CHARAH SOLUTIONS, INC. The following discussion and analysis should be read in conjunction with the historical financial statements and related notes included in Part I, "Item 1. Financial Statements" of this Quarterly Report. This discussion contains "forwardlooking statements" reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forwardlooking statements due to a number of factors. Factors that could cause or contribute to such differences include, but are not limited to, public health threats or outbreaks of communicable diseases, such as the ongoing novel coronavirus "COVID-19" pandemic and its impact on our business, customers, employees or customers' facilities, capital expenditures, economic and competitive conditions, and regulatory changes and other uncertainties, as well as those factors discussed below and elsewhere in this Quarterly Report. Please read "Cautionary Note Regarding ForwardLooking Statements" included elsewhere in this Quarterly Report. Except as otherwise required by applicable law, we assume no obligation to update any of these forwardlooking statements.
Charah Solutions, Inc. (together with its subsidiaries, "Charah Solutions ," the "Company," "we," "us" or "our") was incorporated inDelaware in 2018 in connection with our initial public offering inJune 2018 and, together with its predecessors, has been in business since 1987. Since our founding, we have continuously worked to anticipate our customers' evolving environmental needs, increasing the number of services we provide through our embedded presence at their power generation facilities. Our multi-service platform allows customers to gain efficiencies from sourcing multiple required offerings from a single, trusted partner compared to service providers with a more limited scope.
Overview
We are a leading national service provider of mission-critical environmental
services and byproduct recycling to the power generation industry. We offer a
suite of remediation and compliance services, byproduct services, raw material
sales and Environmental Risk Transfer ("ERT") services. We also design and
implement solutions for complex environmental projects (such as coal ash pond
closures) and facilitate coal ash recycling through byproduct marketing and
other beneficial use services. We believe we are a partner of choice for the
power generation industry due to our quality, safety, domain experience, and
compliance record, all of which are key criteria for our customers. In 2021, we
performed work at more than 40 coal-fired generation sites nationwide.
We operate as a single operating segment, reflecting the suite of end-to-end
services we offer our utility partners and how our chief operating decision
maker reviews consolidated financial information to evaluate results of
operations, assess performance and allocate resources for these services. We
provide the following services through our one segment: remediation and
compliance services, byproduct services, raw material sales and ERT services.
Remediation and compliance services are associated with our customers' need for
multi-year environmental improvement and sustainability initiatives, whether
driven by regulatory requirements, power generation customer initiatives or
consumer expectations and standards. Byproduct services consist of recurring and
mission-critical coal ash management and operations for coal-fired power
generation facilities while also supporting both our power generation customers'
desire to recycle their recurring and legacy volumes of coal combustion
residuals ("CCRs"), commonly known as coal ash, and our ultimate end customers'
need for high-quality, cost-effective supplemental cementitious materials
("SCMs") that provide a sustainable, environmentally-friendly substitute for
Portland cement in concrete. Our raw material sales provide customers with the
raw materials that are essential to their business while also providing the
sourcing, logistics, and management needed to facilitate these raw material
transactions around the globe. ERT services represent an innovative solution
designed to meet coal-fired plant energy providers' evolving and increasingly
complex plant closure and environmental remediation needs. These customers need
to retire and decommission older or underutilized assets while maximizing the
assets value and improving the environment. Our ERT services manage the sites'
environmental remediation requirements, benefiting the communities and lowering
the coal-fired plant energy providers' costs.
COVID-19 Update
The pandemic caused by a novel coronavirus ("COVID-19") has impacted many
aspects of our operations, directly and indirectly, including our employees, the
services we provide at our customers' power generation facilities, our suppliers
and the overall market. We, along with our utility partners, have implemented
the precautionary health and safety measures recommended by the Centers for
Disease Control and Prevention (the "CDC") in response to the COVID-19 pandemic
and we follow current CDC guidelines and recommendations. Understanding that the
COVID-19 challenge is evolving, we continue to monitor the situation and update
our proactive measures in coordination with our customers based on new
information and feedback. We continue to work closely with our utility partners
and concrete producer customers to meet their needs and monitor any potential
slowdowns of byproduct recycling and marketing services if there is decreased
demand for construction materials.
The COVID-19 pandemic presents potential new risks to the Company's business,
including logistical, supply chain and other challenges that may continue to
affect demand for services, which are driven by construction activity, and the
timing of our remediation and compliance services projects, due to delays in new
contract awards and increasing costs and declining availability for certain
machinery and equipment.
