SOURCE: EnergySolutions

EnergySolutions

November 08, 2010 18:35 ET

EnergySolutions Announces Third Quarter 2010 Results

SALT LAKE CITY, UT--(Marketwire - November 8, 2010) - EnergySolutions, Inc. (NYSE: ES) (the "Company"), a leading provider of specialized, technology-based nuclear services to government and commercial customers, today announced financial results for the Company's third quarter ended September 30, 2010.

Q3 2010 Summary

--  Revenues of $419.4 million
--  Net loss attributable to EnergySolutions of $20.4 million, or $(0.23)
    per share
--  Net loss attributable to EnergySolutions before non-cash impact of
    amortization of intangible assets of $(0.17) per share
--  EBITDA of $32.4 million

Third Quarter 2010 Results

Revenues for the third quarter of 2010 were $419.4 million, compared with $364.9 million in the third quarter of 2009. Gross profit for the third quarter of 2010 was $55.8 million, compared with $43.9 million for the third quarter of 2009. Selling, general and administrative expenses for the third quarter of 2010 were $38.2 million, compared with $25.6 million for the third quarter of 2009. The Company's third quarter 2010 results included a non-cash charge of $19.1 million related to the write-off of accumulated deferred financing costs following the refinancing of the Company's credit facilities.

Net loss attributable to EnergySolutions for the third quarter of 2010 was $20.4 million, or ($0.23) per share, compared with net income attributable to EnergySolutions of $12.9 million, or $0.15 per share, for the third quarter of 2009.

Net loss attributable to EnergySolutions before the non-cash impact of amortization of intangible assets for the third quarter of 2010 was $15.3 million, or $0.17 per share, compared with net income attributable to EnergySolutions before the non-cash impact of amortization of intangible assets of $17.6 million, or $0.20 per share, for the third quarter of 2009.

Income tax expense for the quarter included a valuation allowance of $8.6 million for certain domestic and foreign deferred tax assets.

EBITDA for the third quarter of 2010 was $32.4 million, compared with $31.8 million for the third quarter of 2009.

Reconciliations of GAAP to non-GAAP financial measures are provided in the attached Table 4.

CEO Commentary

Commenting on the quarter, Val Christensen, EnergySolutions President and CEO, said, "We experienced a strong level of business activity during the quarter, with each of our operating segments generating year-over-year revenue growth and higher consolidated EBITDA. The most significant drivers of our overall revenue growth were increased disposal volumes at our Clive facility from Federal Government customers and the recognition of revenue related to our planning contract for the Zion license stewardship project. We expect business activity to remain strong in the fourth quarter of 2010.

"Over the course of the past few quarters, we have engaged in a comprehensive review of the strategic positioning and opportunities of the Company. During that time, we have taken a number of strategic steps to better position the Company to compete in the markets we serve, including the changes made this quarter in our capital structure, management and dividend policy. The series of changes we have made reflect our assessment of how we can best position our assets, experience, and expertise to effectively pursue the growth opportunities in the markets we serve."

Business Segments -- Third Quarter 2010

The results of the Company's four business segments, on a GAAP basis, are presented in Table 5 in the accompanying financial tables.

Federal Services

Federal Services revenues for the third quarter of 2010 were $81.2 million, compared with $77.0 million in the third quarter of 2009. The increase in revenues was primarily attributable to a higher level of activity as a result of stimulus funds used to accelerate work on the Moab Atlas mill tailings project and increased subcontracting activity at a federal site in Portsmouth, Ohio.

Income from operations for the third quarter of 2010 was $2.7 million, compared with $5.9 million for the third quarter of 2009. Operating margin was 3.3% for the third quarter of 2010, compared to 7.6% for the third quarter of 2009. Operating margin declined primarily due to increased bid and proposal expenses and an unfavorable shift in project mix, with increased activity on lower margin contracts.

Equity in income of unconsolidated joint ventures was $4.0 million for the third quarter of 2010, compared with $2.8 million for the third quarter of 2009. This increase was primarily due to increased income from the Hanford Tank contract.

