Published:
EnergySolutions Announces Third Quarter 2009 Results
EnergySolutions, Inc. (NYSE: ES), 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, 2009.
Q3 2009 Highlights
-- GAAP EPS of $0.15 per share
-- Net income attributable to EnergySolutions before non-cash impact of
amortization of intangible assets of $17.6 million, or $0.20 per share
-- EBITDA of $31.8 million
-- Strengthened balance sheet by paying down $35.9 million in long-term
debt
Third Quarter 2009 Results
Revenues for the third quarter of 2009 were $364.9 million, compared with
$419.5 million in the third quarter of 2008. Gross profit for the third
quarter of 2009 was $43.9 million, compared with $56.5 million for the
third quarter of 2008. Selling, general and administrative expenses for the
third quarter of 2009 were $25.6 million, compared with $30.7 million for
the third quarter of 2008.
Net income attributable to EnergySolutions for the third quarter of 2009
was $12.9 million, or $0.15 per share, compared with $10.9 million, or
$0.12 per share, for the third quarter of 2008. Net income attributable to
EnergySolutions before the non-cash impact of amortization of intangible
assets for the third quarter of 2009 was $17.6 million, or $0.20 per share,
compared with the third quarter of 2008 of $15.6 million, or $0.18 per
share. EBITDA for the third quarter of 2009 was $31.8 million, compared
with $36.8 million for the third quarter of 2008. A reconciliation of
EBITDA and of net income attributable to EnergySolutions before the
non-cash impact of amortization of intangible assets to net income
attributable to EnergySolutions is provided in the attached Table 4.
During the third quarter ended September 30, 2009, the Company determined
that it had inappropriately applied authoritative guidance related to
intangible assets and goodwill denominated in foreign currencies. As such,
the Company recorded an entry during the quarter ended September 30, 2009
for $1.8 million to reduce amortization expense recorded in previous
periods. Of this $1.8 million, $1.2 million related to the first and
second quarters of 2009 and $0.6 million related to periods prior to 2009.
CEO Commentary
Commenting on the quarter, Steve Creamer, EnergySolutions CEO, said, "Our
overall level of commercial business activity remained lower than normal as
customers continued to remain cautious in moving forward on planned
projects. In addition, projects funded by the American Recovery and
Reinvestment Act continued to be slow in progressing. However, as
commercial customers gain further confidence in the stability of the
recovering economy and as more stimulus dollars are deployed, I am
optimistic that we will see improving trends in 2010."
Business Segments - Third Quarter 2009
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 2009 were $77.0 million,
compared with $84.3 million in the third quarter of 2008. The decline in
revenue is primarily attributable to lower revenue at one of the Company's
consolidated joint ventures due to substantial completion of the
construction phase of the project. This was partially offset by increased
revenues at the Moab Atlas mill tailings project due a higher level of
activity and increased revenues at the Isotek waste remediation project at
the Oak Ridge National Laboratory.
Income from operations for the third quarter of 2009 was $5.9 million,
compared with $10.9 million for the third quarter of 2008. Operating margin
was 7.6% for the third quarter of 2009, compared to 12.9% for the third
quarter of 2008. Operating margin declined primarily due to an unfavorable
shift in project mix, with increased activity on lower margin contracts and
decreased activity on higher margin projects including the Savannah River
and Hanford sites. Operating margin also declined due to increased bid and
contract proposal expenses incurred for the submission of bids on two large
federal proposals.
The Company's proportional share of income from its joint ventures in which
it has noncontrolling interests is included in Other Income and was $2.8
million for the third quarter of 2009, compared with $0.9 million for the
third quarter of 2008. This increase was due to the Company's proportional
share of income from its joint venture that won the Hanford Tank contract
in July 2008.
Commercial Services
Commercial Services revenues for the third quarter of 2009 were $21.3
million, compared with $19.2 million for the third quarter of 2008. The
increase in revenue is primarily due to large component operations related
to the Duke McGuire project.
Income from operations for the third quarter of 2009 was $4.7 million,
compared with $4.7 million in the third quarter of 2008. Operating margin
was 22.1% for the third quarter of 2009, compared to 24.4% for the third
quarter of 2008. The decline in operating margin is primarily due to lower
margins on commercial decommissioning projects.
Logistics, Processing and Disposal
Logistics, Processing and Disposal revenues for the third quarter of 2009
were $52.7 million, compared to $66.2 million in the third quarter of 2008.
The decline in revenue is primarily due to lower commercial waste volumes
at the Clive, Utah facility, as well as decreased revenue from the
Company's manufacturing operations, which had a significant shipment of
product in the third quarter of 2008.
