate transactions price of $125,266 on construction contracts for which we recognize revenue over time. We expect to recognize approximately 35% of our remaining performance obligations as revenue during the remainder of 2020, 29% in 2021, 10% in 2022, and 26% thereafter. Revenue associated with our remaining performance obligations includes performance obligations related to our construction contracts. The balance of remaining performance obligations does not include variable consideration that was determined to be constrained as of June 30, 2020. As of June 30, 2020, we included unapproved change orders associated with project scope changes of $1,655 included in determining the profit or loss on certain construction contracts.

10

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

5. Balance Sheet Items
Allowance for doubtful accounts
The following table presents the changes in the allowance for doubtful accounts:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Balance, beginning of period
$
254

 
$

 
$
146

 
$

Add: provision

 

 
119

 

Less: deduction and other adjustments
(5
)
 

 
(16
)
 

Balance, end of period
$
249

 
$

 
$
249

 
$

Property and equipment, net
The following table shows the components of property and equipment, net:
 
June 30, 2020
 
December 31, 2019
Plant, machinery and equipment
$
79,046

 
$
75,578

Structural fill site improvements
55,760

 
55,760

Vehicles
19,263

 
19,163

Office equipment
2,785

 
2,741

Buildings and leasehold improvements
262

 
262

Structural fill sites
7,110

 
7,110

Construction in progress
7,519

 
12,324

Total property and equipment
$
171,745

 
$
172,938

Less: accumulated depreciation
(96,590
)
 
(87,644
)
Property and equipment, net
$
75,155

 
$
85,294

Depreciation expense was $4,692 and $3,285 for the three months ended June 30, 2020 and 2019, respectively, and $9,121 and $10,332 for the six months ended June 30, 2020 and 2019, respectively.
Accrued liabilities
 
June 30, 2020
 
December 31, 2019
Accrued expenses
$
23,120

 
$
20,456

Accrued payroll and bonuses
12,812

 
13,273

Accrued dividends
850

 

Accrued interest
714

 
1,761

Accrued liabilities
$
37,496

 
$
35,490

Asset Retirement Obligations
The Company owns and operates two structural fill sites that will have continuing maintenance and monitoring requirements subsequent to their closure. As of June 30, 2020 and December 31, 2019, the Company has accrued $10,948 and 15,131, respectively, for the asset retirement obligation.
The following table reflects the activity for the asset retirement obligation:

11

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Balance, beginning of period
$
12,987

 
$
24,218

 
$
15,131

 
$
26,065

Liabilities incurred

 

 

 
1,017

Liabilities settled
(2,201
)
 
(3,575
)
 
(4,533
)
 
(6,782
)
Accretion
162

 
302

 
350

 
645

Balance, end of period
10,948

 
20,945

 
10,948

 
20,945

Less: current portion
(5,845
)
 
(14,126
)
 
(5,845
)
 
(14,126
)
Non-current portion
$
5,103

 
$
6,819

 
$
5,103

 
$
6,819

6. Equity Method Investment
Charah has an investment in a company that provides ash management and remarketing services to the electric utility industry. Charah accounts for its investment under the equity method of accounting because Charah has significant influence over the financial and operating policies of the company. Charah had a receivable due from the equity method investment of $72 and $96 at June 30, 2020 and December 31, 2019, respectively. 
Summarized balance sheet information of our equity method investment entity is as follows: 
 
June 30, 2020
 
December 31, 2019
Current assets
$
2,051

 
$
2,482

Noncurrent assets
339

 
395

Total assets
$
2,390

 
$
2,877

Current liabilities
288

 
321

Equity of Charah
4,851

 
5,078

Equity of joint venture partner
(2,749
)
 
(2,522
)
Total liabilities and members’ equity
$
2,390

 
$
2,877

Summarized financial performance of our equity method investment entity is as follows: 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Revenue
$
1,546

 
$
2,533

 
$
3,024

 
$
4,753

Net income
651

 
1,325

 
1,243

 
2,433

Charah Solutions’ share of net income
326

 
663

 
622

 
1,217

The following table reflects our proportional ownership activity in our investment account: 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2020
 
2019
 
2020
 
2019
Opening balance
$
4,781

 
$
5,102

 
$
5,078

 
$
5,060

Distributions
(256
)
 
(547
)
 
(849
)
 
(1,059
)
Share of net income
326

 
663

 
622

 
1,217

Closing balance
$
4,851

 
$
5,218

 
$
4,851

 
$
5,218

 
7. Distributions to Stockholders, Receivable from Affiliates, and Related Party Transactions
Prior to the Company’s June 18, 2018 corporate reorganization, the Company made certain distributions to stockholders and members to cover their tax liabilities. As of June 30, 2020 and December 31, 2019, the receivable from affiliates associated with these distributions were $0 and $294, respectively.

