Table 1 ENERGYSOLUTIONS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars in thousands, except per share data) For the Quarter For the Year Ended December 31, Ended December 31, 2007 (1) 2006 (2) 2007 (1) 2006 (2) ----------- ----------- ----------- ----------- Revenues $ 427,860 $ 132,798 $ 1,092,613 $ 427,103 Cost of revenues 366,212 78,972 898,339 235,867 ----------- ----------- ----------- ----------- Gross profit 61,648 53,826 194,274 191,236 Selling, general and administrative expenses 42,005 33,102 122,438 101,262 ----------- ----------- ----------- ----------- Income from operations 19,643 20,724 71,836 89,974 Interest expense (20,903) (15,291) (72,689) (68,566) Other income, net 4,767 333 3,364 3,113 ----------- ----------- ----------- ----------- Income before minority interests and income taxes 3,507 5,766 2,511 24,521 Minority interests (92) - (92) - Income tax (expense) benefit (8,184) 3,765 (11,318) 2,342 ----------- ----------- ----------- ----------- Net income (loss) $ (4,769) $ 9,531 $ (8,899) $ 26,863 =========== =========== =========== =========== Net income (loss) per share: Basic $ (0.11) $ (0.79) Diluted $ (0.11) $ (0.79) Number of shares used in per share calculations (in thousands): Basic 44,730 11,274 Diluted 44,730 11,274 (1) Includes the results of operations of Parallax, Inc., Reactor Sites Management Company Limited and its subsidiaries, NUKEM Corporation and Monserco Limited from the dates of their acquisitions in January 2007, June 2007, July 2007 and December 2007, respectively. (2) Includes the results of operations of BNG America, LLC and its subsidiaries, Duratek, Inc. and its subsidiaries and Safeguard International Solutions, Ltd. from the dates of their acquisitions in February 2006, June 2006 and December 2006, respectively. Table 2 ENERGYSOLUTIONS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Dollars in thousands) December 31, December 31, 2007 2006 ------------- ------------- Assets Current assets: Cash and cash equivalents $ 36,366 $ 4,641 Accounts receivable, net of allowance for doubtful accounts 366,083 82,965 Other current assets 103,233 100,229 ------------- ------------- Total current assets 505,682 187,835 Property, plant and equipment, net 110,688 128,845 Goodwill 526,040 462,389 Other intangible assets, net 383,812 296,226 Other noncurrent assets 98,728 81,910 ------------- ------------- Total assets $ 1,624,950 $ 1,157,205 ============= ============= Liabilities and Shareholders' / Member's Equity Current liabilities: Current portion of long-term debt $ 1,557 $ 11,565 Accounts payable 155,663 23,357 Accrued expenses and other current liabilities 233,588 67,872 Other current liabilities 45,135 52,905 ------------- ------------- Total current liabilities 435,943 155,699 Long-term debt, less current portion 605,410 749,602 Other noncurrent liabilities 178,206 102,924 ------------- ------------- Total liabilities 1,219,559 1,008,225 ------------- ------------- Minority interest 68 - Shareholders' / member's equity 405,323 148,980 ------------- ------------- Total liabilities and shareholders' / member's equity $ 1,624,950 $ 1,157,205 ============= ============= Table 3 ENERGYSOLUTIONS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in thousands) For the Quarter For the Year Ended December 31, Ended December 31, 2007 2006 2007 2006 --------- --------- --------- --------- Cash Provided by Operating Activities $ 39,958 $ 14,700 $ 152,796 $ 69,756 --------- --------- --------- --------- Investing Activities Purchases of businesses, net of cash acquired (2,705) (12,993) (199,105) (447,912) Purchases of property, plant and equipment (7,670) (5,082) (13,312) (23,910) Proceeds from disposition of property, plant and equipment 579 55 579 58 --------- --------- --------- --------- Cash Used in Investing Activities (9,796) (18,020) (211,838) (471,764) --------- --------- --------- --------- Financing Activities Net borrowings (repayments) of long-term debt (270,200) (1,908) (154,200) 211,167 Member's capital contributions - - - 175,000 Proceeds from issuance of common stock, net of issuance costs 271,142 - 271,142 - Other items (5,470) 2,854 (25,008) (14,316) --------- --------- --------- --------- Cash Provided by (Used in) Financing Activities (4,528) 946 91,934 371,851 --------- --------- --------- --------- Effect of Exchange Rate on Cash (380) - (1,167) - --------- --------- --------- --------- Increase (Decrease) in Cash and Cash Equivalents $ 25,254 $ (2,374) $ 31,725 $ (30,157) ========= ========= ========= ========= Amortization of Intangible Assets $ 7,027 $ 4,822 $ 24,147 $ 16,589 ========= ========= ========= ========= Depreciation $ 4,571 $ 4,685 $ 19,083 $ 12,039 ========= ========= ========= ========= Table 4 ENERGYSOLUTIONS, INC. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars in thousands, except per share data) For the Quarter For the Year Ended Ended December 31, December 31, 2007 2007 ------------- ------------- Revenues $ 427,860 $ 1,804,626 Cost of revenues 366,334 1,554,849 ------------- ------------- Gross profit 61,526 249,777 Selling, general and administrative expenses 32,564 114,107 ------------- ------------- Income from operations 28,962 135,670 Interest expense (12,304) (53,379) Other income, net 171 1,361 ------------- ------------- Income before minority interests and income taxes 16,829 83,652 Minority interests (92) (92) Income tax expense (6,386) (26,599) ------------- ------------- Net income 10,351 56,961 Amortization of intangible assets 7,027 28,728 Income tax expense (2,453) (10,000) ------------- ------------- Net income before the impact of amortization of intangible assets $ 14,925 $ 75,689 ============= ============= EBITDA $ 40,639 $ 184,750 ============= ============= Net income per share: Basic $ 0.12 $ 0.65 Diluted $ 0.12 $ 0.64 Net income before the impact of amortization of intangible assets per share: Basic $ 0.17 $ 0.86 Diluted $ 0.17 $ 0.85 Number of shares used in per share calculations (in thousands): Basic 88,306 88,306 Diluted 88,720 88,720 Table 4 (Continued) The unaudited pro forma financial information set forth above is derived from the Company's historical financial information, as adjusted to give pro forma effect to the following transactions as if each had occurred as of January 1, 2007: -- the Company's acquisition of RSMC -- the reorganization of the Company from a limited liability company to a "C" corporation -- the Company's sale of 13,153,500 shares of common stock at the initial public offering price of $23.00 per share and the use of the net proceeds to acquire RSMC, pay down debt and make payments to certain executives for termination of certain bonus payments in accordance with their employment agreements -- the elimination of the advisory fees that the Company had paid to its equity sponsors under advisory services agreements that have been terminated following the Company's initial public offering; -- the elimination of non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering; The pro forma financial information has been prepared based upon available information and assumptions that the Company believes are reasonable. However, the pro forma financial information is presented for illustrative and informational purposes only and does not purport to represent what the Company's results of operations or financial condition would have been if the pro forma transactions had occurred on the assumed dates nor are they necessarily indicative of the Company's future performance. Table 5 ENERGYSOLUTIONS, INC. RECONCILIATION OF GAAP TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (Dollars in thousands, except per share data) For the Quarter Ended December 31, 2007 ------------------------------------------- GAAP Adjustments Pro Forma ----------- ----------- ----------- Revenues $ 427,860 $ - $ 427,860 Cost of revenues 366,212 122 (1) 366,334 ----------- ----------- ----------- Gross profit 61,648 (122) 61,526 Selling, general and administrative expenses 42,005 (9,441) (2) 32,564 ----------- ----------- ----------- Income from operations 19,643 9,319 28,962 Interest expense (20,903) 8,599 (3) (12,304) Other income, net 4,767 (4,596) (4) 171 ----------- ----------- ----------- Income before minority interests and income taxes 3,507 13,322 16,829 Minority interests (92) - (92) Income tax (expense) benefit (8,184) 1,798 (5) (6,386) ----------- ----------- ----------- Net income (loss) $ (4,769) $ 15,120 $ 10,351 =========== =========== =========== Reconciliation of net income (loss) to EBITDA: Net income (loss) $ (4,769) $ 10,351 Interest expense 20,903 12,304 Income tax expense 8,184 6,386 Depreciation expense 4,571 4,571 Amortization of intangible assets 7,027 7,027 ----------- ----------- EBITDA $ 35,916 $ 40,639 =========== =========== Reconciliation of net income (loss) to Net income (loss) before the impact of amortization of intangible assets: Net income (loss) $ (4,769) $ 10,351 Amortization of intangible assets 7,027 7,027 Income tax expense related to the reconciling items (2,453) (2,453) ----------- ----------- Net