Commercial Services

Commercial Services revenues for the third quarter of 2010 were $45.7 million, compared with $21.3 million for the third quarter of 2009. The increase in revenues was primarily due to recognition of the planning contract revenue related to the Zion license stewardship project. Income from operations for the third quarter of 2010 was $8.6 million, compared with $4.7 million in the third quarter of 2009. Operating margin was 18.7% for the third quarter of 2010, compared to 22.1% for the third quarter of 2009. The decrease in operating margin was primarily due to higher costs incurred on commercial decommissioning projects.

Logistics, Processing and Disposal

Logistics, Processing and Disposal ("LP&D") revenues for the third quarter of 2010 were $70.4 million, compared to $52.7 million in the third quarter of 2009. The increase in revenues was primarily due to higher volumes of waste disposed at the Clive, Utah facility from federal customers, as well as higher revenues from the shipment of manufactured tubes.

Income from operations for the third quarter of 2010 was $28.5 million, compared with $18.2 million for the third quarter of 2009. Operating margin was 40.5% for the third quarter of 2010, compared to 34.5% for the third quarter of 2009. The increase in operating margin was primarily attributable to greater absorption of fixed costs at facilities within the LP&D segment.

International

International revenues for the third quarter of 2010 were $222.1 million, compared to $213.9 million for the third quarter of 2009. Excluding the effects of fluctuations in foreign currency exchange rates, International revenues for the third quarter of 2010 increased $20.2 million over the third quarter of 2009 mostly due to increased reimbursable contract cost base from our Magnox contracts. International revenues were negatively impacted by $12.0 million due to foreign currency fluctuations in the third quarter of 2010.

Income from operations for the third quarter of 2010 was $1.3 million, compared with $3.6 million for the third quarter of 2009. Operating margin was 0.6% for the third quarter of 2010, compared to 1.7% for the third quarter of 2009. The decrease in operating margin was primarily due to $2.2 million in increased amortization of intangible assets in the third quarter of 2010 relative to the third quarter of 2009.

Outlook for the Fourth Quarter of 2010

For the fourth quarter of 2010, the Company expects EBITDA to range between $50 million and $55 million, GAAP EPS to range between $0.18 and $0.20, and net income before the non-cash impact of the amortization of intangibles to range between $0.23 and $0.25 per share.

Forward-Looking Statements

Statements in this news release regarding future financial and operating results and any other statements about the Company's future expectations, beliefs or prospects expressed by management constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. There are a number of important factors that could cause actual results or events to differ materially from those indicated by such forward-looking statements, including, but not limited to: (a) uncertain and weak economic conditions globally, including decreased credit availability for our customers and the decisions of individual customers to retain cash and reduce credit market exposure, (b) decreased tax revenues combined with increased demands on federal funding allocations reducing funds available for existing or proposed federal projects that we have been awarded or on which we would bid, (c) current regulatory initiatives, including the importation of nuclear waste into the U.S. and the disposal and storage of depleted uranium (d) the weakening of the pound sterling and the related currency translation impact on our business if the currency continues to weaken, (e) adverse public reaction that could lead to increased regulation or limitations on our activities, (f) uncertainty regarding the impact on our business of increased regulatory scrutiny of the nuclear waste industry in the U.S. and U.K., (g) decisions by our customers to reduce or halt their spending on nuclear services, (h) decisions by our commercial customers to store radioactive materials on-site rather than dispose of radioactive materials at one of our facilities, (i) the adverse impact of current or future financial conditions on the value of decommissioning trust funds, (j) failure to obtain approval from the Securities and Exchange Commission of the Company's proposed accounting treatment for the Zion license stewardship transaction, and (k) continued competitive pressures in our markets. Additional information on potential factors that could affect the Company's results and other risks and uncertainties are set forth in EnergySolutions, Inc. filings with the Securities and Exchange Commission including its annual report on Form 10-K for the fiscal year ended December 31, 2009. The Company does not undertake any obligation to release publicly any revision to any of these forward-looking statements.