12

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

ATC Group Services LLC (“ATC”), an entity owned by BCP, our majority stockholder, provided environmental consulting and engineering services at certain service sites. Expenses to ATC were $64 and $94 for the three and six months ended June 30, 2020, respectively. The Company had no receivables outstanding from ATC at June 30, 2020 and December 31, 2019. The Company had payables and accrued expenses, net of credit memos, due to ATC of $31 and $62 at June 30, 2020 and December 31, 2019, respectively.
Brown & Root Industrial Services, LLC (“B&R”), an entity 50% owned by BCP, our majority stockholder, provided subcontracted construction services at one of our remediation and compliance service sites. Expenses to B&R were $0 and $871 for the three months ended June 30, 2020 and 2019, respectively and $0 and $1,311 for the six months ended June 30, 2020 and 2019, respectively. The Company had no receivables outstanding from B&R at June 30, 2020 and December 31, 2019. The Company had payables and accrued expenses, net of credit memos, due to B&R of $0 and $254 at June 30, 2020 and December 31, 2019, respectively.
The Company rented their corporate office through October 2019 through a triple net lease and rented housing at work sites and a condo through March 2020 from Price Real Estate, LLC (“Price Real Estate”), an entity owned by a stockholder of the Company. Rental expense associated with Price Real Estate was $0 and $116 for the three months ended June 30, 2020 and 2019, respectively and $0 and $232 for the six months ended June 30, 2020 and 2019, respectively. The Company had no receivables outstanding from Price Real Estate at June 30, 2020 and December 31, 2019. The Company had a payable due to Price Real Estate of $0 and $2 at June 30, 2020 and December 31, 2019, respectively.
PriceFlight, LLC (“PriceFlight”), an entity owned by a stockholder of the Company, provided flight services to the Company. Expenses to PriceFlight for flight services were $0 for the three months ended June 30, 2020 and 2019, respectively and $0 and $85 for the six months ended June 30, 2020 and 2019, 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.
As further discussed in Note 11, in March 2020, the Company entered into an agreement with an investment fund affiliated with BCP to sell 26,000 shares of Preferred Stock.
8. Goodwill and Intangible Assets
The Company’s goodwill and intangible assets consist of the following:
 
June 30, 2020
 
December 31, 2019
 
Gross Carrying Amount
 
Accumulated
Amortization
 
Gross Carrying Amount
 
Accumulated
Amortization
Definite-lived intangibles:
 
 
 
 
 
 
 
Customer relationships
$
78,942

 
$
(26,885
)
 
$
78,942

 
$
(22,938
)
Technology
2,003

 
(451
)
 
2,003

 
(351
)
Non-compete and other agreements
289

 
(289
)
 
289

 
(253
)
SCB trade name
694

 
(312
)
 
694

 
(243
)
Rail easement
110

 
(110
)
 
110

 
(110
)
Total
$
82,038

 
$
(28,047
)
 
$
82,038

 
$
(23,895
)
 
 
 
 
 
 
 
 
Indefinite-lived intangibles:
 
 
 
 
 
 
 
Charah trade name
$
34,330

 
 
 
$
34,330

 
 
Goodwill
74,213

 
 
 
74,213

 
 
Total
$
108,543

 
 
 
$
108,543

 
 
Definite-Lived Intangible Assets
As of June 30, 2020 and December 31, 2019, definite-lived intangible assets included customer relationships, technology, non-compete and other agreements, the SCB trade name and a rail easement. These assets are amortized on a straight-line basis over their estimated useful lives as shown in the table below. Amortization expense was $2,057 and $2,095 during the three months ended June 30, 2020 and 2019, respectively, and $4,152 and $4,211 during the six months ended June 30, 2020 and 2019, respectively.

