| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Management’s Use of Estimates The preparation of consolidated and combined financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions, in particular estimates of legal reserves and costs to complete contracts in process, that affect the reported amounts in the consolidated and combined financial statements and accompanying notes. Actual results could differ from those estimates. Balance Sheet Classification The Company includes in current assets and liabilities retainage amounts payable, costs and estimated earnings in excess of billings, and billings in excess of costs and estimated earnings, which may extend beyond one year. A one-year time period is used as the basis for classifying all other assets and liabilities. Cash The Company maintains cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant credit risk on cash. Restricted Cash Charah was required to establish an escrow account for the post closure care costs related to the structural fill sites. The post closure care costs are also covered by financial guarantee and performance bonds. During the period from January 13, 2017 to December 31, 2017 (Successor), the requirement to maintain the escrow account was removed and the cash was returned to Charah. Trade Accounts Receivable Trade accounts receivable consist of amounts due from customers. An allowance for doubtful accounts is recorded to the extent it is probable that a portion of a particular account will not be collected. Management determines the allowance for doubtful accounts by evaluating individual customer receivables and considering a customer’s financial condition, credit history, and the current economic conditions. Management believes all trade accounts receivable at December 31, 2018 (Successor) and December 31, 2017 (Successor) are fully collectible; therefore, the consolidated and combined financial statements do not include an allowance for doubtful accounts. Trade accounts receivable balances are considered past due based upon contract or invoice terms and are charged off when deemed uncollectible. The Company does not charge interest on customer accounts and generally does not require collateral on sales and services during the normal course of business. The Company has the right to file liens on the owner’s property with regards to certain construction contracts. Inventory Inventories, mainly comprising of ash for resale, are valued using the first-in, first-out (“FIFO”) method. Inventories are stated at the lower of cost or net realizable value. Property and Equipment Property and equipment are stated at cost. Construction-in-progress represents costs incurred on the construction of assets that have not been completed or placed in service as of the end of the year. Depreciation and amortization is provided principally by the straight-line method over the estimated useful lives of the assets as follows: Plant, machinery and equipment 2 - 15 years Vehicles 2 - 10 years Office equipment 2 - 10 years Buildings and leasehold improvements 5 - 40 years Repair and maintenance costs are expensed as incurred and expenditures for improvements are capitalized. Structural Fill Sites Cost Basis of Structural Fill Sites, Associated Site Improvement Costs, and Related Asset Retirement Obligation (ARO) Prior to the BCP transaction (see Note 3), the acquisition cost of the structural fill sites was capitalized. As a result of the BCP transaction, the fair value of the site improvements related to the structural fill sites was recognized. The site improvement costs relate to items such as directly related engineering, liner material and installation, leachate collection systems, environmental monitoring equipment, on-site road and rail construction, and other infrastructure costs. The structural fill sites are a part of the Company’s Environmental Solutions segment. Following is a description of our asset retirement activities and our related accounting: • Final capping and closure involves the installation of drainage and compacted soil layers and topsoil over areas where total airspace capacity has been consumed. Asset retirement obligations are recorded on a units-of-consumption basis as airspace is consumed (see Note 22). The liability is based on estimates of the discounted cash flows. • Post closure involves the maintenance and monitoring of the structural fill sites. Generally, we are required to maintain and monitor the structural fill sites for a 30 -year period. These maintenance and monitoring costs are recorded as an asset retirement obligation as airspace is consumed over the life of the structural fill sites. Post-closure obligations are recorded over the life of the structural fill sites on a units-of-consumption basis as airspace is consumed (see Note 22), based on estimates of the discounted cash flows associated with performing post-closure activities. We develop our estimates of these obligations using input from our operations personnel. Our estimates are based on our interpretation of current requirements and proposed regulatory changes and are intended to approximate fair value. Absent quoted market prices, the estimate of fair value is based on the best available