Date: November 11, 2008
Source: EnergySolutions
Revenues of $419 Million
EBITDA of $36.2 Million
Net Income Before the Non-Cash Impact of Amortization of Intangible Assets of $15.6 Million, or $0.18 per Share
EnergySolutions, Inc. (NYSE: ES) ("EnergySolutions" or 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, 2008.
Third Quarter 2008 Results
Revenues for the quarter ended September 30, 2008 were $419 million, compared to $389 million for the same quarter of 2007. Gross profit for the quarter ended September 30, 2008 was $56.0 million, compared to gross profit of $56.1 million for the quarter ended September 30, 2007. Selling, general and administrative expenses for the quarter ended September 30, 2008 were $30.8 million, compared to $29.1 million for the third quarter of 2007. Included in these expenses for the third quarter of 2008 was $1.3 million related to the Company's secondary offering in July on behalf of its former controlling shareholder.
The Company generated cash flows from operations of $35.2 million during the quarter ended September 30, 2008. Repayments of $30 million of long-term debt during the first and second quarters of 2008, together with repayments of debt from the proceeds of its initial public offering in November 2007, and lower interest rates have contributed to the reduction of the Company's interest expense, which was $9.2 million in the third quarter of 2008, compared to $21.1 million in the third quarter of 2007.
Net income for the quarter ended September 30, 2008 was $10.9 million, or $0.12 per diluted share, compared to $0.2 million for the same quarter of 2007. EBITDA for the quarter ended September 30, 2008 was $36.2 million, compared with $38.3 million for the third quarter of 2007. Net income before the non-cash impact of amortization of intangible assets for the quarter ended September 30, 2008 was $15.6 million, or $0.18 per diluted share.
"We are very pleased that our underlying business has continued to execute well through the third quarter. We have started work on several new projects in this quarter including the Hanford Tank Farm contract with the Department of Energy. We have completed all regulatory requirements necessary for the license transfer of our first license stewardship project at Zion, Illinois. We are now waiting for NRC approval of the license transfer, which is expected in the next several months; however, as previously announced, we will not close on this contract until the overall decommissioning fund recovers from the recent market downturn. In addition, we are working with various utility companies to find alternative funding arrangements to dispose of large components at our facility in Clive, Utah," said R Steve Creamer, the Company's Chief Executive Officer. "In summary, our core business remains strong in spite of the effects of the current turmoil in the financial markets. Our capital structure is sound, our debt levels are manageable and we have over $100 million of cash and undrawn lending commitments from our banks. Our solid financial position is supported by operations that are among the best and safest in our industry."
Business Segments -- Third Quarter 2008
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 revenues for the third quarter of 2008 were $84.3 million, up from revenues of $39.2 million for the third quarter of 2007. Segment income from operations for the third quarter of 2008 was $10.9 million, unchanged from the same quarter of 2007. Operating margin was 12.9% for the third quarter of 2008, compared to 27.9% for the same quarter of 2007. During the fourth quarter 2007 and the first quarter 2008, the Company, at the request of its customer, the Department of Energy, assumed voting control over two joint ventures. As a result, these joint ventures were consolidated this year, adding approximately $36.1 million to revenues in the third quarter of 2008 at a significantly lower operating margin. Revenues also increased, in part, because of increased revenues of $9.6 million from the cleanup of the Atlas Mill tailings near Moab, Utah. These increases were partially offset by decreased revenues from work we performed at the Savannah River site. Lower operating margins were the result of increased revenues from the lower margin joint venture projects and decreased revenues from the higher margin work performed at the Savannah River site.
Commercial Services revenues for the third quarter of 2008 were $19.2 million, compared to $33.6 million for the third quarter of 2007. The decline in revenues was primarily due to a decrease in revenues from utility services and engineering and technology projects due to the completion of several contracts. Income from operations for the third quarter of 2008 was $4.7 million, compared to $5.8 million for the third quarter of 2007. The operating margin for the third quarter of 2008 was 24.4%, up from 17.1% for the third quarter of 2007. The increase in operating margin was primarily due to decreased revenues of lower margin projects and lower costs incurred for business development.