13

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

Definite-Lived Intangible Asset
 
Useful Life
Customer relationships
 
10 years
Technology
 
10 years
Non-compete and other agreements
 
2 years
SCB trade name
 
5 years
Rail easement
 
2 years
Goodwill and Indefinite-Lived Intangible Assets
Goodwill represents the excess purchase price over the fair value of the net assets acquired in a business combination. Our goodwill included in the unaudited condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019 was $74,213. Our intangible assets, net as of June 30, 2020 and December 31, 2019 include a trade name valued at $34,330 that is considered to have an indefinite life.
Goodwill and indefinite-lived intangible assets are not amortized, but instead are tested for impairment annually or more often if events or changes in circumstances indicate that the fair value of the asset may have decreased below its carrying value. We perform our impairment test effective October 1st of each year and evaluate for impairment indicators between annual impairment tests. There were no impairment triggering events during the quarter ended June 30, 2020 for the Maintenance and Technical Services reporting unit. The Company identified a triggering event during the quarter ended June 30, 2020 for the Environmental Solutions reporting unit that was primarily attributable to the declining macroeconomic environment resulting from the COVID-19 pandemic and its potential impact on the Company and its industry. The Company performed the impairment analysis for the Environmental Solutions reporting unit and determined that no impairment of goodwill occurred as a result of this triggering event. The Environmental Solutions reporting unit’s fair value, as calculated, was approximately 6.0% greater than its book value as of June 1, 2020, the date of our impairment analysis.
The valuation used to test goodwill for impairment is dependent upon a number of significant estimates and assumptions, including macroeconomic conditions, growth rates, competitive activities, cost containment, margin expansion and the Company's business plans. We believe these estimates and assumptions are reasonable. However, future changes in the judgments, assumptions and estimates that are used in our impairment testing for goodwill, including discount and tax rates or future cash flow projections, could result in significantly different estimates of the fair values. As a result of these factors and the related cushion as of the date of the previous annual impairment test, goodwill for the Environmental Solutions reporting unit is more susceptible to impairment risk.
The most significant assumptions utilized in the determination of the estimated fair value of the Environmental Solutions reporting unit are the net sales and earnings growth rates (including residual growth rates) and the discount rate. The residual growth rate represents the rate at which the reporting unit is expected to grow beyond the shorter-term business planning period. The residual growth rate utilized in our fair value estimate is consistent with the reporting unit operating plans and approximates expected long-term category market growth rates and inflation. The discount rate, which is consistent with a weighted average cost of capital that is likely to be expected by a market participant, is based upon industry required rates of return, including consideration of both debt and equity components of the capital structure. Our discount rate may be impacted by adverse changes in the macroeconomic environment, volatility in the equity and debt markets or other factors.
While management can and has implemented strategies to address these events, changes in operating plans or adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that would trigger future impairment charges of the reporting unit's goodwill balance. The table below provides a sensitivity analysis for the Environmental Solutions reporting unit, utilizing reasonably possible changes in the assumptions for the shorter-term revenue and residual growth rates and the discount rate, to demonstrate the potential impacts to the estimated fair values. The table below provides, in isolation, the estimated fair value impacts related to (i) a 50-basis point increase to the discount rate assumption and (ii) a 75-basis point decrease to our shorter-term revenue and residual growth rates assumptions, both of which would result in impairment charges.
 
Approximate Percent Decrease in Estimated Fair Value
 
+50 bps Discount Rate
 
-75 bps Growth Rate
Environmental Solutions reporting unit
6.3
%
 
7.9
%
9. Credit Agreement
On September 21, 2018, we entered into a credit agreement (the “Credit Facility”) by and among us, the lenders party thereto from time to time and Bank of America, N.A., as administrative agent (the “Administrative Agent”). The Credit Facility includes:
a revolving loan not to exceed $50,000 (the “Revolving Loan”);
a term loan of $205,000 (the “Closing Date Term Loan”); and
a commitment to loan up to a further $25,000 in term loans, which expires in March 2020 (the “Delayed Draw Commitment” and the term loans funded under such Delayed Draw Commitment, the “Delayed Draw Term Loan”, together with the Closing Date Term Loan, the “Term Loan”).