information, including the results of present value techniques. We use professional engineering judgment and estimated prices paid for similar work to determine the fair value of these obligations. We are required to recognize these obligations at market prices whether we plan to contract with third parties or perform the work ourselves. In those instances where we perform the work with internal resources, the incremental profit margin realized will be recognized as a component of operating income when the work is completed. Once we have determined the final capping, closure, and post-closure costs, we inflate those costs to the expected time of payment and discount those expected future costs back to present value. During the year ended December 31, 2018 (Successor), the period from January 13, 2017 through December 31, 2017 (Successor), and the period from January 1, 2017 through January 12, 2017 (Predecessor), we inflated these costs in current dollars until the expected time of payment using an inflation rate of 3.0% . We discounted these costs to present value using the credit-adjusted, risk-free rate effective at the time an obligation is incurred, consistent with the expected cash flow approach. Any changes in expectations that result in an upward revision to the estimated cash flows are treated as a new liability and discounted at the current rate while downward revisions are discounted at the historical weighted average rate of the recorded obligation. As a result, the credit-adjusted, risk-free discount rate used to calculate the present value of an obligation is specific to each individual asset retirement obligation. The weighted average rate applicable to our long-term asset retirement obligations at December 31, 2018 was approximately 5.25% . We record the estimated fair value of final capping, closure, and post-closure liabilities for our structural fill sites based on the capacity consumed through the current period. Because these obligations are measured at estimated fair value using present value techniques, changes in the estimated cost or timing of future final capping, closure, and post-closure activities could result in a material change in these liabilities, related assets, and results of operations. We assess the appropriateness of the estimates used to develop our recorded balances annually, or more often if conditions warrant. Changes in inflation rates or the estimated costs, timing, or extent of future final capping, closure, and post-closure activities typically result in both (i) a current adjustment to the recorded liability and structural fill site asset, and (ii) a change in liability and asset amounts to be recorded prospectively over the remaining permitted airspace. Any changes related to the capitalized and future cost of the structural fill assets are then recognized in accordance with our amortization policy, which would generally result in amortization expense being recognized prospectively over the remaining capacity of the permitted airspace. Changes in such estimates associated with airspace that has been fully utilized results in an adjustment to the recorded liability and landfill assets with an immediate corresponding adjustment to landfill airspace amortization expense. Depreciation of Structural Fill Sites and Site Improvements The depreciable basis of a structural fill site includes amounts previously expended and capitalized and projected asset retirement costs related to final capping, closure, and post-closure activities. The value of the structural fill sites to the Company diminishes in direct correlation to the amount of airspace used for ash deposits. Depreciation is recorded on a units-of-consumption basis, applying expense as a rate per ton. The rate per ton is calculated by dividing the depreciable basis of the structural fill site by the number of tons expected to be placed into the structural fill sites. Our engineers, in consultation with third-party engineering consultants and surveyors, are responsible for determining remaining permitted airspace at our structural fill sites. The remaining permitted airspace is determined by comparing the existing structural fill sites topography to the expected final structural fill sites topography. Once the remaining permitted airspace is determined in cubic yards, an airspace utilization factor (“AUF”) is established to calculate the remaining permitted capacity in tons. The AUF is established using the measured density obtained from previous surveys and is then adjusted to account for current and future expected compaction rates. The initial selection of the AUF is subject to a subsequent multi-level review by our engineering group, and the AUF used is reviewed on a periodic basis and revised as necessary. After determining the costs and remaining permitted capacity at each of our structural fill sites, we determine the per ton rates that will be expensed as ash is received and deposited at the structural fill sites by dividing the costs by the corresponding number of tons. These rates per ton are updated annually, or more often, as significant facts change. It is possible that actual results, including the amount of costs incurred, the timing of final capping, closure, and