Logistics, Processing and Disposal revenues for the third quarter of 2008 were $66.2 million, up from $64.0 million for the third quarter of 2007. The increase in revenues was primarily due to revenues from the Company's Monserco operations acquired in December 2007, and increased revenues from its subsidiary, Manufacturing Sciences Corporation, as a result of increased volumes of waste storage containers shipped during the quarter. These increases were partially offset by lower volumes and revenues from the Company's disposal facilities in Bear Creek, TN, Clive, UT and Barnwell, SC. Income from operations for the third quarter of 2008 was $25.0 million, compared to $22.7 million for the third quarter of 2007. The operating margin for the third quarter of 2008 was 37.8%, up from 35.4% in the same quarter of 2007. The increase in operating margin was primarily due to lower costs at the Company's Clive facilities, attributable primarily to decreased equipment maintenance, demurrage costs and labor expenses related to lower volumes of materials processed at that site.
International revenues for the third quarter of 2008 were $249.8 million, compared to $252.1 million for the third quarter of 2007. Revenues increased $16.3 million primarily due to the acceleration of decommissioning projects in our RSMC operations; however, this increase was offset by a decrease in revenues of $18.6 million due to the decline in foreign exchange rates of the pound sterling. Segment income from operations for the third quarter of 2008 was $3.3 million, compared to $5.1 million in the third quarter of 2007, while operating margin for the third quarter of 2008 was 1.3%, compared to 2.0% for the same quarter of 2007. The lower operating margin was primarily due to increased bid and proposal expenses in connection with the Company's business development activities.
Outlook for 2008
"In these unprecedented times for the financial markets, utilities around the country are finding the level of funds that they have accumulated for the eventual clean up and decommissioning of their reactor sites have diminished to a significant extent. This is causing what we expect to be a temporary slowdown in the completion and approval of license stewardship and large component opportunities," said Mr. Creamer. "While this is unfortunate, we believe it will be temporary. We believe that the highest degree of expertise applied to the disposal of nuclear waste is still the standard to which utilities and regulators around the world aspire and regard as best practice."
EnergySolutions will continue to work with the NRC and its nuclear utility customers to seek appropriate exemptions, pursue NRC rulemaking changes and assist in developing alternative funding solutions for both the disposal of large components and the establishment of license stewardship programs.
Under these assumptions, the Company's outlook contains no revenues from license stewardship contracts in 2008 or 2009, and a small number of large component contracts in 2009.
The Company reaffirms the outlook for full year 2008, and the preliminary outlook for 2009 provided in October. That outlook estimates net income for 2008 in the range of $0.50 to $0.60 per share, based on 88.3 million fully diluted shares outstanding. Net income before the non-cash impact of the amortization of intangibles is estimated to be in the range of $0.70 to $0.80 per share. Amortization expense of intangible assets is expected to be $28 million, or $18 million net of related income tax expense. The company estimates EBITDA for 2008 to be in the range of $165 million to $180 million. Estimates for net income before the non-cash impact of the amortization of intangible assets and for EBITDA exclude the costs of approximately $1.8 million from the secondary offering in July 2008 and any special charges that may arise during the remainder of 2008. The Company anticipates that the financial performance for fiscal 2009 will be similar to 2008, again assuming no special charges.
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 economic conditions generally. 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, 2007 and quarterly report on Form 10-Q for the quarter ended June 30, 2008. The Company does not undertake any obligation to release publicly any revision to any of these forward-looking statements.
Conference Call
The Company will conduct a conference call at 10:00 a.m. EST on Wednesday, November 12, 2008, to discuss financial results for the third quarter ended September 30, 2008.
Hosting the call will be R Steve Creamer, Chairman and Chief Executive Officer, and Philip Strawbridge, Chief Financial Officer.
To participate in the event by telephone, please dial (866) 356-4123 five to 10 minutes prior to the start time (to allow time for registration) and reference the conference passcode 51337796. International callers should dial (617) 597-5393 and use the same passcode.