14

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

After the Third Amendment (as defined below), all amounts associated with the Revolving Loan and the Term Loan under the Credit Facility will mature in July 2022 as discussed more fully below. The interest rates per annum applicable to the loans under the Credit Facility are based on a fluctuating rate of interest measured by reference to, at our election, either (i) the Eurodollar rate, currently the London Inter-bank Offered Rate (“LIBOR”), or (ii) an alternative base rate. Defined margins are added to the interest rate based upon our election of either the Eurodollar rate or the base rate. Customary fees are payable in respect of the Credit Facility and include (i) commitment fees for the unused portions of the Credit Facility and (ii) fees on outstanding letters of credit. Amounts borrowed under the Credit Facility are secured by substantially all of the assets of the Company.
The Credit Facility contains various customary representations and warranties, and restrictive covenants that, among other things and subject to specified exceptions, restrict the ability of us and our restricted subsidiaries to grant liens, incur indebtedness (including guarantees), make investments, engage in mergers and acquisitions, make dispositions of assets, make restricted payments or change the nature of our or our subsidiaries’ business. The Credit Facility contains financial covenants related to the consolidated net leverage ratio and the fixed charge coverage ratio (as defined in the Credit Facility), which have been modified as described below.
The Credit Facility also contains certain affirmative covenants, including reporting requirements, such as the delivery of financial statements, certificates and notices of certain events, maintaining insurance and providing additional guarantees and collateral in certain circumstances.
The Credit Facility includes customary events of default, including non-payment of principal, interest or fees as they come due, violation of covenants, inaccuracy of representations or warranties, cross-default to certain other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of guarantees or security interests, material judgments and change of control.
The Revolving Loan provides a principal amount of up to $50,000, reduced by outstanding letters of credit. As of June 30, 2020, $24,500 was outstanding on the Revolving Loan and $14,529 of letters of credit were outstanding.
But for Amendment No. 2 to Credit Agreement and Waiver (the “Second Amendment”), as of June 30, 2019, we would not have been in compliance with the requirement to maintain a consolidated net leverage ratio of 3.75 to 1.00 under the Credit Facility. On August 13, 2019, we entered into the Second Amendment, pursuant to which, among other things, the required lenders agreed to waive such non-compliance.
In addition, pursuant to the terms of the Second Amendment, the Credit Facility was amended to revise the required financial covenant ratios, which have been modified as described below. As consideration for these accommodations, we agreed that amounts borrowed pursuant to the Delayed Draw Commitment would not exceed $15,000 at any one time outstanding (without reducing the overall Delayed Draw Commitment amount). Further, the margin of interest charged on all outstanding loans was increased to 4.00% for loans based on LIBOR and 3.00% for loans based on the alternative base rate. The Second Amendment revised the amount of (i) the commitment fees to 0.35% at all times for the unused portions of the Credit Facility and (ii) fees on outstanding letters of credit to 3.35% at all times. The Second Amendment also added a requirement to make two additional scheduled prepayments of outstanding loans under the Credit Facility, including a payment of $50,000 on or before September 13, 2019 and an additional payment of $40,000 on or before March 31, 2020. The $50,000 payment was made before September 13, 2019, using proceeds of the Brickhaven deemed termination payment. We are required to pay the Administrative Agent an amendment fee in an amount equal to 1.00% of the total credit exposure under the Credit Facility immediately prior to the effectiveness of the Second Amendment, with such fee due and payable on August 16, 2020, provided that the Credit Facility has not been terminated prior to such date.
The Second Amendment also included revisions to the restrictive covenants, including removing certain exceptions to the restrictions on our ability to make acquisitions, to make investments and to make dividends or other distributions. After giving effect to the Second Amendment, we will not be permitted to make any distributions or dividends to our stockholders without the consent of the required lenders.
In March 2020, the Company entered into Amendment No. 3 to Credit Agreement (the “Third Amendment”).
Pursuant to the terms of the Third Amendment, the Credit Facility was amended to waive the mandatory $40,000 prepayment due on or before March 31, 2020, and to revise the required financial covenant ratios such that, after giving effect to the Third Amendment, we are not required to comply with any financial covenants through December 30, 2020. After December 30, 2020, we will be required to comply with a maximum consolidated net leverage ratio of 6.50 to 1.00 from December 31, 2020 through June 29, 2021, decreasing to 6.00 to 1.00 from June 30, 2021 through December 30, 2021, and to 3.50 to 1.00 as of December 31, 2021 and thereafter. After giving effect to the Third Amendment, we will also be required to comply with a minimum fixed charge coverage ratio of 1.00 to 1.00 as of December 31, 2020, increasing to 1.20 to 1.00 as of March 31, 2021 and thereafter. Our ability to comply with such financial covenants is dependent upon the Company’s forecasted leverage and adjusted EBITDA for the applicable periods, which could be impacted by the effects of COVID-19 or other unforeseen factors. In the event that we are unable to comply in the future with such financial covenants upon delivery of our financial statements pursuant to the terms of the Credit Facility, an Event of Default (as defined in the Credit Facility) will have occurred and the Administrative Agent can then, following a specified cure period, declare the unpaid principal amount of all outstanding loans, all interest accrued and unpaid thereon, and all other amounts payable to be immediately due and payable by the Company.
The Third Amendment increased the maximum amount available to be borrowed pursuant to the Delayed Draw Commitment from $15,000 to $25,000, subject to certain quarterly amortization payments. The Third Amendment also included revisions to the restrictive covenants, including increasing the amount of indebtedness that the Company may incur in respect of certain capitalized leases from $50,000 to $75,000.