How We Evaluate Our Operations
We use a variety of financial and operational metrics to assess the performance of our operations, including:
•Revenue;
•Gross Profit;
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•Operating Income; •Adjusted EBITDA; and •Adjusted EBITDA Margin. Revenue We analyze our revenue by comparing actual revenue to our internal projections for a given period and to prior periods to assess our performance. We believe that revenue is a meaningful indicator of the demand and pricing for our services.
Gross Profit
We analyze our gross profit, which we define as revenue less cost of sales, to measure our financial performance. We believe that gross profit is a meaningful metric because it provides insight on financial performance of our revenue streams without consideration of company overhead. When analyzing gross profit, we compare actual gross profit to our internal projections for a given period and to prior periods to assess our performance.
Operating Income
We analyze our operating income, which we define as revenue and gains associated with ERT services less cost of sales, other operating expenses from ERT services, general and administrative expenses, and impairment expense to measure our financial performance. We believe that operating income is a meaningful metric because it provides insight on profitability and true operating performance based on the historical cost basis of our assets. Additionally, due to the nature of the accounting requirements relating to our ERT services, the gains from the sales of fixed assets and the costs associated with ERT fixed asset sales are recorded as a component of operating income. When analyzing operating income, we compare actual operating income to our internal projections for a given period and to prior periods to assess our performance.
Adjusted EBITDA and Adjusted EBITDA Margin
We view Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP financial measures, as important indicators of performance because they allow for an effective evaluation of our operating performance when compared to our peers, without regard to our financing methods or capital structure. We define Adjusted EBITDA as net loss attributable toCharah Solutions, Inc. before income from discontinued operations, net of tax, interest expense, net, loss on extinguishment of debt, income taxes, depreciation and amortization, equity-based compensation, impairment expense (including inventory reserves), gain on change in contingent payment liability and transaction-related expenses and other items. Adjusted EBITDA margin represents the ratio of Adjusted EBITDA to total revenue. See "-Non-GAAP Financial Measures" below for more information and a reconciliation of Adjusted EBITDA to net loss attributable toCharah Solutions, Inc. , the most directly comparable financial measure calculated and presented in accordance with GAAP.
Key Factors Affecting Our Business and Financial Statements
Ability to Capture New Contracts and Opportunities
Our ability to grow revenue and earnings is dependent on maintaining and increasing our market share, renewing existing contracts, and obtaining additional contracts from proactive bidding on contracts with new and existing customers. We proactively work with existing customers ahead of contract end dates to attempt to secure contract renewals. We also leverage the embedded long-term nature of our customer relationships to obtain insight and capture new business opportunities across our platform.
Seasonality of Business
Based on historical trends, we expect our operating results to vary seasonally. Variations in normal weather patterns can also cause changes in energy consumption which may influence the demand and timing of associated services for our byproduct services offerings. Our byproduct services and raw material sales are also negatively affected during winter months when the use of cement and cement products is generally lower. 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.
Project-Based Nature of Environmental Remediation Mandates
We believe there is a significant pipeline of coal ash ponds and landfills that will require remediation and/or closure in the future. Due to their scale and complexity, these environmental remediation projects are typically completed over longer periods. As a result, our revenue from these projects can fluctuate over time. Some of our revenue from projects is recognized over time using the cost-to-cost input method of accounting for GAAP purposes, based primarily on contract costs incurred to date compared to total estimated contract costs. This method is the most accurate measure of our contract performance because it depicts the company's performance in transferring control of goods or services promised to customers according to a reasonable measure of progress toward complete satisfaction of the performance obligation. The timing of revenue recorded for financial reporting purposes may differ from actual billings to customers, sometimes resulting in costs and billings in excess of actual revenue. Because of the risks in estimating gross profit margins for long-term jobs, actual results may differ from these estimates.
Byproduct Recycling Market Dynamics
There is a growing demand for recycled coal ash across various applications driven by market forces and governmental regulations,
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creating the need to dispose of coal ash in an environmentally sensitive manner.
Pricing of byproduct services and raw material sales are driven by supply and
demand market dynamics as well as the chemical and physical properties of the
ash. As demand increases for the end-products that use CCRs (i.e., concrete for
construction and infrastructure projects), the demand for recycled coal ash also
typically rises. These fluctuations affect the relative demand for our raw
material sales. In recessionary periods, construction and infrastructure
spending and the corresponding need for concrete may decline. However, this
unfavorable effect may be partially offset by an increase in the demand for
recycled coal ash during recessionary periods, given that coal ash is more
cost-effective than other alternatives.