post-closure activities, or our airspace utilization, could ultimately turn out to be significantly different from our estimates and assumptions. To the extent that such estimates, or related assumptions, prove to be significantly different than actual results, lower profitability may be experienced due to higher depreciation rates or higher expenses; or higher profitability may result if the opposite occurs. Most significantly, if it is determined that expansion capacity should no longer be considered in calculating the recoverability of a structural fill site asset, we may be required to recognize an asset impairment or to incur significantly higher depreciation expense. Depreciation for the structural fill sites and site improvements for the year ended December 31, 2018 (Successor), the period from January 13, 2017 through December 31, 2017 (Successor), the period from January 1, 2017 through January 12, 2017 (Predecessor), and the year ended December 31, 2016 (Predecessor) was $33,956 , $17,603 , $90 , and $2,182 , respectively. The remaining capacity of the active structural fill site at December, 31, 2018 (Successor), December 31, 2017 (Successor), January 12, 2017 (Predecessor), and December 31, 2016 (Predecessor), was 5.0 million tons ( 41% ), 6.2 million tons ( 52% ), 9.2 million tons ( 77% ), and 9.3 million tons ( 78% ), respectively. The Company also owns an additional structural fill site with 8.0 million tons ( 100% ) of capacity. The Company anticipates commencing closure of both sites in 2019 prior to the capacity being fully utilized. Equity Method Investment In January 2016, Charah organized a joint venture with an unrelated third party. Charah has a 50% interest in the joint venture, which is accounted for by the equity method. Goodwill and Indefinite Lived Intangible Assets Goodwill represents the excess purchase price over the estimated fair value of net assets acquired in a business combination. Our goodwill included in the consolidated and combined balance sheets as of December 31, 2018 (Successor) and 2017 (Successor) was $74,213 and $73,468 , respectively. Our intangible assets in the consolidated and combined balance sheets as of December 31, 2018 (Successor) and 2017 (Successor) include a $34,330 trade name that is considered to have an indefinite life. Goodwill and indefinite-lived intangible assets are not amortized, but instead are tested for impairment at least annually or more often if events or changes in circumstances indicate that the fair value of the asset may have decreased below its carrying value. Goodwill is tested at the reporting unit level. We may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value is greater than its carrying value. If a qualitative assessment is not performed, or if as a result of a qualitative assessment it is not more likely than not that the fair value exceeds its carrying value, then the fair value is compared to its carrying value. Fair value is typically estimated using an income approach based on discounted cash flows. However, when appropriate, we may also use a market approach. The income approach is based on the long-term projected future cash flows of the asset and reporting units. We discount the estimated cash flows to present value using a weighted average cost of capital that considers factors such as market assumptions, the timing of the cash flows, and the risks inherent in those cash flows. We believe that this approach is appropriate because it provides a fair value estimate based upon the reporting units’ expected long-term performance considering the economic and market conditions that generally affect our business. The market approach estimates fair value by measuring the aggregate market value of publicly traded companies with similar characteristics to our business as a multiple of their reported earnings. We then apply that multiple to the reporting units’ earnings to estimate their fair values. We believe that this approach may also be appropriate in certain circumstances because it provides a fair value estimate using valuation inputs from entities with operations and economic characteristics comparable to our reporting units. Fair value is computed using several factors, including projected future operating results, economic projections, anticipated future cash flows, comparable marketplace data, and the cost of capital. There are inherent uncertainties related to these factors and to our judgment in applying them in our analysis. However, we believe our methodology for estimating the fair value of our reporting units and the trade name is reasonable. If the carrying value exceeds its fair value, the asset is written down to its implied fair value. We evaluate the indefinite-lived trade name each reporting period to determine whether events and circumstances continue to support an indefinite useful life. During 2017, we performed our annual impairment tests as of October 31st and determined there was no impairment based upon a qualitative assessment. For the period from October 31, 2017 to December 31, 2017, there were no indicators of impairment. During 2018, we changed the date of the annual impairment tests to October 1st. We performed a quantitative