15

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

Under the Third Amendment, the Company has agreed to make monthly amortization payments in respect of term loans beginning in April 2020, and to move the maturity date for all loans under the Credit Facility to July 31, 2022 (the “Maturity Date”). In addition, if at any time the outstanding principal amount of the Delayed Draw Term Loans exceeds $10,000, we will incur additional interest at a rate equal to 10.0% per annum on all daily average amounts exceeding $10,000 which was paid at March 31, 2020 and will be payable at the Maturity Date. Further, the Third Amendment requires mandatory prepayments of revolving loans with any cash held by the Company in excess of $10,000, which excludes the amount of proceeds received in respect of the Preferred Stock Offering (as defined below) to the extent such funds are used for liquidity and general corporate purposes. The Company has also agreed to an increase of four percent (4%) to the interest rate applicable to the Closing Date Term Loan that will be compounded monthly and paid in-kind by adding such portion to the outstanding principal amount.
As a condition to entering into the Second Amendment, we are required to pay the Administrative Agent an amendment fee (the “Second Amendment Fee”) in an amount equal to 1.50% of the total credit exposure under the Credit Facility, immediately prior to the effectiveness of the Second Amendment. Of the Second Amendment Fee, 0.50% was due and paid on October 15, 2019 and 1.00% of such Second Amendment Fee will become due and payable on August 16, 2020 if the facility has not been terminated on or prior to August 15, 2020. We are also required to pay the Administrative Agent an amendment fee associated with the Third Amendment (the “Third Amendment Fee”) in an amount equal to 0.20% of the total credit exposure under the Credit Facility, immediately prior to the effectiveness of the Third Amendment, with such Third Amendment Fee paid on June 30, 2020. Finally, we will pay an additional fee with respect to the Third Amendment in the amount of $2,000 with such fee being due and payable on the Maturity Date; provided that if the facility is terminated by December 31, 2020, 50% of this fee shall be waived.
In accordance with ASC 470, Debt, the Company calculated the present value of the cash flows for purposes of applying the 10 percent cash flow test for the Third Amendment and concluded that the original and new debt instruments were substantially different, necessitating that the Third Amendment be accounted for as an extinguishment. The Company capitalized third-party fees of $1,623 associated with the Third Amendment that will be amortized prospectively through interest expense, net in the consolidated statement of operations using the effective interest method through the Maturity Date. Fees payable to the lenders (as discussed above) of $5,162 were associated with the extinguishment of the old debt instrument and included in loss on extinguishment of debt in the accompanying unaudited condensed consolidated statements of operations. The Company wrote-off unamortized debt issuance costs of $3,441, which is included in loss on extinguishment of debt in the accompanying unaudited condensed consolidated statements of operations.


16

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

10. Notes Payable
The following table summarizes the major components of debt at each balance sheet date and provides maturities and interest rate ranges for each major category as of June 30, 2020 and December 31, 2019
 
June 30, 2020
 
December 31, 2019
Various equipment notes entered into in November 2017, payable in monthly installments ranging from $6 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 $2,752 as of June 30, 2020.
$
3,411

 
$
3,937

Various equipment notes entered into in 2018, payable in monthly installments ranging from $1 to $39, including interest ranging from 5.6% to 6.8%, maturing in March 2023 through May 2025. The notes are secured by equipment with a net book value of $8,756 as of June 30, 2020.
9,453

 
10,429

Various equipment notes entered into in 2019, payable in monthly installments ranging from $2 to $23, including interest ranging from 3.9% to 6.4%, maturing in April 2021 through December 2024. The notes are secured by equipment with a net book value of $3,386 as of June 30, 2020.
3,917

 
4,333

In June 2018, the Company entered into a $12,000 non-revolving credit note with a bank. The credit note converted to a term loan on April 10, 2019 and was amended in November 2019, December 2019 and April 2020. Pursuant to the terms of the amendment, this loan was amended to require a maturity date of December 31, 2020 and interest on borrowings to be calculated at a fixed rate per annum equal to 5.9%. The note is secured by equipment with a net book value of $7,406 as of June 30, 2020.
8,641

 
9,900

In July 2019, the Company entered into a commercial insurance premium financing agreement, payable in monthly installments of $169, including interest of 4.4%, that matured in March 2020.