Power Generation Industry Spend on Environmental Liability Management and Regulatory Requirements
The power generation industry has increased annual spending on environmental liability management. We believe this results from regulatory requirements, consumer pressure and the industry's increasing focus on environmental stewardship. Continued increases in spending on environmental liability management by our customers should result in increased demand for services across our platform.
Many power generation entities are experiencing an increased need to retire and
decommission older or less economically viable generating assets while
minimizing costs, maximizing the value of the assets and improving the
environment. Our ERT services allow these partners to remove the environmental
risk and insurance obligations and place control and oversight with a company
specializing in these complex remediation and reclamation projects. We believe
our broad set of service capabilities, track record of quality service and
safety, exacting environmental standards, and a dependable and experienced labor
force is a significant competitive advantage. Our work, mission and culture are
directly aligned with meeting environmental, sustainability, and governance
("ESG") standards and providing innovative services to solve our coal-fired
plant energy providers' most complex environmental challenges.
Cost Management and Capital Investment Efficiency
Our principal operating costs consist of labor, material and equipment costs and equipment maintenance. We focus on cost management and efficiency, including monitoring labor costs, both in terms of wage rates and headcount, along with other costs such as materials and equipment. We believe we maintain a disciplined approach to capital expenditure decisions, typically associated with specific contract requirements. Furthermore, we strive to extend our equipment's useful life through a well-planned routine maintenance program.
How We Generate Revenue
Our remediation and compliance services primarily consist of designing, constructing, managing, remediating and closing ash ponds and landfills on customer-owned sites.
Our byproduct services include recycling recurring and contracted volumes of coal-fired power generation waste byproducts, such as fly ash, bottom ash, IGCC slag and gypsum byproducts, each of which can be used for various industrial purposes. Byproduct services also include the management of coal ash which is mission-critical to power plants' daily operations including silo management, on-site ash transportation and capture, and disposal of combustion byproducts from coal-power operations. More than 90% of our services work is time and materials based, cost reimbursable or unit price contracts, which significantly reduces the risk of loss on contracts and provides gross margin visibility. Revenue from management contracts is recognized when the ash is hauled to the landfill or the management services are provided. Revenue from the sale of ash is recognized when it is delivered to the customer. Revenue from construction contracts is recognized using the cost-to-cost input method.
Our raw material sales provide customers with the raw materials essential to their business while also providing the sourcing, logistics, and management needed to facilitate these raw material transactions around the globe.
Revenue from construction contracts is recognized using the cost-to-cost input
method. Revenue from management contracts is recognized when the ash is hauled
to the landfill or the management services are provided. Revenue from the sale
of ash is recognized when it is delivered to the customer. This combination of
one-stop related services deepens customer connectivity and drives long-term
relationships, which we believe are critical for renewing existing contracts,
winning incremental business from existing customers at new sites and adding new
customers.
Business Environment
We believe there are long-term growth opportunities within the industry in which
we operate, and we continue to have a positive long-term outlook. We believe
that with our full suite of service offerings, broad geographic reach, and
technical and safety expertise, we are well positioned to mitigate the risks and
challenges in our industry while continuing to capitalize on opportunities and
trends. The following represent the recent risks and challenges experienced by
the Company.
Inflationary Market Pressures
We are experiencing the general impact of inflationary market pressures in our
supply chain, labor and subcontractor markets. As a result of the tightening of
the labor market, we continue to operate with disciplined hiring practices, but
we believe our labor costs will remain high given our demand for labor in this
environment. Further, we could continue to experience difficulties in securing
pricing and the availability of certain equipment, materials and subcontractors.
While opportunities to bid on new projects and work continue to be comparable to
prior year levels, we believe inflationary market pressures may impact our
ability to secure backlog in the near term. Our customer are focused on cost
containment to maintain allowable budgets and we continue to see projects on
which we have submitted competitive bids being left unawarded from
higher-than-expected cost proposals received.
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--------------------------------------------------------------------------------Additionally, continued inflation may result in tightening of the credit markets, making access to funding, bonding, letters of credit or sureties more challenging, any of which could adversely impact our profitability and cash flow.
Competitive Labor Market.
As our continued success depends on our ability to attract and retain qualified personnel, we continue to compete to identify, hire and retain qualified employees in this labor market. We believe this labor competition trend is likely to continue, possibly to such a degree that demand for labor resources will outpace supply. Furthermore, the nature of our business as well as the markets in which our projects operate could result in shortages of qualified labor in those markets during periods of high demand. Our ability to capitalize on available opportunities is limited by our ability to employ, train and retain the necessary skilled personnel at acceptable labor costs. We continue to monitor our labor markets and do not currently believe the labor market environment will present a material risk to our profitability as we continue to retain and develop our workforce.