assessment and determined there was no impairment as of October 1, 2018. For the period from October 1, 2018 to December 31, 2018, there were no indicators of impairment. If actual future results are not consistent with our assumptions and estimates, we may be required to record impairment charges in the future. Definite Lived Intangible Assets As of December 31, 2018 (Successor) and December 31, 2017 (Successor), definite lived intangible assets include customer relationships, technology, non-compete and other agreements, SCB trade name (Note 3), and a rail easement. These assets are amortized on a straight-line basis over their estimated useful lives as shown in the table below. Definite Lived Intangible Useful Life Customer relationships 10 years Technology 10 years Non-compete agreement 2 years SCB trade name 5 years Rail easement 2 years Purchase Option Liability In the BCP transaction (see Note 3), Charah recorded the fair value of a bargain purchase liability for an option held by a customer and a third party for the structural fill sites. The purchase option liability is calculated as the difference between the estimated fair value of the structural fill sites at the date the option will most likely be exercised, and the option price to be paid by the customer or third party. The purchase options are exercisable after completion of work at the structural fill sites. The bargain purchase option is amortized over the structural fill sites’ estimated useful lives. The following table reflects activity related to the bargain purchase liability: Fair value of liability recognized at January 13, 2017 (Successor) $ 29,883 Amortization in the period from January 13, 2017 to December 31, 2017 (Successor) (4,639 ) Balance, December 31, 2017 (Successor) 25,244 Amortization in the year ended December 31, 2018 (Successor) (15,227 ) Balance, December 31, 2018 (Successor) $ 10,017 Fair Value Disclosure Long-term debt bears interest at variable rates and book value approximates fair value, and is considered to be level 2 in the fair value hierarchy. The interest rate swap (within other liabilities at December 31, 2017 and within other assets at December 31, 2018) is considered to be level 2 in the fair value hierarchy. The Company did not have any recurring or non-recurring level 3 fair value measurements as of December 31, 2018 (Successor) or December 31, 2017 (Successor) other than the application of business combination accounting as described in Note 3 and the application of stock-based compensation accounting as described in Note 12. There have been no transfers between levels of the fair value hierarchy during the year ended December 31, 2018 (Successor), the period from January 13, 2017 through December 31, 2017 (Successor), or the period from January 1, 2017 through January 12, 2017 (Predecessor). Revenue Recognition Revenue from management contracts is recognized when the ash is hauled to the landfill, or the management services are provided. Revenue from the sales of ash is recognized when it is delivered to the customer. Certain contracts contain minimum quantity and quality standards that if not met will reduce the amount of revenue recognized. When applicable, revenue is recorded net of sales tax. Revenue and Cost Recognition on Construction Contracts During the year ended December 31, 2018 (Successor), the period from January 13, 2017 through December 31, 2017 (Successor), the period from January 1, 2017 through January 12, 2017 (Predecessor), and the year ended December 31, 2016 (Predecessor), we recognized approximately 34% , 45% , 51% and 66% , respectively, of our total revenues using the percentage-of-completion method. Accounting for these contracts involves management judgment in estimating total contract revenue and cost. Contract revenues are largely determined by negotiated contract prices and quantities, modified by our assumptions regarding contract options, change orders and price adjustment clauses (such as inflation or index-based clauses). Contract costs are incurred over a period of time, which can be several years, and the estimation of these costs requires management judgment. Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends and other economic projections. Significant factors that influence these estimates include inflationary trends, technical and schedule risk, internal and subcontractor performance trends, business volume assumptions, and asset utilization. We have processes during which management reviews the progress and performance of our contracts. As part of this process, management reviews information including any outstanding key contract matters, progress toward completion and the related project timeline, and the related changes in estimates of revenues and costs. Anticipated losses on long-term contracts are recognized when such losses become evident. As of December 31, 2018 (Successor) and December 31, 2017 (Successor), accruals for anticipated losses on long-term contracts were $677 and $0 , respectively. Revenue from contract claims is recognized when invoiced. Revenue from contract change orders is recognized when it is probable that the change order will be approved, the amount can be reasonably estimated, and the