 
506

In April 2020, the Company entered into a commercial insurance premium financing agreement, payable in monthly installments ranging from $22 to $57, including interest of 3.4%, maturing in February 2021.
549

 

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 $5,689 as of June 30, 2020.
6,766

 
7,719

Pursuant to the terms of the Third Amendment, the Closing Date Term Loan and the Delayed Draw Term Loan entered into in September 2018 as part of the Syndicated Credit Facility (see also Note 9), maturing July 2022. The interest rate applicable to the Closing Date Term Loan and the Delayed Draw 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. With respect to the Closing Date Term Loan, principal payments required are $854 monthly from July 2020 through September 2020, $1,153 monthly from October 2020 through December 2020, $1,280 monthly from January 2021 through December 2021, and $1,500 monthly thereafter. With respect to the Delayed Draw Term Loan, principal payments required are $833 monthly from July 2020 through March 2021. Beginning in April 2021, the then outstanding principal balance of the Delayed Draw Term Loans will be payable in sixteen equal installments monthly thereafter. The term loan is secured by substantially all the assets of the Company and is subject to certain financial covenants.
161,225

 
152,188

Total
193,962

 
189,012

Less debt issuance costs
(1,410
)
 
(3,441
)
 
192,552

 
185,571

Less current maturities
(38,721
)
 
(34,873
)
Notes payable due after one year
$
153,831

 
$
150,698



17

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

11. Mezzanine Equity
As a condition to the Third Amendment, the Company entered into an agreement with an investment fund affiliated with BCP to sell 26,000 shares of Series A Preferred Stock, par value $0.01per share (the “Preferred Stock”), with an initial aggregate liquidation preference of $26,000, net of a 3% Original Issue Discount (“OID”) of $780 for net proceeds of $25,220 in a private placement (the “Preferred Stock Offering”). Proceeds from the Preferred Stock Offering will be used for liquidity and general corporate purposes. In connection with the issuance of the Preferred Stock, the Company incurred direct expenses of $956, including financial advisory fees, closing costs, legal expenses and other offering-related expenses. The Preferred Stock was initially recorded net of OID and direct expenses, which will be accreted through paid-in-capital as a deemed dividend from the date of issuance through the first possible known redemption date, March 16, 2023. As of June 30, 2020, the Company had accrued dividends of $850 associated with the Preferred Stock, which was recorded at a fair value of $850 using observable information for similar items and is classified as a level 2 fair value measurement.
Dividend Rights The Preferred Stock ranks senior to the shares of the Company’s common stock, with respect to dividend rights and rights on the distribution of assets in any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The Preferred Stock had an initial liquidation preference of $1 (one thousand dollars) per share.
The holders of the Preferred Stock are entitled to a cumulative dividend paid in cash at the rate of 10.0% per annum, payable on a quarterly basis. If we do not declare and pay a dividend to the holders of the Preferred Stock, the dividend rate will increase to 13.0% per annum and the dividends are paid-in-kind by adding such amount to the liquidation preference. The Company’s intention is to pay dividends in-kind for the foreseeable future. The dividend rate will increase to 16.0% per annum upon the occurrence and during the continuance of an event of default. As of June 30, 2020, the liquidation preference of the Preferred Stock was $27,000.
Conversion Features The Preferred Stock is convertible at the option of the holders at any time on and subsequent to the three-month anniversary of the date of issuance into shares of common stock at a conversion price of $2.77 per share (the “Conversion Price”), which represents a 30% premium to the 20-day volume-weighted average price ended March 4, 2020. As of June 30, 2020, the maximum number of common shares that could be required to be issued if converted is 9,747 (nine million, seven hundred forty-seven thousand). The conversion rate is subject to the following customary anti-dilution and other adjustments:
the issuance of common stock as a dividend or the subdivision, combination, or reclassification of common stock into a greater or lesser number of shares of common stock;
the dividend, distribution or other issuance of rights, options or warrants to holders of common stock entitling them to subscribe for or purchase shares of common stock at a price per share that is less than the market value for such issuance;
the issuance of a dividend or similar distribution in-kind, which can include shares of any class of capital stock, evidences of the Company’s indebtedness, assets or other property or securities, to holders of common stock;
a transaction in which a subsidiary of the Company ceases to be a subsidiary of the Company as a result of the distribution of the equity interests of the subsidiary to the holders of the Company’s common stock; and
the payment of a cash dividend to the holders of common stock.
On or subsequent to the three-year anniversary of the date of issuance, if the holders have not elected to convert all their shares of Preferred Stock, the Company may give 30 days’ notice to the holders giving the holders the option to choose, in their sole discretion, to have all outstanding shares of Preferred Stock converted into shares of common stock or redeemed in cash at the then applicable Redemption Price (as defined below). The Company may not issue this conversion notice unless (i) the average volume-weighted average price per share of the Company’s common stock during each of the 20 consecutive trading days prior to the conversion is greater than 120% of the conversion price; (ii) the Company’s common stock is listed on a national securities exchange; (iii) a registration statement for the re-sale of the Common Stock is then effective; and (iv) the Company is not then in possession of material non-public information as determined by Regulation FD promulgated under the Exchange Act.
The Preferred Stock and the associated dividend payable on March 31, 2020, did not generate a beneficial conversion feature (“BCF”) upon issuance as the fair value of the Company’s common stock was less than the conversion price. The Company will determine and, if required, measure a BCF based on the fair value of our stock price on the date dividends are declared for each subsequent dividend. If a BCF is recognized, a reduction to paid-in capital and the Preferred Stock will be recorded, and then subsequently accreted through the first redemption date.
Additionally, the Company determined that the nature of the Preferred Stock was more akin to an equity instrument and that the economic characteristics and risks of the embedded conversion options were clearly and closely related to the Preferred Stock. As such, the conversion options were not required to be bifurcated from the host under ASC 815, Derivatives and Hedging.
Redemption Rights If the Company undergoes certain change of control transactions, the Company will be required to immediately make an offer to repurchase all of the then-outstanding shares of Preferred Stock for cash consideration per share equal to the greater of (i) 100% of the Liquidation Preference, plus accrued and unpaid dividends, if any, plus, if applicable for a transaction occurring prior to the third anniversary of the closing, a make-whole premium determined pursuant to a calculation of the present value of the dividends that would have accrued through such anniversary, discounted at a rate equal to the applicable treasury rate plus 0.50% (the “Make-Whole Premium”); provided that if the transaction occurs prior to the first anniversary of the closing, the Make-Whole Premium shall be no greater than $4,000 and (ii) the closing sale