A replay of the call will be available on Wednesday, November 12, 2008, at 12:00 p.m. EST through Wednesday, November 19, 2008, at 12:00 pm EST. To access the replay, dial (888) 286-8010 and enter passcode 53583509. 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. To listen to the live call, please visit the Web site at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. An audio replay of the event will be archived on EnergySolutions' Web site for 90 days.
About EnergySolutions
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.
Table 1
ENERGYSOLUTIONS, INC.
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,
2008 2007 2008 2007
----------- ----------- ----------- -----------
Revenues $ 419,453 $ 388,895 $ 1,381,551 $ 664,753
Cost of revenues 363,462 332,758 1,191,466 532,127
----------- ----------- ----------- -----------
Gross profit 55,991 56,137 190,085 132,626
Selling, general and
administrative
expenses 30,779 29,092 89,290 80,432
----------- ----------- ----------- -----------
Income from
operations 25,212 27,045 100,795 52,194
Interest expense (9,204) (21,074) (32,043) (51,785)
Other income
(expenses), net (72) (1,961) (1,891) (1,403)
----------- ----------- ----------- -----------
Income (loss)
before minority
interests and
income taxes 15,936 4,010 66,861 (994)
Minority interests (207) - (907) -
Income tax (expense)
benefit (4,827) (3,786) (23,164) (3,134)
----------- ----------- ----------- -----------
Net income (loss) $ 10,902 $ 224 $ 42,790 $ (4,128)
=========== =========== =========== ===========
Net income per share:
Basic $ 0.12 $ 0.48
Diluted $ 0.12 $ 0.48
Number of shares used
in per share
calculations:
Basic 88,303,500 88,303,500
Diluted 88,312,311 88,310,791
Table 2
ENERGYSOLUTIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(Dollars in thousands)
September 30, December 31,
ASSETS 2008 2007
------------- -------------
Current assets:
Cash and cash equivalents $ 59,900 $ 36,366
Accounts receivable, net of allowance for
doubtful accounts 241,182 366,083
Other current assets 141,817 103,233
------------- -------------
Total current assets 442,899 505,682
Property, plant & equipment, net 102,571 110,688
Goodwill 526,532 526,040
Other intangible assets, net 363,714 383,812
Other noncurrent assets 142,363 98,728
------------- -------------
Total assets $ 1,578,079 $ 1,624,950
============= =============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 11,329 $ 1,557
Accounts payable 91,283 155,663
Accrued expenses and other current
liabilities 204,701 233,588
Other current liabilities 41,810 45,135
------------- -------------
Total current liabilities 349,123 435,943
Long-term debt, less current portion 565,427 605,410
Other noncurrent liabilities 209,280 178,206
------------- -------------
Total liabilities 1,123,830 1,219,559
------------- -------------
Minority interests 852 68
Commitments and contingencies
Stockholders' equity 453,397 405,323
------------- -------------
Total liabilities and stockholders'
equity $ 1,578,079 $ 1,624,950
============= =============
Table 3
ENERGYSOLUTIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in thousands)
For the Nine Months
Ended September 30,
2008 2007
--------- ---------
Cash Provided by Operating Activities $ 81,630 $ 112,838
--------- ---------
Investing Activities
Purchases of businesses, net of cash acquired - (196,400)
Purchases of property, plant and equipment (9,731) (5,642)
Other items (318) -
--------- ---------
Cash Used in Investing Activities (10,049) (202,042)
--------- ---------
Financing Activities
Net borrowings (repayments) of long-term debt (30,210) 116,000
Dividends/distributions to shareholders (6,623) (8,918)
Other items (9,649) (10,620)
--------- ---------
Cash Provided by (Used in) Financing Activities (46,482) 96,462
--------- ---------
Effect of Exchange Rate on Cash (1,565) (787)
--------- ---------
Increase in Cash and Cash Equivalents $ 23,534 $ 6,471
========= =========
Amortization of Intangible Assets $ 21,308 $ 17,120
========= =========
Depreciation $ 13,380 $ 14,512
========= =========
Table 4
ENERGYSOLUTIONS, INC.
