Charah Solutions, Inc. 8.50% Se (CHRB) 8-K Charah Solutions, Inc. Announces Sale of Allied Power Holdings, LLC

Exhibit 99.2

CHARAH SOLUTIONS, INC.

Unaudited Pro Forma Condensed Consolidated Financial Information

The following unaudited pro forma condensed consolidated financial information and related notes are based upon and should be read in conjunction with the historical consolidated financial statements and related notes of Charah Solutions, Inc. (the “Company”) included in the Company’s Form 10-Q for the period ended September 30, 2020 and Form 10-K for the year ended December 31, 2019.

On November 19, 2020, the Company announced that it had entered into a definitive agreement (the “Purchase Agreement”) to sell its subsidiary, Allied Power Holdings LLC, (“Allied”) to Allied Group Intermediate Holdings, LLC, an affiliate of Bernhard Capital Management LP, the majority shareholder of the Company, in an all-cash deal for $40 million to be paid at closing, subject to adjustment for working capital and certain other adjustments as set forth in the Purchase Agreement (the “Transaction”). The Transaction is effective immediately. This Transaction will be treated as a sale to an entity under common control with the net proceeds recognized as a contribution to equity.

The unaudited pro forma condensed consolidated balance sheet presents the financial position of the Company as if the Transaction was consummated on September 30, 2020.

The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2020, the years ended December 31, 2019 and 2018, and the period from January 13, 2017 through December 31, 2017 give effect to the Transaction as if it were consummated upon Allied’s formation in May 2017.

The unaudited pro forma condensed consolidated financial information has been prepared based upon currently available information and assumptions that are deemed appropriate by the Company’s management. The pro forma information is for informational purposes only and is not intended to be indicative of what actual results would have been, nor does such data purport to represent the consolidated financial results of the Company for future periods. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed consolidated financial information.

The unaudited pro forma condensed consolidated financial information of the Company are prepared in accordance with Article 11 of Regulation S-X.

CHARAH SOLUTIONS, INC.

Pro Forma Condensed Consolidated Balance Sheet

as of September 30, 2020

(in thousands, except par value amounts)

(Unaudited)

	(a)			Pro Forma
	As Reported			Adjustments			Pro Forma
Assets
Current assets:
Cash	$	30,006		$	(93	)(b)	$	29,913
Restricted cash		9,161			(240	)(b)		8,921
Trade accounts receivable, net		66,422			(25,493	)(b)		40,929
Receivable from affiliates		94			—			94
Contract assets		17,216			—			17,216
Inventory		9,234			—			9,234
Income tax receivable		650			—			650
Prepaid expenses and other current assets		7,445			(1,555	)(b)		5,890
Total current assets		140,228			(27,381	)		112,847
Property and equipment, net		64,769			(1,237	)(b)		63,532
Goodwill		74,213			(7,595	)(h)		66,618
Intangible assets, net		86,106			—			86,106
Equity method investments		5,095			—			5,095
Other assets		1,157			—			1,157
Total assets	$	371,568		$	(36,213	)	$	335,355
Liabilities, mezzanine equity and stockholders’ equity
Current liabilities:
Accounts payable		22,414			(5,294	)(b)		17,120
Contract liabilities		12,061			—			12,061
Notes payable, current maturities		37,873			(9,721	)(g)		28,152
Asset retirement obligation, current portion		2,921			—			2,921
Accrued liabilities		45,023			(24,767	)(b)		20,256
Other current liabilities		1,021			—			1,021
Total current liabilities		121,313			(39,782	)		81,531
Deferred tax liabilities		2,214			—			2,214
Contingent payments for acquisitions		11,624			—			11,624
Asset retirement obligation		4,026			—			4,026
Line of credit		25,667			(8,128	)(g)		17,539
Notes payable, less current maturities		148,986			(20,079	)(g)		128,707
Other liabilities		1,000			—			1,000
Total liabilities		314,830			(68,189	)		246,641
Mezzanine equity
Series A Preferred Stock — $0.01 par value; 50 shares authorized, 26 shares issued and outstanding as of September 30, 2020; aggregate liquidation preference of $27,878 as of September 30, 2020		25,536			—			25,536
Stockholders’ equity
Retained losses		(55,004	)		—			(55,004	)
Common Stock — $0.01 par value; 200,000 shares authorized, 29,986, 29,624, and 29,083 shares issued and outstanding as of September 30, 2020, December 31, 2019, and December 31, 2018, respectively		300			—			300
Additional paid-in capital		84,970			31,976	(i)		116,946
Total stockholders’ equity		30,266			31,976			62,242
Non-controlling interest		936			—			936
Total equity		31,202			31,976			63,178
Total liabilities, mezzanine equity and stockholders’ equity	$	371,568		$	(36,213	)	$	335,355