18

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

price of the common stock on the date of such redemption multiplied by the number of shares of common stock issuable upon conversion of the outstanding Preferred Stock.
On or subsequent to the three-year anniversary of the issuance of the Preferred Stock, the Company may redeem the Preferred Stock, in whole or in part, for an amount in cash equal to the greater of (i) the closing sale price of the common stock on the date the Company delivers such notice multiplied by the number of shares of common stock issuable upon conversion of the outstanding Preferred Stock and (ii) (x) if the redemption occurs prior to the fourth anniversary of the date of the closing, 103% of the Liquidation Preference, plus accrued and unpaid dividends, or (y) if the redemption occurs on or after the fourth anniversary of the date of the closing, the Liquidation Preference plus accrued and unpaid dividends (the foregoing clauses (i) or (ii), as applicable, the “Redemption Price”).
On or subsequent to the seven-year anniversary of the date of issuance, the holders have the right, subject to applicable law, to require the Company to redeem the Preferred Stock, in whole or in part, into cash consideration equal to the liquidation preference, plus all accrued and unpaid dividends, from any source of funds legally available for such purpose
Since the redemption of the Preferred Stock is contingently or optionally redeemable, and therefore not certain to occur, the Preferred Stock is not required to be classified as a liability under ASC 480, Distinguishing Liabilities from Equity. As the Preferred Stock is redeemable in certain circumstances at the option of the holder and is redeemable in certain circumstances upon the occurrence of an event that is not solely within our control, we have classified the Preferred Stock in mezzanine equity in the accompanying unaudited condensed consolidated balance sheets. 
Liquidation Rights In the event of any liquidation, winding-up or dissolution of the Company, whether voluntary or involuntary, the holders of the Preferred Stock will receive an amount in cash equal to the greater of (i) 100% of the liquidation preference plus a Make-Whole Premium and (ii) the amount such holders would be entitled to receive at such time if the Preferred Stock were converted into Company common stock immediately prior to the liquidation event. The Make-Whole Premium is removed from the calculation for a liquidation event occurring subsequent to the third anniversary of the issuance date.
Voting Rights The holders of the Preferred Stock are entitled to vote with the holders of the common stock on an as-converted basis in addition to voting as a separate class as provided by applicable Delaware law and the Company’s organizational documents. The holders, acting exclusively and as a separate class, shall have the right to appoint either a non-voting observer to the Company’s Board of Directors or one director to the Company’s Board of Directors.
Registration Rights The holders of the Preferred Stock have certain customary registration rights with respect to the Preferred Stock and the shares of common stock into which they are converted, pursuant to the terms of a registration rights agreement.
12. Interest Rate Swap
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 June 30, 2020 and December 31, 2019, the notional amount of the interest rate swap was $150,000. A fair value liability of $1,086 and $1,116 was recorded within other current liabilities in the unaudited condensed consolidated balance sheet as of June 30, 2020 and December 31, 2019, respectively. The total amount of gain (loss) included in interest expense, net in the unaudited condensed consolidated statements of operations was $94 and $(434) for the three months ended June 30, 2020 and 2019, respectively, and $30 and $(1,796) for the six months ended June 30, 2020 and 2019, respectively.
13. Contract Assets and Liabilities
The timing of revenue recognition, billings and cash collections results in accounts receivable, contract assets, and contract liabilities on the unaudited condensed consolidated balance sheets.
Our contract assets are as follows:
 
