Edgar Filing: EnergySolutions, Inc.

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-33830

EnergySolutions, Inc.

(Exact name of registrant as specified in its charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)		51-0653027 (I.R.S. Employer Identification Number)

423 West 300 South, Suite 200 Salt Lake City, Utah (Address of principal executive offices)		84101 (Zip Code)

Registrant’s telephone number, including area code: (801) 649-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x		Accelerated filer o

Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of November 5, 2010, 88,621,825 shares of the registrant’s common stock were outstanding.

Table of Contents

EXPLANATORY NOTE

EnergySolutions, Inc. (the “Company”) is filing this Amendment No. 1 to its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”) on November 9, 2010 (the “Original Form 10-Q”), at the request of the SEC to provide in the Original Form 10-Q its previously disclosed restated unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2010. In addition, this amended periodic report reflects the revisions necessary to address the restatement to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of Part I and updated XBRL data files in Item 6 of Part II. This restated financial information has previously been reported in the Company’s Annual Report on Form 10-K, as amended, for the year ended December 31, 2010 under the caption “Selected Financial Data” included in Item 6 therein.

As disclosed in the Original Form 10-Q for the quarter ended September 30, 2010, as of the date of its filing we were in the process of seeking the views of the staff of the SEC Office of the Chief Accountant regarding our accounting for the Zion Station transaction. The Zion Station transaction is a first-of-its-kind approach to decommissioning developed by EnergySolutions, involving accounting treatment for portions of the arrangement that had no prior authority or precedence. The discussions with the SEC continued until late March 2011. As a result of those discussions, we revised our initial accounting model for the Zion Station transaction and, accordingly, we restated our previously reported unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2010 and included the restated information in our Annual Report on Form 10-K, as amended, as mentioned above. The accounting methodology we now utilize for the Zion Station transaction includes recording the following balances at the inception of the project: nuclear decommissioning trust (“NDT”) fund, deferred costs, deferred revenue, deferred tax liability, and an asset retirement obligation (“ARO”). The impact for transactions related to the ARO are included within cost of revenue and earnings or losses from the NDT fund investments are included in other income (expense) in the restated unaudited condensed consolidated statement of operations.

We are restating in this periodic report amendment our previously filed unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2010 at the request of the SEC because we did not in the Original Form 10-Q record the deferred revenue or deferred cost balances related to this transaction on the unaudited condensed consolidated balance sheet nor did we record the accretion expense, the ARO settlement gain or the earnings on the NDT fund investments within the unaudited condensed consolidated statement of operations, due to our utilization of our previously proposed accounting model for the transaction. We also determined that the planning contract we had entered into to perform certain activities prior to the closing of the transaction with Exelon was part of a multiple element arrangement and its previously recognized gross margin should be deferred and recognized over the duration of the project.

This Quarterly Report on Form 10-Q/A (Amendment No. 1) has not been updated for events or information subsequent to the date of the filing of the Original Form 10-Q, except in connection with the foregoing, and should be read in conjunction with the Company’s other filings made with the SEC since the date of the filing of the Original Form 10-Q. For convenience and ease of reference, this amended periodic report sets forth the Original Form 10-Q filing in its entirety, as amended where necessary to reflect the restatement.

Table of Contents

ENERGYSOLUTIONS, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q/A

For the Three and Nine Months Ended September 30, 2010

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)	2
	Condensed Consolidated Statement of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flow	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	33
Item 4.	Controls and Procedures	34
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	36
Item 6.	Exhibits	52
Signatures		53

Table of Contents

PART I

Item 1. Financial Statements

EnergySolutions, Inc.

Condensed Consolidated Balance Sheets

September 30, 2010 and December 31, 2009

(in thousands of dollars, except per share information)