income (loss) before the impact of amortization of intangible assets $ (195) $ 14,925 =========== =========== Net income (loss) per share: Basic $ (0.11) $ 0.12 Diluted $ (0.11) $ 0.12 Net income before the impact of amortization of intangible assets per share: Basic $ (0.00) $ 0.17 Diluted $ (0.00) $ 0.17 Number of shares used in per share calculations (in thousands): Basic 44,730 88,306 Diluted 45,145 88,720 For the Year Ended December 31, 2007 ------------------------------------------- GAAP Adjustments Pro Forma ----------- ----------- ----------- Revenues $ 1,092,613 $ 712,013 (6) $ 1,804,626 Cost of revenues 898,339 656,510 (7) 1,554,849 ----------- ----------- ----------- Gross profit 194,274 55,503 249,777 Selling, general and administrative expenses 122,438 (8,331) (8) 114,107 ----------- ----------- ----------- Income from operations 71,836 63,834 135,670 Interest expense (72,689) 19,310 (3) (53,379) Other income, net 3,364 (2,003) (4) 1,361 ----------- ----------- ----------- Income before minority interests and income taxes 2,511 81,141 83,652 Minority interests (92) - (92) Income tax (expense) benefit (11,318) (15,281) (5) (26,599) ----------- ----------- ----------- Net income (loss) $ (8,899) $ 65,860 $ 56,961 =========== =========== =========== Reconciliation of net income (loss) to EBITDA: Net income (loss) $ (8,899) $ 56,961 Interest expense 72,689 53,379 Income tax expense 11,318 26,599 Depreciation expense 19,083 19,083 Amortization of intangible assets 24,147 28,728 ----------- ----------- EBITDA $ 118,338 $ 184,750 =========== =========== Reconciliation of net income (loss) to Net income (loss) before the impact of amortization of intangible assets: Net income (loss) $ (8,899) $ 56,961 Amortization of intangible assets 24,147 28,728 Income tax expense related to the reconciling items (8,718) (10,000) ----------- ----------- Net income (loss) before the impact of amortization of intangible assets $ 6,530 $ 75,689 =========== =========== Net income (loss) per share: Basic $ (0.79) $ 0.65 Diluted $ (0.79) $ 0.64 Net income before the impact of amortization of intangible assets per share: Basic $ 0.58 $ 0.86 Diluted $ 0.56 $ 0.85 Number of shares used in per share calculations (in thousands): Basic 11,274 88,306 Diluted 11,689 88,720 (1) Pro forma adjustment due to the following: Non-cash accretion income of decontamination and decommissioning liabilities $ 494 Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering (372) ----------- $ 122 =========== (2) Pro forma adjustment due to the following: Advisory fees to equity sponsors prior to termination of advisory services agreements in connection with the Company's initial public offering $ (639) Non-cash equity compensation related to profit interests (596) Compensation paid to certain executives in connection with the Company's initial public offering to terminate certain bonus arrangements in accordance with their employment agreements (6,945) Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering (1,261) ----------- $ (9,441) =========== (3) Pro forma adjustment to reflect reduction of interest expense as a result of paydown of debt from use of proceeds from the Company's initial public offering as if paydown occurred on January 1, 2007 and increase in interest expense for amortization of deferred loan costs related to costs incurred to obtain an amendment to the debt agreement related to the initial public offering as if the amendment occurred on January 1, 2007. (4) Pro forma adjustment to eliminate interest and investment income (balance represents joint venture income only). (5) Adjustment to reflect non-GAAP pro forma income tax expense using an assumed income tax rate of 38% and 28% of U.S. and UK pre-tax income, respectively, as a result of the reorganization of the Company from a limited liability company to a "C" corporation from January 1, 2007. (6) Represents revenues of RSMC from January 1, 2007 to the acquisition on June 26, 2007. (7) Pro forma adjustment due to the following: Cost of revenues of RSMC from January 1, 2007 to the acquisition on June 26, 2007 $ 666,272 To eliminate overhead charges allocated to RSMC from its former parent prior to acquisition on June 26, 2007 (8,000) Non-cash accretion expense of decontamination and decommissioning liabilities (1,390) Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering (372) ----------- $ 656,510 =========== (8) Pro forma adjustment due to the following: Selling, general and administrative expenses of RSMC from January 1, 2007 to the acquisition on June 26, 2007 $ 5,070 Advisory fees to equity sponsors prior to termination of advisory services agreements in connection with the Company's initial public offering (2,477) Non-cash equity compensation related to profit interests (2,718) Compensation paid to certain executives in connection with the Company's initial public offering to terminate certain bonus arrangements in accordance with their employment agreements (6,945) Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering (1,261) ----------- $ (8,331) =========== Table 5 (Continued) 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 it 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. 