Supply Chain Disruption.
We are experiencing supply chain disruptions in our end markets related to the
following factors: (i) delays in receiving materials and equipment, and (ii)
increased logistics costs resulting from a reduction in available rail cars and
truck drivers as well as increases in imported raw materials from tax, tariffs
and border controls.
These factors differ in their severity and impact to our financial situation,
and we continue to monitor these supply chain disruptions, logistical challenges
and general market conditions with respect to availability and costs of certain
materials and equipment necessary for the performance of our business and the
impact to our profitability and cash flow.
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--------------------------------------------------------------------------------Results of Operations
Three Months EndedSeptember 30, 2022 Compared to Three Months EndedSeptember 30, 2021 Three Months Ended September 30, Change 2022 2021 $ % (dollars in thousands) Revenue$ 81,540 $ 84,161 $ (2,621) (3.1) % Cost of sales (78,681) (74,712) (3,969) 5.3 % Gross profit 2,859 9,449 (6,590) (69.7) % General and administrative expenses (9,493) (9,396) (97) 1.0 %
Gains on sales of real estate, property and equipment, net
2,601 2,998 (397) (13.2) %
Gain on ARO settlement 978 1,127 (149) (13.2) %
Other operating expenses from ERT services (5,847) (817) (5,030) 615.7 %
Impairment expense - (700) 700 (100.0) %
Operating income (8,902) 2,661 (11,563) 434.5 %
Interest expense, net (4,534) (3,541) (993) 28.0 %
Loss on extinguishment of debt - (638) 638 (100.0) %
Loss before income taxes (13,436) (1,518) (11,918) 785.1 %
Income tax (benefit) expense (77) 203 (280) (137.9) %
Net loss (13,359) (1,721) (11,638) (676.2) %
Less loss attributable to non-controlling interest - (44) 44 100.0 %
Net loss attributable to
(696.6) %
Revenue. Revenue decreased $2.6 million , or 3.1%, to $81.5 million for the three
months ended September 30, 2022 as compared to $84.2 million for the three
months ended September 30, 2021 , primarily driven by decreases in remediation
and compliance services revenue of $7.8 million from the net completions of
project work. This decrease was partially offset by increases in byproduct
services revenue of $3.5 million resulting from increased ash production and raw
material sales of $1.7 million resulting from an increase in shipments.
Gross Profit. Gross profit decreased $6.5 million , or 69.7%, to $2.9 million for
the three months ended September 30, 2022 as compared to $9.4 million for the
three months ended September 30, 2021 . As a percentage of revenue, gross profit
was 3.5% and 11.2% for the three months ended September 30, 2022 and 2021,
respectively. The decrease in gross profit and gross profit margin continued to
be directly affected by several factors, including supply chain and logistics
issues that impacted two long-term beneficial use projects and additional costs
incurred to complete and demobilize certain construction projects. Delays in
receiving material and obtaining necessary rail and trucking resources and
securing necessary off-take agreements resulted in delays and margin degradation
on the beneficial use projects. The Company is taking steps to address these
issues, including working closely with its customers on mutually acceptable
contract adjustments although there can be no assurance that such adjustments
will be successfully negotiated. During the three months ended September 30,
2022 , the gross loss was $1.6 million and $2.2 million on the construction
projects and the two beneficial use projects, respectively.
General and Administrative Expenses. General and administrative expenses
increased
Gains on Sales of Real Estate, Property and Equipment, Net. Gains on sales of real estate, property and equipment, net decreased$0.4 million , or 13.2%, to$2.6 million for the three months endedSeptember 30, 2022 as compared to$3.0 million for the three months endedSeptember 30, 2021 , primarily due to a decrease in scrap sale volume from the demolition of theGibbons Creek power plant partially offset by scrap sales resulting from the acquisitions of theAvon Lake and Cheswick ERT projects. Gain on ARO settlement. Gain on ARO settlement decreased$0.1 million for the three months endedSeptember 30, 2022 due to differences in the timing of remediation activities and the size of the resulting gains recognized between the estimated costs used in the measurement of the fair value of the Company's AROs and the actual costs incurred for specific remediation tasks recognized on a proportionate basis. Other Operating Expenses from ERT Services. Other operating expenses from ERT services increased$5.0 million , or 615.7%, to$5.8 million for the three months endedSeptember 30, 2022 as compared to$0.8 million for the three months endedSeptember 30, 2021 , primarily driven by an increase in operating expenses resulting from the acquisition of theAvon Lake and Cheswick ERT projects, project management-related expenses of$1.1 million for the achievement of certain projects-related milestones and profitability levels on the Gibbons Creek ERT project and accretion expense of$2.4 million .