Income from operations for the third quarter of 2009 was $18.2 million,
compared with $25.5 million for the third quarter of 2008. Operating
margin was 34.5% for the third quarter of 2009, compared to 38.6% for the
third quarter of 2008. The decline in operating margin is primarily due to
lower gross margins at the Clive, Utah facility and in the Company's
manufacturing operations.
International
Excluding the effects of fluctuations in foreign currency exchange rates,
International revenues for the third quarter of 2009 decreased by $4.0
million, compared with the third quarter of 2008, primarily due to a lower
reimbursable contract cost base of the Company's Magnox contracts.
International revenues were also negatively impacted by $31.9 million due
to foreign currency fluctuations. As a result, on a GAAP basis,
International revenues for the third quarter of 2009 were $213.9 million,
compared to $249.8 million for the third quarter of 2008.
Income from operations for the third quarter of 2009 was $3.6 million,
compared with $3.3 million for the third quarter of 2008. Operating margin
was 1.7% for the third quarter of 2009, compared to 1.3% for the third
quarter of 2008. The increase in operating income and margin was primarily
due to decreased amortization expense of intangible assets, which was
partially offset by increased bid and proposal costs as well as foreign
currency fluctuations.
Liquidity and Capital Resources
As of September 30, 2009, EnergySolutions had $21.4 million in cash and
cash equivalents, and $63.1 million of availability under its $75 million
revolving line of credit. The decline in cash and cash equivalents from
the end of the prior quarter is primarily due to cash utilized to pay down
long-term debt by approximately $35.9 million during the third quarter of
2009.
Outlook for 2009
Given the year-to-date results, a revised expectation of no additional
large component project in 2009, and the continued slow pace of projects
funded by the American Recovery and Reinvestment Act, EnergySolutions'
revised 2009 EBITDA guidance is $145 million to $150 million. Previous
2009 GAAP EPS guidance of $0.50 to $0.60 per share and of net income before
the non-cash impact of the amortization of intangibles of $0.70 to $0.80
per share remains unchanged.
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)
deteriorating economic conditions globally, including the current financial
crisis and decreased credit availability for our customers, (b) the
weakening of the pound sterling and the related currency translation impact
on our business if the currency continues to weaken, (c) adverse public
reaction that could lead to increased regulation or limitations on our
activities, (d) uncertainty regarding the impact on our business of
increased regulatory scrutiny of the nuclear waste industry in the U.S. and
U.K., (e) decisions by our customers to reduce or halt their spending on
nuclear services, (f) decisions by our commercial customers to store
radioactive materials on-site rather than dispose of radioactive materials
at one of our facilities, (g) the adverse impact of current or future
financial conditions on the value of decommissioning trust funds, and (h)
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, 2008 and its most recent quarterly
report on Form 10-Q for the quarter ended June 30, 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 2009 third quarter teleconference and webcast are
scheduled to begin at 10:00 a.m. EST, on Thursday, November 5, 2009.
Hosting the call will be Steve Creamer, Chairman and Chief Executive
Officer, and Philip Strawbridge, Chief Financial Officer.
To participate in the event by telephone, please dial (800) 573-4842 five
to ten minutes prior to the start time (to allow time for registration) and
reference the conference passcode 61884244. International callers should
dial (617) 224-4327 and enter the same passcode.
A replay of the call will be available on Thursday, November 5, at 1:00
p.m. EST through Thursday, November 12, 2009. To access the replay, dial
(888) 286-8010 and enter passcode 54942792. 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 is a global leader in nuclear waste management,
remediation, and disposal. The Company 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.