	September 30, 2010			December 31, 2009
	(Unaudited) (As Restated)
Assets
Current assets:
Cash and cash equivalents	$	89,621		$	15,913
Accounts receivable, net of allowance for doubtful accounts	268,949			260,380
Costs and estimated earnings in excess of billings on uncompleted contracts	113,057			115,651
Income tax receivable	530			3,658
Prepaid expenses	6,431			9,135
Deferred income taxes	—			2,701
Nuclear decommissioning trust fund investments	90,399			—
Deferred costs, current portion	99,339			15,651
Other current assets	6,501			6,417
Total current assets	674,827			429,506
Property, plant and equipment, net	121,325			122,696
Goodwill	481,514			516,849
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
Deferred costs, less current portion	667,917			—
Other noncurrent assets	153,891			107,648
Total assets	$	3,469,380		$	1,511,175
Liabilities and 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	208,257			167,503
Facility and equipment decontamination and decommissioning liabilities	95,462			—
Deferred income taxes	2,427			—
Unearned revenues	122,069			12,447
Total current liabilities	539,625			309,268
Long-term debt, less current portion	835,408			505,040
Pension liability	122,302			80,306
Facility and equipment decontamination and decommissioning liabilities	733,326			63,488
Deferred income taxes	88,824			47,743
Unearned revenues, less current portion	672,417			—
Other noncurrent liabilities	2,991			5,168
Total liabilities	2,994,893			1,011,013
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value, 100,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, $0.01 par value, 1,000,000,000 shares authorized; 88,606,756 and 88,361,604 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively	886			884
Additional paid-in capital	495,770			492,541
Accumulated other comprehensive loss	(20,013		)	(20,761		)
Retained earnings (deficit)	(4,165		)	26,381
Total EnergySolutions stockholders’ equity	472,478			499,045
Noncontrolling interests	2,009			1,117
Total stockholders’ equity	474,487			500,162
Total liabilities and stockholders’ equity	$	3,469,380		$	1,511,175

See accompanying notes to condensed consolidated financial statements.

Table of Contents

EnergySolutions, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

Three and Nine Months Ended September 30, 2010 and 2009

(in thousands of dollars, except per share information)

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
	(As Restated)						(As Restated)
Revenues	$	417,656		$	364,853		$	1,301,885		$	1,175,547
Cost of revenues	(368,654		)	(320,910		)	(1,165,621		)	(1,034,678		)
Gross profit	49,002			43,943			136,264			140,869
Selling, general and administrative expenses	(37,919		)	(25,631		)	(97,066		)	(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	15,035			21,131			14,363			60,084
Interest expense	(33,831		)	(6,368		)	(52,374		)	(21,789		)
Other income (expenses), net	29,923			169			30,943			(730		)
Income (loss) before income taxes and noncontrolling interests	11,127			14,932			(7,068		)	37,565
Income tax expense	(16,053		)	(1,742		)	(20,078		)	(8,367		)
Net income (loss)	(4,926		)	13,190			(27,146		)	29,198
Less: Net income attributable to noncontrolling interests	(735		)	(334		)	(1,188		)	(885		)
Net income (loss) attributable to EnergySolutions	$	(5,661	)	$	12,856		$	(28,334	)	$	28,313
Net income (loss) attributable to EnergySolutions per share:
Basic	$	(0.06	)	$	0.15		$	(0.32	)	$	0.32
Diluted	$	(0.06	)	$	0.15		$	(0.32	)	$	0.32
Shares used to calculate net income (loss) attributable to EnergySolutions per share:
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
Cash dividends declared per common share	$	0.025		$	0.025		$	0.075		$	0.075
Comprehensive income (loss):
Net income (loss)	$	(4,926	)	$	13,190		$	(27,146	)	$	29,198
Foreign currency translation adjustment	7,248			(22,178		)	880			(21,233		)
Change in unrecognized actuarial gain (loss)	42			77			(132		)	2,260
Comprehensive income (loss)	2,364			(8,911		)	(26,398		)	10,225
Comprehensive income attributable to noncontrolling interests	(735		)	(334		)	(1,188		)	(885		)
Comprehensive income (loss) attributable to EnergySolutions	$	1,629		$	(9,245	)	$	(27,586	)	$	9,340

See accompanying notes to condensed consolidated financial statements.

Table of Contents

EnergySolutions, Inc.

Condensed Consolidated Statement of Changes in Stockholders’ Equity

Nine Months Ended September 30, 2010

(in thousands of dollars, except per share information)

(unaudited)

	Common Stock				Additional Paid-in			Accumulated Other Comprehensive			Retained			Noncontrolling			Total Stockholders’
	Shares		Amount		Capital			Income (Loss)			Earnings			Interests			Equity
Balance at December 31, 2009	88,361,604		$	884	$	492,541		$	(20,761	)	$	26,381		$	1,117		$	500,162
Net income (loss) (as restated)	—		—		—			—			(28,334		)	1,188			(27,146		)
Distributions to noncontrolling interest	—		—		—			—			—			(296		)	(296		)
Dividend distributions	—		—		(4,426		)	—			(2,212		)	—			(6,638		)
Equity-based compensation	—		—		8,032			—			—			—			8,032
Vesting of restricted stock	306,979		2		(2		)	—			—			—			—
Minimum tax withholdings on restricted stock awards	(61,827	)	—		(375		)	—			—			—			(375		)
Change in unrecognized actuarial loss	—		—		—			(132		)	—			—			(132		)
Foreign currency translation	—		—		—			880			—			—			880
Balance at September 30, 2010 (as restated)	88,606,756		$	886	$	495,770		$	(20,013	)	$	(4,165	)	$	2,009		$	474,487

See accompanying notes to condensed consolidated financial statements.