Impairment Expense. Impairment expense decreased
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In performing the evaluation for potential impairment indicators with respect to
the Company's long-lived assets, including the trade name indefinite-lived
intangible as of September 30, 2022 , we considered the impact of the Company's
recent operating results on forecasts of future cash flows attributable to such
trade name. While the financial results in our near-term and terminal forecast
periods remain relatively consistent with prior forecasts, we continue to
analyze the rapidly changing regulatory and political environment and the
potential impacts to our trade name from our existing revenue-generating
activities and an expansion of our ERT offerings. We continue to assess
strategic initiatives to maximize the potential in our existing backlog and
pipeline of opportunities.
Changes resulting from the Company's strategic decisions and initiatives, the
current economic environment and other external factors, including inflationary
market pressures and supply chain disruption, could result in significant
adverse changes to the Company's assumptions related to the estimated fair value
of the intangible asset that could lead to a reduction in the fair value of our
trade name. Any future impairment charges on our trade name indefinite-lived
intangible asset could have a material adverse impact on the Company's
consolidated financial condition and results of operations.
Interest Expense, Net. Interest expense, net increased $1.0 million , or 28.0%,
to $4.5 million for the three months ended September 30, 2022 as compared to
$3.5 million for the three months ended September 30, 2021 , primarily due to a
higher weighted-average cost of capital associated with equipment financing and
an increase in amortization of debt issuance costs.
Loss on Extinguishment of Debt. Loss on extinguishment of debt decreased $0.6
million , or 100%, for the three months ended September 30, 2022 to $0.0 million
as compared to $0.6 million for the three months ended September 30, 2021 , due
to the write-off on unamortized debt issuance costs related to the Credit
Facility in the third quarter of 2021.
Income Tax Expense. Income tax expense decreased $0.3 million , or 137.9%, for
the three months ended September 30, 2022 to an income tax benefit of $0.1
million as compared to an income tax expense of $0.2 million for the three
months ended September 30, 2021 , primarily due to limitations of the utilization
of deferred tax assets against the reversal of deferred tax liabilities.
Net Loss. Net loss increased $11.6 million , or 676.2%, to $13.4 million for the
three months ended September 30, 2022 as compared to $1.7 million for the three
months ended September 30, 2021 .
Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30,
2021
Nine Months Ended
September 30, Change
2022 2021 $ %
(dollars in thousands)
Revenue $ 224,701 $ 199,786 $ 24,915 12.5 %
Cost of sales (222,935) (177,832) (45,103) 25.4 %
Gross profit 1,766 21,954 (20,188) (92.0) %
General and administrative expenses (27,683) (28,080) 397 (1.4) %
Gain on sales-type lease - 5,568 (5,568) (100.0) %
Gains on sales of real estate, property and equipment, net
8,942 6,241 2,701 43.3 %
Gain on ARO settlement 4,986 1,127 3,859 342.4 %
Other operating expenses from ERT services (9,100) (2,114) (6,986) 330.5 %
Impairment expense - (827) 827 (100.0) %
Operating (loss) income (21,089) 3,869 (24,958) 645.1 %
Interest expense, net (13,574) (10,090) (3,484) 34.5 %
Loss on extinguishment of debt - (638) 638 (100.0) %
Income from equity method investment - 191 (191) (100.0) %
Loss before income taxes (34,663) (6,668) (27,995) 419.8 %
Income tax (benefit) expense 342 432 (90) (20.8) %
Net loss (35,005) (7,100) (27,905) (393.0) %Less (loss) income attributable to non-controlling interest
(3) 30 (33) 110.0 %
Net loss attributable to
(7,130) (27,872) (390.9) % Revenue. Revenue increased$24.9 million , or 12.5%, to$224.7 million for the nine months endedSeptember 30, 2022 as compared to$199.8 million for the nine months endedSeptember 30, 2021 , primarily driven by increases in in raw material sales of$12.4 million from an increase in shipments, remediation and compliance services revenue of$7.5 million from the net commencements of new project work and byproduct services revenue of$5.0 million from an increase in production. Gross Profit. Gross profit decreased$20.2 million , or 92.0%, to$1.8 million for the nine months endedSeptember 30, 2022 as compared to$22.0 million for the nine months endedSeptember 30, 2021 . As a percentage of revenue, gross profit was 0.8% and 11.0% for the nine months endedSeptember 30, 2022 and 2021, respectively. The decrease in