work has been completed. The asset, “Costs and estimated earnings in excess of billings” represents revenue recognized in excess of amounts billed on uncompleted contracts. The liability, “Billings in excess of costs and estimated earnings” represents billings in excess of revenue recognized. As a result of the BCP transaction and the push down of fair values to Charah, the costs and estimated earnings in excess of billings and billings in excess of costs and estimated earnings amounts at January 13, 2017 were reduced to $0 . Freight Costs Freight costs charged to customers are included in revenue. Costs incurred by the Company for freight are included in cost of sales. Income Taxes Charah Solutions is a “C” Corporation under the Internal Revenue Code of 1986, as amended (the “Code”), and, as a result, is subject to U.S. federal, state and local income taxes. In connection with the IPO, predecessor flow-through entities for income tax purposes were contributed to the Company by their owners and became indirect subsidiaries of the Company. Prior to the contribution to the Company and its conversion to a taxable corporation, the predecessor entities passed through their taxable income to their owners for U.S. federal, state, and local income tax purposes, and thus these entities were not subject to such income taxes, except for franchise tax at the state level (at less than 1% of modified pre-tax earnings). Accordingly, the financial data attributable to the predecessor entities prior to the contribution on June 18, 2018 contains no provision for U.S. federal income taxes or income taxes in any state or locality, other than franchise taxes. As of June 18, 2018, the Company became subject to U.S. federal, state and local income taxes, and as a result of the conversion, and in accordance with Accounting Standards Codification (“ASC”) Topic 740, Income Taxes , the Company established a beginning net deferred tax liability of $1.5 million and recognized a corresponding amount of income tax expense. Income taxes are accounted for in accordance with ASC Topic 740. Income tax expense, or benefit, is calculated using the asset and liability method under which deferred tax assets and liabilities are recorded based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The Company assesses its deferred tax assets each quarter to determine whether the assets are more likely than not (probability of more than 50%) realizable under ASC Topic 740. The Company is required to record a valuation allowance for any portion of the tax assets that, based on the assessment, are not more likely than not realizable. The assessment considers, among other things, earnings in prior periods, forecasts of future taxable income, statutory carryforward periods, and tax planning strategies, to the extent feasible. The realization of deferred tax assets depends in large part on the generation of future taxable income during the periods in which the differences become deductible. The value of the deferred tax assets will also depend on applicable income tax rates. Judgment is required in determining the future tax consequences of events that have been recognized in the financial statements. Differences between anticipated and actual outcomes of these future tax consequences could have material impact on the financial statements. Changes in existing tax laws and tax rates also affect actual tax results and the valuation of deferred tax assets over time. Business Segments The Company operates in two business segments: Environmental Solutions (ES) . The Environmental Solutions segment includes remediation and compliance services, as well as byproduct sales. Remediation and compliance services are associated with customers’ need for multi-year environmental improvement and sustainability initiatives, whether driven by proactive engagement by power generation customers, by regulatory requirements or by consumer expectations and standards. Byproduct sales support both power generation customers’ desire to profitably recycle recurring volumes of coal combustion residuals and ultimate end customers’ need for high-quality, cost-effective raw material substitutes. Maintenance and Technical Services (M&TS). The Maintenance and Technical Services segment includes fossil services and nuclear services. Fossil services are the recurring and mission-critical management of coal ash and the routine maintenance, outage services and staffing solutions for coal-fired power generation facilities. Nuclear services, which we market under the Allied Power brand name, include routine maintenance, outage services, facility maintenance, and staffing solutions for nuclear power generation facilities. Stock/Share-Based Compensation Plans Prior to December 31, 2016 (Predecessor), Charah had a Deferred Stock Plan (the “Plan”) for the benefit of certain key employees. Charah accounted for the Plan as a liability-classified plan. The Plan was terminated in December 2016, all units became 100% vested and were converted into shares of non-voting common stock. In 2017, Charah Management and Allied Power Management each issued certain Series C member interests to employees. Additionally, certain employees of Allied Power Management were