RECONCILIATION OF NET INCOME (LOSS) TO EBITDA AND NET INCOME (LOSS)
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,
2008 2007 2008 2007
---------- ---------- ---------- ----------
Reconciliation of net
income (loss) to EBITDA:
Net income (loss) $ 10,902 $ 224 $ 42,790 $ (4,128)
Interest expense 9,204 21,074 32,043 51,785
Interest rate swap loss
(gain) 10 524 2,223 486
Income tax expense
(benefit) 4,827 3,786 23,164 3,134
Depreciation expense 4,323 5,411 13,380 14,512
Amortization of intangible
assets 6,930 7,294 21,308 17,120
---------- ---------- ---------- ----------
EBITDA $ 36,196 $ 38,313 $ 134,908 $ 82,909
========== ========== ========== ==========
Reconciliation of net income
(loss) to net income (loss)
before the impact of
amortization of intangible
assets:
Net income (loss) $ 10,902 $ 224 $ 42,790 $ (4,128)
Amortization of intangible
assets 6,930 7,294 21,308 17,120
Income tax expense related
to amortization of
intangible assets (2,235) (2,633) (7,484) (6,181)
---------- ---------- ---------- ----------
Net income (loss) before
the impact of
amortization of
intangible assets $ 15,597 $ 4,885 $ 56,614 $ 6,811
========== ========== ========== ==========
Net income before the impact
of amortization of
intangible assets per share:
Basic $ 0.18 $ 0.64
Diluted $ 0.18 $ 0.64
Number of shares used in per
share calculations:
Basic 88,303,500 88,303,500
Diluted 88,312,311 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 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 before the impact of amortization of
intangible assets as net income plus amortization expense of intangible
assets, net of the related income tax expense of these items. Net income
before the impact of amortization of intangible assets and net income
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 before the impact of amortization of
intangible assets and net income before the impact of amortization of
intangible assets per share should not be considered as a substitute for
net income or net income per share, as determined in accordance with GAAP.
Net income before the impact of amortization of intangible assets and net
income 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 For the Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
-------- -------- ---------- --------
Revenues
Federal
Services $ 84,346 $ 39,162 $ 202,057 $111,254
Commercial
Services 19,175 33,569 75,995 97,516
LP&D 66,159 64,036 183,318 187,182
International 249,773 252,128 920,181 268,801
-------- -------- ---------- --------
Total
Revenues $419,453 $388,895 $1,381,551 $664,753
======== ======== ========== ========
Gross Profit
and Margin
Federal
Services $ 13,269 15.7% $ 14,264 36.4% $ 30,491 15.1% $ 33,614 30.2%
Commercial
Services 6,512 34.0% 8,925 26.6% 26,077 34.3% 19,690 20.2%
LP&D 27,675 41.8% 24,587 38.4% 71,937 39.2% 69,984 37.4%
International
Operations 8,535 3.4% 8,361 3.3% 61,580 6.7% 9,338 3.5%
-------- -------- ---------- --------
Total Gross
Profit $ 55,991 13.3% $ 56,137 14.4% $ 190,085 13.8% $132,626 20.0%
======== ======== ========== ========
Income from
Operations
and Margin
Federal
Services $ 10,851 12.9% $ 10,916 27.9% $ 23,469 11.6% $ 24,701 22.2%
Commercial
Services 4,688 24.4% 5,754 17.1% 20,562 27.1% 11,378 11.7%
LP&D 25,033 37.8% 22,661 35.4% 64,022 34.9% 63,721 34.0%
International 3,330 1.3% 5,083 2.0% 47,258 5.1% 3,124 1.2%
-------- -------- ---------- --------
Total Income
from
Operations
before
corporate
unallocated
items 43,902 10.5% 44,414 11.4% 155,311 11.2% 102,924 15.5%
Corporate
unallocated
items (18,690) (17,369) (54,516) (50,730)
-------- -------- ---------- --------
Total Income
from
Operations $ 25,212 $ 27,045 $ 100,795 $ 52,194
======== ======== ========== ========
John Rasmussen
(801) 303-1681
Email Contact
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