Table of Contents

EnergySolutions, Inc.

Condensed Consolidated Statements of Cash Flows

Nine Months Ended September 30, 2010 and 2009

(in thousands of dollars)

(Unaudited)

	Nine Months Ended September 30,
	2010			2009
	(As Restated)
Cash flows from operating activities
Net income (loss)	$	(27,146	)	$	29,198
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation, amortization and accretion	36,245			33,896
Equity-based compensation expense	8,032			8,697
Foreign currency transaction gain	(45		)	(650		)
Deferred income taxes	12,620			3,832
Write-off of debt financing fees	19,070			—
Amortization of debt financing fees	4,819			3,167
Impairment of goodwill	35,000			—
Gain on disposal of property, plant and equipment	(213		)	(5		)
Unrealized (gain) loss on derivative contracts	(1,091		)	2,746
Unrealized gain on nuclear decommissioning trust fund investments	(18,178		)	—
Changes in operating assets and liabilities:
Accounts receivable	(10,143		)	(48,884		)
Costs and estimated earnings in excess of billings on uncompleted contracts	2,790			(10,470		)
Income tax receivable	3,128			(1,791		)
Inventories	711			(1,399		)
Prepaid expenses and other current assets	13,767			25,484
Accounts payable	(3,309		)	21,317
Accrued expenses and other current liabilities	43,025			(1,480		)
Unearned revenues	14,963			(6,452		)
Facility and equipment decontamination and decommissioning liabilities	(5,702		)	1,175
Restricted cash and decontamination and decommissioning deposits	940			1,725
Other noncurrent assets	(42,702		)	(42,602		)
Other noncurrent liabilities	39,594			38,329
Net cash provided by operating activities	126,175			55,833
Cash flows from investing activities
Purchases of property, plant and equipment	(11,665		)	(15,059		)
Purchase of investments in nuclear decommissioning trust fund	(364,047		)	—
Proceeds from sales of nuclear decommissioning trust fund investments	353,327			—
Purchases of intangible assets	(845		)	(558		)
Proceeds from disposition of property, plant and equipment	143			22
Net cash (used in) investing activities	(23,087		)	(15,595		)
Cash flows from 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		)
Distributions to noncontrolling interests partners	(296		)	(762		)
Minimum tax withholding on restricted stock awards	(375		)	(5,839		)
Settlement of interest rate contracts	(1,555		)	—
Debt financing fees	(23,196		)	(4,564		)
Repayments of capital lease obligations	(513		)	(1,078		)
Net cash (used in) financing activities	(31,493		)	(66,512		)
Effect of exchange rate on cash	2,113			(782		)
Net increase (decrease) in cash and cash equivalents	73,708			(27,056		)
Cash and cash equivalents, beginning of period	15,913			48,448
Cash and cash equivalents, end of period	$	89,621		$	21,392

See accompanying notes to condensed consolidated financial statements.

Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements

(1) Description of Business

EnergySolutions, Inc. (“we,” “our,” “EnergySolutions” or the “Company”) is a leading provider of specialized, technology-based nuclear services to government and commercial customers. Our customers rely on our expertise to address their needs throughout the lifecycle of their nuclear operations. Our broad range of nuclear services includes engineering, operation of nuclear reactors, in-plant support services, spent nuclear fuel management, decontamination and decommissioning (“D&D”), logistics, transportation, processing and disposal. We derive almost 100% of our revenues from the provision of nuclear services.