granted Series B member interests in both Charah Management and Allied Power Management. The unvested Series C Profits Interests at June 18, 2018 were canceled as a result of the corporate reorganization that occurred upon the closing of the IPO. In connection with the corporate reorganization that occurred upon the closing of the IPO, the Series C Profits Interests were replaced by shares that are subject to time-based vesting conditions, as well as performance vesting conditions. The Company has issued further shares under the Charah Solutions, Inc. 2018 Omnibus Incentive Plan subject to time-based and performance vesting conditions. The Company accounts for its stock/share-based compensation plans as equity-classified plans, in accordance with the fair value recognition provisions of ASC Topic 718, Compensation-Stock Compensation. The Company utilizes the Black-Scholes model, which requires the input of subjective assumptions. These assumptions include estimating (i) the volatility of the common stock price over the expected term, (ii) the expected term, and (iii) expected dividends. Where the vesting of the stock is also based upon performance measures, management determines the likelihood of meeting such measures. Changes in the subjective assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amounts recognized on the consolidated and combined statements of operations. Stock based compensation expense is recognized in general and administrative expenses. Recently Adopted Accounting Pronouncements In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business , which provides guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU 2017-01 requires entities to use a screen test to determine when an integrated set of assets and activities is not a business or if the integrated set of assets and activities needs to be further evaluated against the framework. The Company adopted the new standard effective January 1, 2018 on a prospective basis. The new standard did not have a material impact on our consolidated financial statements. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting , to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC Topic 718. The Company adopted the new standard effective January 1, 2018 on a prospective basis. The new standard did not have a material impact on our consolidated financial statements. Recently Issued Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (Topic 606) , requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The core principle of ASC Topic 606 is to recognize revenues when a customer obtains control of a good or service, in an amount that reflects the consideration to which an entity is expected to be entitled for those goods or services. Additionally, the standard requires enhanced qualitative and quantitative disclosures regarding customer contracts. The standard will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either a full retrospective or modified retrospective with cumulative effect transition method. To assess the impact of the standard, we utilized internal resources to lead the implementation effort and supplemented them with external resources. The Company’s adoption activities were performed over three phases: (i) assessment, (ii) design, and (iii) implementation using a cross-functional team that included accounting, operational and information technology personnel. Based on our work to date, we believe we have identified all material contract types, revenues and costs that may be impacted by implementing ASC Topic 606. Generally, the Company believes the majority of its contracts will have similar performance obligations under ASC Topic 606 as compared with the units of account previously identified. We have identified certain contracts where the timing of revenue recognition will change under ASC Topic 606. Prior to the adoption of ASC Topic 606, revenue recorded for certain contracts with fluctuating rates per unit matched the amount that was billed to the customer. In accordance with the standard, for contracts with fluctuating rates per unit that are not directly related to changes in the Company’s effort to perform under the contract, the Company will recognize revenue based on the stand-alone selling price per unit, calculated as the average rate per unit over the term of those contractual rates. This will at times create a contract asset or liability for the difference between the revenue recognized and the amount billable/billed to the customer. Effective January 1, 2019, we adopted the requirements of ASC Topic 606 to all contracts using the modified retrospective with cumulative effect transition method. Accordingly, we will recognize the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings for the year ended December 31, 2019. The comparative information will not be restated and will continue to be reported under the accounting standards in effect for the comparative periods. Based upon our current assessment of the impact from the adoption of ASC Topic 606, we estimate a decrease of approximately $300 to the opening balance of retained earnings as of January 1, 2019, with an associated decrease in the contract asset balance “costs and estimated earnings in exc |