See accompanying notes to unaudited pro forma condensed consolidated financial information.

CHARAH SOLUTIONS, INC.

Pro Forma Condensed Consolidated Statement of Operations

for the Nine Months Ended September 30, 2020

(in thousands, except per share data)

(Unaudited)

	(a)			Pro Forma
	As Reported			Adjustments			Pro Forma
Revenue	$	416,491		$	249,795	(c)	$	166,696
Cost of sales		382,917			234,656	(c)		148,261
Gross profit		33,574			15,139			18,435
General and administrative expenses		27,246			5,878	(c)		21,368
Impairment expense		6,399			—			6,399
Operating (loss) income		(71	)		9,261			(9,332	)
Interest expense, net		(12,787	)		(2,745	)(j)		(10,042	)
Loss on extinguishment of debt		(8,603	)		—			(8,603	)
Income from equity method investment		1,247			—			1,247
(Loss) income before income taxes		(20,214	)		6,516			(26,730	)
Income tax expense		608			—	(d)		608
Net (loss) income		(20,822	)		6,516			(27,338	)
Less income attributable to non-controlling interest		1,180			—			1,180
Net (loss) income attributable to Charah Solutions, Inc.		(22,002	)		6,516			(28,518	)
Deemed and imputed dividends on Series A Preferred Stock		(314	)		—			(314	)
Series A Preferred Stock dividends		(1,846	)		—			(1,846	)
Net (loss) income attributable to common stockholders	$	(24,162	)	$	6,516		$	(30,678	)
Loss per common share:
Basic	$	(0.81	)				$	(1.03	)
Diluted	$	(0.81	)				$	(1.03	)
Weighted-average shares outstanding:
Basic		29,853						29,853
Diluted		29,853						29,853

See accompanying notes to unaudited pro forma condensed consolidated financial information.

CHARAH SOLUTIONS, INC.

Pro Forma Condensed Consolidated Statement of Operations

for the Year Ended December 31, 2019

(in thousands, except per share data)

(Unaudited)

	(a)			Pro Forma
	As Reported			Adjustments				Pro Forma
Revenue	$	554,868		$	310,207	(c)		$	244,661
Cost of sales		514,492			291,106	(c)			223,386
Gross profit		40,376			19,101				21,275
General and administrative expenses		60,870			8,135	(c)			52,735
Operating (loss) income		(20,494	)		10,966				(31,460	)
Interest expense, net		(16,835	)		(2,211	)(j)			(14,624	)
Income from equity method investment		2,295			—				2,295
(Loss) income before income taxes		(35,034	)		8,755				(43,789	)
Income tax expense		4,190			2,303	(e)			1,887
Net loss		(39,224	)		6,452				(45,676	)
Less income attributable to non-controlling interest		2,834			—				2,834
Net (loss) income attributable to Charah Solutions, Inc.	$	(42,058	)	$	6,452			$	(48,510	)
Loss per common share:
Basic	$	(1.43	)					$	(1.64	)
Diluted	$	(1.43	)					$	(1.64	)
Weighted-average shares outstanding:
Basic		29,495					��		29,495
Diluted		29,495							29,495

See accompanying notes to unaudited pro forma condensed consolidated financial information.

CHARAH SOLUTIONS, INC.