We provide our services through four segments: Federal Services; Commercial Services; Logistics, Processing and Disposal (“LP&D”); and International. Our Federal Services segment derives revenues from United States (“U.S.”) government customers for the management and operation or clean-up of facilities with radioactive materials. Our U.S. government customers are primarily individual offices, departments and administrations within the U.S. Department of Energy (“DOE”) and the U.S. Department of Defense (“DOD”). Our Commercial Services segment provides a broad range of on-site services, including D&D, to commercial customers. Our commercial customers include power and utility companies, pharmaceutical companies, research laboratories, universities, industrial facilities and other commercial entities with nuclear materials, as well as state agencies in the U.S. Our LP&D segment provides a broad range of logistics, transportation, processing and disposal services to government and commercial customers. This segment also operates our facilities for the safe processing and disposal of radioactive materials, including a facility in Clive, Utah, four facilities in Tennessee and two facilities in Barnwell, South Carolina. Our International segment derives revenues primarily through contracts with the Nuclear Decommissioning Authority (“NDA”) in the United Kingdom (“U.K.”) to operate, manage and decommission 10 Magnox sites with 22 nuclear reactors. In addition, our International segment provides turn-key services for the disposal of radioactive sources from non-nuclear power generating facilities such as hospitals, research facilities and other manufacturing and industrial facilities.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments, consisting only of normal recurring activities, considered necessary for a fair presentation have been included. We evaluated all subsequent events through the date we filed these financial statements in our Quarterly Report on Form 10-Q with the Securities and Exchange Commission (“SEC”). These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the SEC on March 1, 2010.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The results of operations for the three and nine months ended September 30, 2010 are not necessarily indicative of results that can be expected for the full year.

We have majority voting rights for two of our minority-owned joint ventures. Accordingly, we have consolidated their operations in our consolidated financial statements. We recorded the noncontrolling interests, which reflect the portion of the earnings of operations which are applicable to other noncontrolling partners.

Certain amounts for prior periods have been reclassified to conform to the current year presentation. Prior to the fourth quarter of 2009, we included equity in income of unconsolidated joint ventures in other income (expense), net. During the fourth quarter of 2009, we reclassified these amounts from other income (expense), net, to operating income in the accompanying consolidated statements of operations. Accordingly, for the three and nine months ended September 30, 2009, income from operations was increased by $2.8 million and $5.9 million, respectively, as a result of the reclassification. There was no impact on net income or net income attributable to EnergySolutions for the three or nine months ended September 30, 2009. Income from unconsolidated joint ventures is included in our Federal Services segment operations. In addition, we reclassified $36.8 million from accounts receivable, net of allowance for doubtful accounts, to costs and estimated earnings in excess of billings on uncompleted contracts as of December 31, 2009 to conform to the current year presentation which

Table of Contents

reflects a difference in the way our new accounting system, implemented effective January 1, 2010, records invoicing activities related to the current period, but generated in the subsequent period. This reclassification had no impact on total current assets, total assets, revenue or net income.

(2) Recent Accounting Pronouncements

Accounting Pronouncements Issued But Not Yet Effective

In October 2009, the Financial Accounting Standards Board (“FASB”) issued an update to the authoritative guidance for multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. This update is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and may be applied retrospectively for all periods presented or prospectively to arrangements entered into or materially modified after the adoption date. This guidance is effective for us on January 1, 2011. We are currently evaluating the potential impact of the adoption of this guidance but we do not expect it to have a material impact on the Company’s results of operations, financial position or cash flows.

In January 2010, the FASB issued accounting guidance improving disclosures about fair value measurements, which requires reporting entities to make new disclosures about recurring or nonrecurring fair value measurements including significant transfers into and out of Level 1 and Level 2 fair value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair value measurements. This guidance is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures which are effective for annual periods beginning after December 15, 2010. The adoption of the Level 1 and Level 2 provisions as of January 1, 2010 did not have any impact on our consolidated financial statements. We do not expect the adoption of the Level 3 provisions to have a material impact on our consolidated financial statements.

(3) Restatement

As disclosed in our Original Form 10-Q, we were in the process of seeking the views of the staff of the SEC Office of the Chief Accountant regarding our accounting for the Zion Station transaction. The Zion Station transaction, a first-of-its-kind approach to decommissioning developed by EnergySolutions, involved accounting treatment for portions of the arrangement that had no prior authority or precedence. The discussions with the SEC continued until late March 2011. As a result of those discussions, we revised our accounting model for the Zion Station transaction and concluded that our previously reported unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2010 should be restated. The accounting methodology we utilize for the transactions related to decommissioning of the Zion Station includes recording the following balances at the inception of the project: nuclear decommissioning trust (“NDT”) fund, deferred costs, deferred revenue, deferred tax liability, and an asset retirement obligation (“ARO”). The impact for transactions related to the ARO are included within cost of revenue and earnings or losses from the NDT fund investments are included in other income (expense) in the unaudited condensed consolidated statement of operations.