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 6 ENERGYSOLUTIONS, INC. REPORTING SEGMENT INFORMATION (UNAUDITED) (Dollars in thousands) GAAP PRO FORMA ---------------------------------- ----------------- For the Quarter For the Quarter Ended Ended December 31, December 2007 2006 31, 2007 ----------- --------- ----------- Revenues Federal Services $ 40,101 $ 28,542 $ 40,101 Commercial Services 39,862 22,976 39,862 LP&D 75,619 81,280 75,619 International 272,278 - 272,278 ----------- --------- ----------- Total Revenues $ 427,860 $ 132,798 $ 427,860 =========== ========= =========== Gross Profit and Margin Federal Services $ 8,769 21.9% $ 8,052 28.2% $ 8,769 21.9% Commercial Services 8,122 20.4% 7,373 32.1% 8,213 20.6% LP&D 36,526 48.3% 38,401 47.2% 36,072 47.7% International Operations 8,231 3.0% - 8,472 3.1% ----------- --------- ----------- Total Gross Profit $ 61,648 14.4% $ 53,826 40.5% $ 61,526 14.4% =========== ========= =========== Income from Operations and Margin Federal Services $ 6,376 15.9% $ 5,783 20.3% $ 6,518 16.3% Commercial Services 8,704 21.8% 3,327 14.5% 8,838 22.2% LP&D 34,270 45.3% 35,159 43.3% 33,826 44.7% International (194) -0.1% - 88 0.0% ----------- --------- ----------- Total Income from Operations before corporate unallocated items 49,156 11.5% 44,269 33.3% 49,270 11.5% Corporate unallocated items (29,513) (23,545) (20,308) ----------- --------- ----------- Total Income from Operations $ 19,643 $ 20,724 $ 28,962 =========== ========= =========== GAAP PRO FORMA ---------------------------------- ----------------- For the Year For the Year Ended Ended December 31, December 2007 2006 31, 2007 ----------- --------- ----------- Revenues Federal Services $ 151,355 $ 79,941 $ 151,355 Commercial Services 137,378 54,137 137,378 LP&D 262,801 293,025 262,801 International 541,079 - 1,253,092 ----------- --------- ----------- Total Revenues $ 1,092,613 $ 427,103 $ 1,804,626 =========== ========= =========== Gross Profit and Margin Federal Services $ 42,383 28.0% $ 24,820 31.0% $ 42,383 28.0% Commercial Services 27,812 20.2% 14,558 26.9% 27,903 20.3% LP&D 106,510 40.5% 151,858 51.8% 107,940 41.1% International Operations 17,569 3.2% - 71,551 5.7% ----------- --------- ----------- Total Gross Profit $ 194,274 17.8% $ 191,236 44.8% $ 249,777 13.8% =========== ========= =========== Income from Operations and Margin Federal Services $ 31,077 20.5% $ 20,634 25.8% $ 31,219 20.6% Commercial Services 20,082 14.6% 7,092 13.1% 20,216 14.7% LP&D 97,991 37.3% 144,251 49.2% 99,431 37.8% International 2,930 0.5% - 51,884 4.1% ----------- --------- ----------- Total Income from Operations before corporate unallocated items 152,080 13.9% 171,977 40.3% 202,750 11.2% Corporate unallocated items (80,244) (82,003) (67,080) ----------- --------- ----------- Total Income from Operations $ 71,836 $ 89,974 $ 135,670 =========== ========= =========== Table 7 ENERGYSOLUTIONS, INC. RECONCILIATION OF GAAP TO PRO FORMA REPORTING SEGMENT INFORMATION (UNAUDITED) (Dollars in thousands) For the Quarter Ended December 31, 2007 ------------------------------------------- GAAP Adjustments Pro Forma ----------- ----------- ----------- Revenues Federal Services $ 40,101 $ - $ 40,101 Commercial Services 39,862 - 39,862 LP&D 75,619 - 75,619 International 272,278 - 272,278 ----------- ----------- ----------- Total Revenues $ 427,860 $ - $ 427,860 =========== =========== =========== Gross Profit and Margin Federal Services $ 8,769 $ - $ 8,769 Commercial Services 8,122 91 (1) 8,213 LP&D 36,526 (454) (2) 36,072 International Operations 8,231 241 (1) 8,472 ----------- ----------- ----------- Total Gross Profit $ 61,648 $ (122) $ 61,526 =========== =========== =========== Income from Operations and Margin Federal Services $ 6,376 $ 142 (1) $ 6,518 Commercial Services 8,704 134 (1) 8,838 LP&D 34,270 (444) (3) 33,826 International (194) 