gross profit and gross profit margin was directly affected by several factors, including supply chain and logistics issues that impacted two long-term beneficial use projects and significant challenges from weather and site conditions that delayed the completion of three projects during the nine months endedSeptember 30, 2022 . Delays in 31 -------------------------------------------------------------------------------- receiving material and obtaining necessary rail and trucking resources and securing necessary off-take agreements resulted in delays and margin degradation on the beneficial use projects. The Company is taking steps to address these issues, including working closely with its customers on contract adjustments. During the nine months endedSeptember 30, 2022 , gross profit loss was$9.0 million and$5.9 million on the two beneficial use projects and three legacy construction projects, respectively. General and Administrative Expenses. General and administrative expenses decreased$0.4 million , or 1.4%, for the nine months endedSeptember 30, 2022 to$27.7 million as compared to$28.1 million for the nine months endedSeptember 30, 2021 , primarily attributable to the timing of certain corporate expenses. Gain on sales-type lease. Gain on sales-type lease decreased$5.6 million for the nine months endedSeptember 30, 2022 due to the absence of the recognition of a parcel transferred under a sales-type lease at an ERT project as discussed in Note 5, Balance Sheet Items, to the accompanying unaudited condensed consolidated financial statements. Gains on Sales of Real Estate, Property and Equipment, Net. Gains on sales of real estate, property and equipment, net increased$2.7 million , or 43.3%, to$8.9 million for the nine months endedSeptember 30, 2022 as compared to$6.2 million for the nine months endedSeptember 30, 2021 , primarily due to increased scrap sales resulting from the demolition of theGibbons Creek power plant in the fourth quarter of 2021 and the acquisitions of theAvon Lake and Cheswick ERT projects. Gain on ARO settlement. Gain on ARO settlement increased$3.9 million , or 342.4%, to$5.0 million for the nine months endedSeptember 30, 2022 as compared to$1.1 million for the nine months endedSeptember 30, 2021 due to differences in the timing of remediation activities and the size of the resulting gains recognized between the estimated costs used in the measurement of the fair value of the Company's AROs and the actual costs incurred for specific remediation tasks recognized on a proportionate basis. Other Operating Expenses from ERT Services. Other operating expenses from ERT services increased$7.0 million , or 330.5%, to$9.1 million for the nine months endedSeptember 30, 2022 as compared to$2.1 million for the nine months endedSeptember 30, 2021 , primarily driven by an increase in operating expenses resulting from the acquisition of theAvon Lake and Cheswick ERT projects, project management-related expenses of$2.8 million for the achievement of certain projects-related milestones and profitability levels on the Gibbons Creek ERT project and accretion expense of$3.1 million .
Impairment Expense. Impairment expense decreased
Interest Expense, Net. Interest expense, net increased$3.5 million , or 34.5%, to$13.6 million for the nine months endedSeptember 30, 2022 as compared to$10.1 million for the nine months endedSeptember 30, 2021 , primarily due to a higher weighted-average cost of capital associated with equipment financing and an increase in amortization of debt issuance costs. Loss on Extinguishment of Debt. Loss on extinguishment of debt decreased$0.6 million , or 100%, for the nine months endedSeptember 30, 2022 to$0.0 million as compared to$0.6 million for the nine months endedSeptember 30, 2021 , due to the write-off on unamortized debt issuance costs related to the Credit Facility in the third quarter of 2021. Income fromEquity Method Investment . Income from equity method investment decreased$0.2 million for the nine months endedSeptember 30, 2022 , as compared to the nine months endedSeptember 30, 2021 , due to the dissolution of our joint venture in CV Ash in the first quarter of 2021. Income Tax Expense. Income tax expense decreased$0.1 million , or 20.8%, for the nine months endedSeptember 30, 2022 to$0.3 million as compared to$0.4 million for the nine months endedSeptember 30, 2021 , primarily due to limitations of the utilization of deferred tax assets against the reversal of deferred tax liabilities. Net Loss. Net loss increased$27.9 million , or (393.0)%, to$35.0 million for the nine months endedSeptember 30, 2022 as compared to$7.1 million for the nine months endedSeptember 30, 2021 .
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