Table 1
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,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Revenues $ 364,853 $ 419,453 $ 1,175,547 $ 1,381,551
Cost of revenues 320,910 362,962 1,034,678 1,189,557
----------- ----------- ----------- -----------
Gross profit 43,943 56,491 140,869 191,994
Selling, general and
administrative
expenses 25,631 30,705 86,730 88,992
----------- ----------- ----------- -----------
Income from
operations 18,312 25,786 54,139 103,002
Interest expense (6,368) (9,778) (21,789) (34,250)
Other income
(expenses), net 2,988 (72) 5,215 (1,891)
----------- ----------- ----------- -----------
Income before income
taxes and
noncontrolling
interests 14,932 15,936 37,565 66,861
Income tax expense (1,742) (4,827) (8,367) (23,164)
----------- ----------- ----------- -----------
Net income 13,190 11,109 29,198 43,697
Less: Net income
attributable to
noncontrolling
interests (334) (207) (885) (907)
----------- ----------- ----------- -----------
Net income
attributable to
EnergySolutions $ 12,856 $ 10,902 $ 28,313 $ 42,790
=========== =========== =========== ===========
Net income attributable
to EnergySolutions per
share:
Basic $ 0.15 $ 0.12 $ 0.32 $ 0.48
Diluted $ 0.15 $ 0.12 $ 0.32 $ 0.48
Number of shares used
in per share
calculations:
Basic 88,315,158 88,303,500 88,308,870 88,303,500
Diluted 88,557,831 88,312,311 88,390,569 88,310,791
Table 2
ENERGYSOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
September 30, December 31,
ASSETS 2009 2008
------------- -------------
Current assets:
Cash and cash equivalents $ 21,392 $ 48,448
Accounts receivable, net of allowance for
doubtful accounts 275,239 213,037
Other current assets 120,301 129,772
------------- -------------
Total current assets 416,932 391,257
Property, plant & equipment, net 115,047 114,021
Goodwill 518,751 528,254
Other intangible assets,net 326,316 357,100
Other noncurrent assets 207,512 160,080
------------- -------------
Total assets $ 1,584,558 $ 1,550,712
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,392 $ 2,954
Accounts payable 117,917 89,513
Accrued expenses and other current
liabilities 178,021 177,439
Other current liabilities 22,370 28,801
------------- -------------
Total current liabilities 319,700 298,707
Long-term debt, less current portion 517,719 563,803
Other noncurrent liabilities 266,782 219,383
------------- -------------
Total liabilities 1,104,201 1,081,893
------------- -------------
EnergySolutions stockholders' equity 479,210 467,786
Noncontrolling interests 1,147 1,033
------------- -------------
Total equity 480,357 468,819
------------- -------------
Total liabilities and equity $ 1,584,558 $ 1,550,712
============= =============
Table 3
ENERGYSOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
For the Nine Months Ended
September 30,
2009 2008
------------ ------------
Cash Provided by Operating Activities $ 55,833 $ 86,973
------------ ------------
Investing Activities
Purchases of property, plant and equipment (15,059) (9,731)
Purchases of intangible assets (558) (351)
Proceeds from sale of property, plant and
equipment 22 33
------------ ------------
Cash Used in Investing Activities (15,595) (10,049)
------------ ------------
Financing Activities
Repayments of long-term debt (47,646) (30,210)
Dividends to stockholders (6,623) (6,623)
Other items (12,243) (9,649)
------------ ------------
Cash Used in Financing Activities (66,512) (46,482)
------------ ------------
Effect of Exchange Rate on Cash (782) (6,908)
------------ ------------
Increase (Decrease) in Cash and Cash
Equivalents $ (27,056) $ 23,534
============ ============
Amortization of Intangible Assets $ 18,728 $ 21,308
============ ============
Depreciation $ 15,168 $ 13,380
============ ============
Table 4
ENERGYSOLUTIONS, INC.
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO ENERGYSOLUTIONS TO
EBITDA AND TO NET INCOME ATTRIBUTABLE TO ENERGYSOLUTIONS BEFORE
THE IMPACT OF AMORTIZATION OF INTANGIBLE ASSETS (UNAUDITED)
(Dollars in thousands, except per share data)
For the Quarter For the Nine Months
Ended September 30, Ended September 30,
2009 2008 2009 2008
---------- ---------- ---------- ----------
Reconciliation of net
income attributable to
EnergySolutions to EBITDA:
Net income attributable
to EnergySolutions $ 12,856 $ 10,902 $ 28,313 $ 42,790
Interest expense 6,368 9,778 21,789 34,250
Interest rate swap loss
(gain) 514 10 1,714 2,223
Income tax expense 1,742 4,827 8,367 23,164
Depreciation expense 5,480 4,323 15,168 13,380
Amortization of
intangible assets 4,821 6,930 18,728 21,308
---------- ---------- ---------- ----------
EBITDA $ 31,781 $ 36,770 $ 94,079 $ 137,115
========== ========== ========== ==========
Reconciliation of net
income attributable to
EnergySolutions to
net income attributable to
EnergySolutions before
the impact of amortization
of intangible assets:
Net income attributable
to EnergySolutions $ 12,856 $ 10,902 $ 28,313 $ 42,790
Amortization of
intangible assets 4,821 6,930 18,728 21,308
Income tax expense
related to amortization
of intangible assets (100) (2,235) (4,272) (7,484)
---------- ---------- ---------- ----------
Net income attributable
to EnergySolutions
before the impact of
amortization of
intangible assets $ 17,577 $ 15,597 $ 42,769 $ 56,614
========== ========== ========== ==========
Net income attributable to
EnergySolutions before the
impact of amortization of
intangible assets per share:
Basic $ 0.20 $ 0.18 $ 0.48 $ 0.64
Diluted $ 0.20 $ 0.18 $ 0.48 $ 0.64
Number of shares used in
per share calculations:
Basic 88,315,158 88,303,500 88,308,870 88,303,500
Diluted 88,557,831 88,312,311 88,390,569 88,310,791
The Company defines EBITDA as earnings before interest expense, income
taxes, depreciation and amortization. The Company uses EBITDA to facilitate
a comparison of its 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 its business than GAAP measures alone.