Pro Forma Condensed Consolidated Statement of Operations

for the Year Ended December 31, 2018

(in thousands, except per share data)

(Unaudited)

	(a)			Pro Forma
	As Reported			Adjustments			Pro Forma
Revenue	$	740,462		$	339,575	(c)	$	400,887
Cost of sales		642,734			322,888	(c)		319,846
Gross profit		97,728			16,687			81,041
General and administrative expenses		76,752			41,460	(c)		35,292
Operating income (loss)		20,976			(24,773	)		45,749
Interest expense, net		(32,226	)		(1,944	)(j)		(30,282	)
Income from equity method investment		2,407			—			2,407
(Loss) income before income taxes		(8,843	)		(26,717	)		17,874
Income tax (benefit) expense		(2,427	)		(7,027	)(e)		4,600
Net (loss) income		(6,416	)		(19,690	)		13,274
Less income attributable to non-controlling interest		2,486			—			2,486
Net (loss) income attributable to Charah Solutions, Inc.	$	(8,902	)	$	(19,690	)	$	10,788
(Loss) earnings per common share:
Basic	$	(0.33	)				$	0.41
Diluted	$	(0.33	)				$	0.39
Weighted-average shares outstanding:
Basic		26,610						26,610
Diluted		26,610						27,630

See accompanying notes to unaudited pro forma condensed consolidated financial information.

CHARAH SOLUTIONS, INC.

Pro Forma Condensed Consolidated Statement of Operations

for the Period from January 13, 2017 through December 31, 2017

(in thousands, except per share data)

(Unaudited)

	(a)			Pro Forma
	As Reported			Adjustments			Pro Forma
Revenue	$	421,239		$	136,229	(c)	$	285,010
Cost of sales		338,908			131,336	(c)		207,572
Gross profit		82,331			4,893			77,438
General and administrative expenses		48,495			18,869	(c)		29,626
Operating income (loss)		33,836			(13,976	)		47,812
Interest expense, net		(14,146	)		(3,127	)(j)		(11,019	)
Income from equity method investment		816			—			816
Income (loss) before income taxes		20,506			(17,103	)		37,609
Income tax expense		—			—	(f)		—
Net income (loss)		20,506			(17,103	)		37,609
Less income attributable to non-controlling interest		2,190			—			2,190
Net income (loss) attributable to Charah Solutions, Inc.	$	18,316		$	(17,103	)	$	35,419
Earnings per common share:
Basic	$	0.77					$	1.49
Diluted	$	0.75					$	1.44
Weighted-average shares outstanding:
Basic		23,710						23,710
Diluted		24,532						24,532

See accompanying notes to unaudited pro forma condensed consolidated financial information.

CHARAH SOLUTIONS, INC.

Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

The following is a summary of the pro forma adjustments reflected in the unaudited pro forma condensed consolidated financial information:

(a) As reported financial information for the Company has been derived from historical financial statements previously filed with the Securities and Exchange Commission.

(b) Represents the elimination of the assets and liabilities of the Allied business.

(c) Represents the elimination of revenue and operating expenses of the Allied business.

(d) No income tax expense was attributed to Allied due to the Company’s valuation allowance.

(e) Income tax expense (benefit) was attributed to Allied using the federal and state statutory income tax rate of 26.3%.

(f) No income tax expense was attributed to Allied due to the Company’s status as a non-taxable entity.

(g) Debt balances are adjusted to give effect to the Transaction as follows:

Gross Proceeds	$	40,000
Less: Estimated closing costs		1,872
Net proceeds		38,128
Less: Proceeds applied to current maturities of notes payable		9,721
Less: Proceeds applied to non-current maturities of notes payable		20,279
Proceeds applied to line of credit	$	8,128

(h) Represents the allocation of the Maintenance & Technical Services reporting unit’s goodwill to Allied based on its relative fair value in proportion to the reporting unit’s fair value.

(i) Represents the estimated pro forma “contribution” from the sale of the Allied business assuming net proceeds of $38,128, less Allied net assets, as this Transaction will be treated as a contribution to equity since the sale of Allied is to an entity under common control. Note, this estimate may not be indicative of the actual contribution to equity from the Transaction as there could be material changes to the financial position of Allied and the related working capital through the post-closing adjustments.

(j) Represents the allocation of interest expense, net to Allied due to a requirement in our Credit Agreement that the net cash proceeds from this Transaction be utilized to reduce our debt.