Conference Call Details

The EnergySolutions 2010 third quarter teleconference and webcast are scheduled to begin at 10:00 a.m. EST, on Tuesday, November 9, 2010.

Hosting the call will be Val Christensen, President and Chief Executive Officer, and William Benz, Interim Chief Financial Officer.

To participate in the event by telephone, please dial (866) 700-7477 five to ten minutes prior to the start time (to allow time for registration) and reference the conference passcode 59663091. International callers should dial (617) 213-8840 and enter the same passcode.

A replay of the call will be available on Tuesday, November 9, 2010, at 1:00 p.m. EST through Tuesday, November 16, 2010 at 11:59 p.m. EST. To access the replay, dial (888) 286-8010 and enter passcode 10062417. International callers should dial (617) 801-6888 and enter the same passcode.

The conference call will be broadcast live over the Internet and can be accessed by all interested parties through the company's web site at www.energysolutions.com by clicking on the "investor relations" tab at the top of the home page. An audio replay of the event will be archived on EnergySolutions' web site for 90 days. About EnergySolutions, Inc.

EnergySolutions offers customers a full range of integrated services and solutions, including nuclear operations, characterization, decommissioning, decontamination, site closure, transportation, nuclear materials management, the safe, secure disposition of nuclear waste, and research and engineering services across the fuel cycle.

-Financial Tables to follow-

We have made a formal submission to the Securities and Exchange Commission ("SEC") requesting pre-clearance of our proposed accounting treatment for the Zion license stewardship project. There is no assurance the SEC will concur with our proposed accounting treatment. Therefore, we may be required to modify such accounting treatment which might have a material impact on the tables presented below

                          ENERGYSOLUTIONS, INC.
        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
              (Dollars in thousands, except per share data)



                            For the Quarter         For the Nine Months
                          Ended September 30,       Ended September 30,
                            2010         2009         2010         2009
                        -----------  -----------  -----------  -----------

Revenues                $   419,353  $   364,853  $ 1,303,582  $ 1,175,547
Cost of revenues           (363,600)    (320,910)  (1,160,567)  (1,034,678)
                        -----------  -----------  -----------  -----------

  Gross profit               55,753       43,943      143,015      140,869

Selling, general and
 administrative
 expenses                   (38,195)     (25,631)     (97,342)     (86,730)
Impairment of goodwill            -            -      (35,000)           -
Equity in income of
 unconsolidated joint
 ventures                     3,952        2,819       10,165        5,945
                        -----------  -----------  -----------  -----------

  Income from
   operations                21,510       21,131       20,838       60,084

Interest expense            (33,831)      (6,368)     (52,374)     (21,789)
Other income
 (expenses), net              1,025          169        2,045         (730)
                        -----------  -----------  -----------  -----------

  Income before income
   taxes and
   noncontrolling
   interests                (11,296)      14,932      (29,491)      37,565

Income tax expense           (8,319)      (1,742)     (12,344)      (8,367)
                        -----------  -----------  -----------  -----------

  Net income                (19,615)      13,190      (41,835)      29,198

Less: Net income
 attributable to
 noncontrolling
 interests                     (735)        (334)      (1,188)        (885)
                        -----------  -----------  -----------  -----------

  Net income
   attributable to
   EnergySolutions      $   (20,350) $    12,856  $   (43,023) $    28,313
                        ===========  ===========  ===========  ===========

Net income attributable
 to EnergySolutions per
 share:
  Basic                 $     (0.23) $      0.15  $     (0.49) $      0.32
  Diluted               $     (0.23) $      0.15  $     (0.49) $      0.32

Number of shares used
 in per share
 calculations:
  Basic                  88,582,398   88,315,158   88,504,525   88,308,870
  Diluted                88,582,398   88,557,831   88,504,525   88,390,569





                          ENERGYSOLUTIONS, INC.
            CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                          (Dollars in thousands)