June 30, 2020
 
December 31, 2019
Costs and estimated earnings in excess of billings
$
15,968

 
$
19,256

Retainage
3,765

 
1,385

Total contract assets
$
19,733

 
$
20,641

Our contract liabilities are as follows:

19

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

 
June 30, 2020
 
December 31, 2019
Deferred revenue
$
465

 
$
505

Billings in excess of costs and estimated earnings
14,490

 
77

Total contract liabilities
$
14,955

 
$
582

We recognized revenue of $163 and $423 for the three and six months ended June 30, 2020, respectively, that was previously included in contract liabilities at December 31, 2019. The increase in contract liabilities was primarily due to an increase in billings in excess of costs and estimated earnings associated with billings during the three months ended June 30, 2020 for a specific remediation and compliance project.
Costs and estimated earnings on uncompleted contracts are as follows:
 
June 30, 2020
 
December 31, 2019
Costs incurred on uncompleted contracts
$
91,513

 
$
65,343

Estimated earnings
12,827

 
9,618

Total costs and estimated earnings
104,340

 
74,961

Less billings to date
(102,862
)
 
(55,782
)
Costs and estimated earnings in excess of billings
$
1,478

 
$
19,179

The net balance in process classified on the unaudited condensed consolidated balance sheets is as follows: 
 
June 30, 2020
 
December 31, 2019
Costs and estimated earnings in excess of billings
$
15,968

 
$
19,256

Billings in excess of costs and estimated earnings
(14,490
)
 
(77
)
Net balance in process
$
1,478

 
$
19,179

Anticipated losses on long-term contracts are recognized when such losses become evident. As of June 30, 2020 and December 31, 2019, accruals for anticipated losses on long-term contracts were $251 and $322, respectively.
14. Stock/Unit-Based Compensation
The Company adopted the Charah Solutions, Inc. 2018 Omnibus Incentive Plan (the “2018 Plan”), pursuant to which employees, consultants, and directors of the Company and its affiliates, including named executive officers, are eligible to receive awards. The 2018 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, bonus stock, dividend equivalents, other stock-based awards, substitute awards, annual incentive awards, and performance awards intended to align the interests of participants with those of Company stockholders. The Company has reserved 3,007 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.
During the three and six months ended June 30, 2020, the Company granted 287 and 542 restricted stock units (“RSUs”), respectively, under the 2018 Plan that are time-based. Of the RSUs granted during the six months ended June 30, 2020, 15 vest at the end of an eleven-month period, 90 vest at the end of a one-year period, and 437 vest in equal installments over three years. The fair value of these RSUs is based on the market price of the Company’s shares on the grant date.
During the three and six months ended June 30, 2020, the Company granted 121 and 228 performance share units (“PSUs”), respectively, under the 2018 Plan that cliff vest after three years. The vesting of these PSUs is dependent upon the following performance goals during the period January 1, 2020 through December 31, 2022 (the “Performance Period”): (i) the relative total stockholder return percentile ranking of the Company as compared to the specified performance peer group and (ii) cumulative revenue. Each performance goal is weighted at 50% in determining the number of PSUs that become earned PSUs. The maximum number of earned PSUs for the Performance Period is 200% of the target number of PSUs. The total compensation cost we will recognize under the PSUs will be determined using the Monte Carlo valuation methodology, which factors in the value of the TSR market condition when determining the grant date fair value of the PSU. Compensation cost for each PSU is recognized during the Performance Period based on the probable achievement of the two performance criteria. The PSUs are converted into shares of our common stock at the time the PSU award value is finalized.
A summary of the Company’s non-vested share activity for the six months ended June 30, 2020 is as follows:

20

CHARAH SOLUTIONS, INC.
Notes to Condensed Consolidated Financial Statements, continued
(in thousands, except per share data)
(Unaudited)

 
Restricted Stock
 
Performance Stock
 
Total
 
Shares
 
Weighted-Average Grant Date Fair Value
 
Shares
 
Weighted-Average Grant Date Fair Value
 
Shares
 
Weighted-Average Grant Date Fair Value
Balance as of December 31, 2019
1,120

 
$
6.87

 
301

 
$
6.14

 
1,421

 
$
6.72

Granted
542

 
1.74

 
228

 
1.28

 
770

 
1.60

Forfeited
(71
)
 
8.86

 
(15
)
 
6.19

 
(86
)
 
8.85

Vested
(426
)
 
4.82

 

 

 
(426
)
 
4.82

Balance as of June 30, 2020
1,165

 
$
4.79

 
514

 
$
3.98