EBITDA assists management in comparing its operating performance on a
consistent basis because it removes the impact of its capital structure
(primarily interest charges), asset base (primarily depreciation and
amortization) and items outside the control of its management team (taxes)
from its results of operations. EBITDA should not be considered as a
substitute for net income attributable to EnergySolutions or income from
operations, as determined in accordance with GAAP. EBITDA is not defined by
GAAP, and you should not consider it in isolation or as a substitute for
analyzing the Company's results as reported under GAAP.
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 of these items. Net income attributable to
EnergySolutions before the impact of amortization of intangible assets and
net income attributable to EnergySolutions before the impact of
amortization of intangible assets per share are not computed in accordance
with GAAP. These non-GAAP measures may be useful to investors seeking to
compare the 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. Net income attributable to EnergySolutions before the impact of
amortization of intangible assets and net income attributable to
EnergySolutions before the impact of amortization of intangible assets per
share should not be considered as a substitute for net income attributable
to EnergySolutions or net income attributable to EnergySolutions per share,
as determined in accordance with GAAP. Net income attributable to
EnergySolutions before the impact of amortization of intangible assets and
net income attributable to EnergySolutions before the impact of
amortization of intangible assets per share are not defined by GAAP, and
you should not consider them in isolation or as a substitute for analyzing
the Company's results as reported under GAAP.
Table 5
ENERGYSOLUTIONS, INC.
REPORTING SEGMENT INFORMATION (UNAUDITED)
(Dollars in thousands)
For the Quarter Ended September 30,
2009 2008
---------- ----------
Revenues
Federal Services $ 77,007 $ 84,346
Commercial Services 21,254 19,175
LP&D 52,681 66,159
International 213,911 249,773
---------- ----------
Total Revenues $ 364,853 $ 419,453
========== ==========
Gross Profit and Margin
Federal Services $ 10,812 14.0% $ 13,269 15.7%
Commercial Services 6,073 28.6% 6,512 34.0%
LP&D 19,505 37.0% 28,175 42.6%
International Operations 7,553 3.5% 8,535 3.4%
---------- ----------
Total Gross Profit $ 43,943 12.0% $ 56,491 13.5%
========== ==========
Income from Operations and Margin
Federal Services $ 5,871 7.6% $ 10,851 12.9%
Commercial Services 4,699 22.1% 4,688 24.4%
LP&D 18,189 34.5% 25,519 38.6%
International 3,631 1.7% 3,330 1.3%
---------- ----------
Total Income from Operations before
corporate unallocated items 32,390 8.9% 44,388 10.6%
Corporate unallocated items (14,078) (18,602)
---------- ----------
Total Income from Operations $ 18,312 $ 25,786
========== ==========
For the Nine Months Ended September 30,
2009 2008
----------- -----------
Revenues
Federal Services $ 217,809 $ 202,057
Commercial Services 66,084 75,995
LP&D 160,299 183,318
International 731,355 920,181
----------- -----------
Total Revenues $ 1,175,547 $ 1,381,551
=========== ===========
Gross Profit and Margin
Federal Services $ 27,833 12.8% $ 30,491 15.1%
Commercial Services 16,663 25.2% 26,077 34.3%
LP&D 59,303 37.0% 73,846 40.3%
International Operations 37,070 5.1% 61,580 6.7%
----------- -----------
Total Gross Profit $ 140,869 12.0% $ 191,994 13.9%
=========== ===========
Income from Operations and Margin
Federal Services $ 16,136 7.4% $ 23,469 11.6%
Commercial Services 11,659 17.6% 20,562 27.1%
LP&D 53,592 33.4% 65,940 36.0%
International 23,272 3.2% 47,258 5.1%
----------- -----------
Total Income from Operations before
corporate unallocated items 104,659 8.9% 157,229 11.4%
Corporate unallocated items (50,520) (54,227)
----------- -----------
Total Income from Operations $ 54,139 $ 103,002
=========== ===========
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