                                              September 30,  December 31,
ASSETS                                            2010           2009
                                              -------------- --------------
  Current assets:
   Cash and cash equivalents                  $       89,621 $       15,913
   Accounts receivable, net of allowance for
    doubtful accounts                                268,949        260,380
   Nuclear decommissioning trust fund
    investments                                       90,399              -
   Other current assets                              142,180        153,213
                                              -------------- --------------
    Total current assets                             591,149        429,506

  Property, plant & equipment, net                   119,405        120,775
  Goodwill                                           483,434        518,770
  Other intangible assets, net                       291,166        310,203
  Nuclear decommissioning trust fund
   investments                                       739,928              -
  Restricted cash and decontamination and
   decommissioning deposits                          338,812         24,273
  Other noncurrent assets                            153,892        107,648
                                              -------------- --------------

    Total assets                              $    2,717,786 $    1,511,175
                                              ============== ==============

LIABILITIES & STOCKHOLDERS' EQUITY
  Current liabilities:
   Current portion of long-term debt          $        5,600 $       19,071
   Accounts payable                                  105,810        110,247
   Accrued expenses and other current
    liabilities                                      209,957        167,503
   Facility and equipment decontamination and
    decommissioning liabilities                       87,957              -
   Other current liabilities                          29,504         12,447
                                              -------------- --------------
    Total current liabilities                        438,828        309,268

  Long-term debt, less current portion               835,408        505,040
  Facility and equipment decontamination and
   decommissioning liabilities                       685,763         63,488
  Other noncurrent liabilities                       297,989        133,217
                                              -------------- --------------

    Total liabilities                              2,257,988      1,011,013
                                              -------------- --------------

  EnergySolutions stockholders' equity               457,789        499,045
  Noncontrolling interests                             2,009          1,117
                                              -------------- --------------

    Total equity                                     459,798        500,162
                                              -------------- --------------

    Total liabilities and equity              $    2,717,786 $    1,511,175
                                              ============== ==============






                          ENERGYSOLUTIONS, INC.
        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                          (Dollars in thousands)



                                                      For the Nine Months
                                                      Ended September 30,
                                                        2010       2009
                                                      ---------  ---------

 Cash Provided by Operating Activities                $ 126,175  $  55,833
                                                      ---------  ---------

 Investing Activities
   Purchases of property, plant and equipment           (11,665)   (15,059)
   Purchase and sale of investments in nuclear
    decommissioning trust fund                          (10,720)         -
   Purchases of intangible assets                          (845)      (558)
   Proceeds from disposition of property, plant and
    equipment                                               143         22
                                                      ---------  ---------
 Cash Used in Investing Activities                      (23,087)   (15,595)
                                                      ---------  ---------

 Financing Activities
   Net proceeds from issuance of senior notes           296,070          -
   Net proceeds from issuance of long-term debt         546,000          -
   Retirement of long-term debt                        (524,111)         -
   Restricted cash held as collateral of letter of
    credit obligations                                 (315,479)         -
   Repayments of long-term debt                          (1,400)   (47,646)
   Dividends to stockholders                             (6,638)    (6,623)
   Other items                                          (25,935)   (12,243)
                                                      ---------  ---------
 Cash Used in Financing Activities                      (31,493)   (66,512)
                                                      ---------  ---------

 Effect of Exchange Rate on Cash                          2,113       (782)
                                                      ---------  ---------

 Increase (Decrease) in Cash and Cash Equivalents     $  73,708  $ (27,056)
                                                      =========  =========


 Amortization of Intangible Assets                    $  19,227  $  18,728
                                                      =========  =========
 Depreciation                                         $  14,527  $  15,168
                                                      =========  =========





                          ENERGYSOLUTIONS, INC.
    RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES (UNAUDITED)
              (Dollars in thousands, except per share data)



                            For the Quarter Ended     For the Nine Months
                                September 30,         Ended September 30,
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------