282 (1) 88 ----------- ----------- ----------- Total Income from Operations before corporate unallocated items 49,156 114 49,270 Corporate unallocated items (29,513) 9,205 (4) (20,308) ----------- ----------- ----------- Total Income from Operations $ 19,643 $ 9,319 $ 28,962 =========== =========== =========== For the Year Ended December 31, 2007 ------------------------------------------- GAAP Adjustments Pro Forma ----------- ------------ ----------- Revenues Federal Services $ 151,355 $ - $ 151,355 Commercial Services 137,378 - 137,378 LP&D 262,801 - 262,801 International 541,079 712,013 (5) 1,253,092 ----------- ------------ ----------- Total Revenues $ 1,092,613 $ 712,013 $ 1,804,626 =========== ============ =========== Gross Profit and Margin Federal Services $ 42,383 $ - $ 42,383 Commercial Services 27,812 91 (1) 27,903 LP&D 106,510 1,430 (6) 107,940 International Operations 17,569 53,982 (7) 71,551 ----------- ------------ ----------- Total Gross Profit $ 194,274 $ 55,503 $ 249,777 =========== ============ =========== Income from Operations and Margin Federal Services $ 31,077 $ 142 (1) $ 31,219 Commercial Services 20,082 134 (1) 20,216 LP&D 97,991 1,440 (8) 99,431 International 2,930 48,954 (9) 51,884 ----------- ------------ ----------- Total Income from Operations before corporate unallocated items 152,080 50,670 202,750 Corporate unallocated items (80,244) 13,164 (10) (67,080) ----------- ------------ ----------- Total Income from Operations $ 71,836 $ 63,834 $ 135,670 =========== ============ =========== (1) Pro forma adjustment reflects the add back of non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering. (2) Pro forma adjustment due to the following: Non-cash accretion income of decontamination and decommissioning liabilities $ (494) Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering 40 ----------- $ (454) =========== (3) Pro forma adjustment due to the following: Non-cash accretion income of decontamination and decommissioning liabilities $ (494) Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering 50 ----------- $ (444) =========== (4) Pro forma adjustment due to the following: Advisory fees to equity sponsors prior to termination of advisory services agreements in connection with the Company's initial public offering $ 639 Non-cash equity compensation related to profit interests 597 Compensation paid to certain executives in connection with the Company's initial public offering to terminate certain bonus arrangements in accordance with their employment agreements 6,945 Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering 1,024 ----------- $ 9,205 =========== (5) Represents revenues of RSMC from January 1, 2007 to the acquisition on June 26, 2007. (6) Pro forma adjustment due to the following: Non-cash accretion expense of decontamination and decommissioning liabilities $ 1,390 Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering 40 ----------- $ 1,430 =========== (7) Pro forma adjustment due to the following: Gross profit of RSMC from January 1, 2007 to the acquisition on June 26, 2007 $ 45,741 To eliminate overhead charges allocated to RSMC from its former parent prior to acquisition on June 26, 2007 8,000 Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering 241 ----------- $ 53,982 =========== (8) Pro forma adjustment due to the following: Non-cash accretion expense of decontamination and decommissioning liabilities $ 1,390 Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering 50 ----------- $ 1,440 =========== (9) Pro forma adjustment due to the following: Income of operations of RSMC from January 1, 2007 to the acquisition on June 26, 2007 $ 40,672 To eliminate overhead charges allocated to RSMC from its former parent prior to acquisition on June 26, 2007 8,000 Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering 282 ----------- $ 48,954 =========== (10) Pro forma adjustment due to the following: Advisory fees to equity sponsors prior to termination of advisory services agreements in connection with the Company's initial public offering $ 2,477 Non-cash equity compensation related to profit interests 2,718 Compensation paid to certain executives in connection with the Company's initial public offering to terminate certain bonus arrangements in accordance with their employment agreements 6,945 Non-cash compensation expense related to stock options granted to employees on the date of the Company's initial public offering 1,024 ----------- $ 13,164 ===========
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