Reconciliation of net
 income (loss) attributable
 to EnergySolutions
 to EBITDA and Adjusted
 EBITDA:
Net income (loss)attributable
 to EnergySolutions         $  (20,350) $   12,856  $  (43,023) $   28,313
Interest expense                33,831       6,368  $   52,374      21,789
Interest rate collar loss
 (gain)                           (208)        514  $   (1,090)      1,714
Income tax expense               8,319       1,742  $   12,344       8,367
Depreciation expense             4,346       5,480  $   14,527      15,168
Impairment of goodwill               -           -  $   35,000           -
Amortization of intangible
 assets                          6,450       4,821  $   19,227      18,728
                            ----------  ----------  ----------  ----------
  EBITDA                        32,388      31,781  $   89,358      94,079
Accretion                          223         400  $      661       1,175
Equity-based compensation        2,982       3,152  $    8,032       8,697
                            ----------  ----------  ----------  ----------
  Adjusted EBITDA           $   35,593  $   35,333  $   98,051  $  103,951
                            ==========  ==========  ==========  ==========


Reconciliation of net
 income (loss) attributable
 to EnergySolutions to
 net income attributable to
 EnergySolutions before
 the non-cash impact of
 amortization of intangible
 assets:
  Net income (loss)
   attributable to
   EnergySolutions          $  (20,350) $   12,856  $  (43,023) $   28,313
  Amortization of intangible
   assets                        6,450       4,821  $   19,227      18,728
  Income tax expense related
   to amortization of
   intangible assets            (1,354)       (100) $   (4,499)     (4,272)
                            ----------  ----------  ----------  ----------
    Net income attributable
     to EnergySolutions
     before the non-cash
     impact of amortization
     of intangible assets   $  (15,254) $   17,577  $  (28,295) $   42,769
                            ==========  ==========  ==========  ==========

Net income attributable to
 EnergySolutions before the
 non-cash impact of
 amortization of intangible
 assets:
  Basic                     $    (0.17) $     0.20  $    (0.32) $     0.48
  Diluted                   $    (0.17) $     0.20  $    (0.32) $     0.48

Number of shares used in
 per share calculations:
  Basic                     88,582,398  88,315,158  88,504,525  88,308,870
  Diluted                   88,582,398  88,557,831  88,504,525  88,390,569

The Company defines EBITDA as net income (loss) attributable to EnergySolutions plus interest expense (including the effects of interest rate derivative agreements), income taxes, depreciation, impairment charges and amortization. The Company defines Adjusted EBITDA as EBITDA plus non-cash equity compensation expense and non-cash accretion expense. The Company uses EBITDA and Adjusted EBITDA as key indicators of its operating performance and for planning and forecasting future business operations. EBITDA and Adjusted EBITDA, as presented in this release, are supplemental measures of the Company's performance that are not required by, or presented in accordance with, generally accepted accounting principles in the United States ("GAAP"). They are not measures of the Company's financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP or as alternatives to cash flow from operating activities as measures of the Company's liquidity.

The Company's measurement of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. the Company has included information concerning EBITDA and Adjusted EBITDA in this release because they are used by management to measure operating performance and because the Company believes that such information is often used by certain investors as measures of a company's historical performance and for modeling.

EBITDA and Adjusted EBITDA have limitations as analytical tools, and investors should not consider them in isolation, or as a substitute for analysis of the Company's operating results or cash flows as reported under GAAP. Some of these limitations are:

--  They do not reflect the Company's cash expenditures, or future
    requirements, for capital expenditures or contractual commitments;
--  They do not reflect changes in, or cash requirements for, the
    Company's working capital needs;
--  They do not reflect the significant interest expense or the cash
    requirements necessary to service interest or principal payments on the
    Company's debt;
--  Although depreciation is a non-cash charge, the assets being
    depreciated will often have to be replaced in the future, and EBITDA
    and Adjusted EBITDA do not reflect any cash requirements for such
    replacements;
--  They are not adjusted for all non-cash income or expense items that are
    reflected in the Company's statements of cash flows; and
--  Other companies in the Company's industry may calculate these measures
    differently than the Company does, limiting their usefulness as
    comparative measures.
Because of these limitations, EBITDA and Adjusted EBITDA should not be considered as measures of discretionary cash available to the Company to invest in the growth of its business. The Company compensates for these limitations by relying primarily on its GAAP results and using EBITDA and Adjusted EBITDA only for supplemental purposes.


The Company defines net income attributable to EnergySolutions before the impact of amortization of intangible assets as net income attributable to EnergySolutions plus amortization expense of intangible assets, net of the related income tax expense. These non-GAAP measures may be useful to investors seeking to compare the Company's operating performance on a consistent basis from period to period that, when viewed with its GAAP results and the above reconciliation, management believes provides a more complete understanding of factors and trends affecting the Company's business than GAAP measures alone. These measures should not be considered as substitutes for net income attributable to EnergySolutions, as determined in accordance with GAAP, and you should not consider them in isolation or as a substitute for analyzing the Company's results as reported under GAAP



                          ENERGYSOLUTIONS, INC.
                REPORTING SEGMENT INFORMATION (UNAUDITED)
                          (Dollars in thousands)



             For the Quarter Ended         For the Nine Months Ended
                 September 30,                   September 30,
              2010           2009            2010             2009
            --------       --------       ----------       ----------

Revenues
Federal
 Services   $ 81,158       $ 77,007       $  262,828       $  217,809
Commercial
 Services     45,655         21,254           91,197           66,084
LP&D          70,417         52,681          189,397          160,299
Internation-
 al          222,123        213,911          760,160          731,355
            --------       --------       ----------       ----------
Total
 Revenues   $419,353       $364,853       $1,303,582       $1,175,547
            ========       ========       ==========       ==========


Gross
 Profit and
 Margin
Federal
 Services   $  8,037  9.9% $ 10,812 14.0% $   24,127  9.2% $   27,833 12.8%
Commercial
 Services      9,894 21.7%    6,073 28.6%     19,610 21.5%     16,663 25.2%
LP&D          30,572 43.4%   19,505 37.0%     65,362 34.5%     59,303 37.0%
International
 Operations    7,250  3.3%    7,553  3.5%     33,916  4.5%     37,070  5.1%
            --------       --------       ----------       ----------
Total Gross
 Profit     $ 55,753 13.3% $ 43,943 12.0% $  143,015 11.0% $  140,869 12.0%
            ========       ========       ==========       ==========


Income from
 Operations
 and Margin
Federal
 Services   $  2,708  3.3% $  5,871  7.6% $   11,577  4.4% $   16,136  7.4%
Commercial
 Services      8,555 18.7%    4,699 22.1%     14,651 16.1%     11,659 17.6%
LP&D          28,543 40.5%   18,189 34.5%     59,286 31.3%     53,592 33.4%
Internation-
 al            1,328  0.6%    3,631  1.7%     18,873  2.5%     23,272  3.2%
            --------       --------       ----------       ----------
Total income
 from
 operations
 before
 corporate
 selling,
 general
 and
 administrative
 expenses,
 impairment
 of goodwill
 and equity
 in income of
 unconsoli-
 dated
 joint
 ventures     41,134  9.8%   32,390  8.9%    104,387  8.0%    104,659  8.9%
Corporate
 selling,
 general
 and
 administra-
 tive
 expenses    (23,576)       (14,078)         (58,714)         (50,520)
Impairment
 of
 goodwill          -              -          (35,000)               -
Equity in
 income of
 unconsoli-
 dated
 joint
 ventures      3,952          2,819           10,165            5,945
            --------       --------       ----------       ----------
Total
 Income
 from
 Operations $ 21,510  5.1% $ 21,131  5.8% $   20,838  1.6% $   60,084  5.1%
            ========       ========       ==========       ==========

Contact Information

  • For more information, please contact:

    John Rasmussen
    EnergySolutions, Inc.
    (801) 649-2000
    Email Contact