Although we entered into this contract in December 2007, we postponed the closing of the Zion Station transaction due to the financial crisis affecting the stock markets at the time, and as a result all costs associated with the execution of the planning phase were also deferred. The transaction closed on September 1, 2010. After closing, we recognized the costs and the related revenue associated with the planning contract in our unaudited condensed consolidated statements of operations, with $5.1 million in revenue being deferred over the period of D&D work.

On the date of the closing, the NDT fund investments of approximately $801.4 million previously held by Exelon for the purpose of decommissioning the Zion Station nuclear power plant were transferred to us and the use of those funds, and any investments returns arising therein, remains restricted solely to that purpose. The investments are classified as trading securities and as such, the investment gains and losses are recorded in the unaudited condensed consolidated income statement as other income or expense. As part of this transaction, we have assumed Exelon’s cost basis in the investments, for tax purposes, which included an unrealized gain of approximately $171.7 million at the closing date which resulted in a deferred tax liability of approximately $34.3 million. To the extent that the NDT fund assets exceed the costs to perform the D&D work, we have a contractual obligation to return any excess funds to Exelon. Throughout the period over which we perform the D&D work, we assess whether such a contingent liability exists using the measurement thresholds under ASC 450-20.

Table of Contents

As the NDT fund assets that were transferred to us represent a prepayment of fees to perform the D&D work, we also recorded deferred revenue, including deferred revenue associated with the planning contract, of $772.2 million. Revenue recognition throughout the life of the project is based on the proportional performance method using a cost-to-cost approach.

In conjunction with the acquisition of the shut down nuclear power plant, we became responsible for and assumed the asset retirement obligations for the plant, and we have established and initially measured an ARO in accordance with ASC 410-20. Subsequent measurement of the ARO will follow ASC 410-20 accounting guidance, including the recognition of accretion expense, reassessment of the remaining liability using our estimated costs to complete the D&D work plus the original profit margin, and recognition of the ARO gain as the obligation is settled. The ARO gain results from the requirement to record costs plus an estimate of third-party profit in determining the ARO. When we perform the work using internal resources and reduce the ARO for work performed, we recognize gain if actual costs are less than the estimated costs plus the third-party profit. Accretion expense and the ARO gain are recorded within cost of revenue because, through this arrangement, we are providing D&D services to a customer. Any change to the ARO as a result of cost estimate changes is recorded to cost of revenue in the statement of operations. We also recorded deferred costs to reflect the costs incurred to acquire the future revenue stream. The deferred cost balance was initially recorded at $767.1 million, which is the same value as the initial ARO, and will be amortized into cost of revenue in the same manner as deferred revenue, using the proportional performance method.

The information presented in the following tables has been adjusted to reflect our restatement resulting from our review of our accounting treatment for the Zion Station transaction as more fully described in the “Explanatory Note” immediately preceding Part I, Item 1.

CONDENSED CONSOLIDATED BALANCE SHEET
As of September 30, 2010
(in thousands)

	As Reported			Adjustment			As Restated
Assets
Costs and estimated earnings in excess of billings on uncompleted contracts(1)	$	119,133		$	(6,076	)	$	113,057
Income tax receivable(2)	6,625			(6,095		)	530
Other current assets(3)	9,575			95,848			105,423
Total current assets	591,149			83,678			674,827
Other noncurrent assets(3)	153,892			667,917			821,809
Total assets	$	2,717,786		$	751,594		$	3,469,380
Liabilities and Stockholders’ Equity
Accrued expenses and other current liabilities(4)	$	209,957		$	(1,700	)	$	208,257
Facility and equipment decontamination and decommissioning liabilities(5)	87,957			7,505			95,462
Deferred income taxes(2)	3,792			(1,365		)	2,427
Unearned revenue(6)	25,712			96,357			122,069
Total current liabilities	438,828			100,797			539,625
Facility and equipment decontamination and decommissioning liabilities(5)	685,763			47,563			733,326
Deferred income taxes(2)	51,469			37,355			88,824
Unearned revenue(6)	—			672,417			672,417
Other noncurrent liabilities(7)	124,218			(121,227		)	2,991
Accumulated deficit for the current period(8)	(18,854		)	14,689			(4,165		)
Total liabilities and stockholders’ equity	$	2,717,786		$	751,594		$	3,469,380

(1) Reversal of unbilled amounts previously recorded for decommissioning work at Zion Station for the month ended September 30, 2010.

(2) To reflect the tax impact of the various adjustments, including the establishment of a noncurrent deferred tax liability as of September 1, 2010 related to unrealized gains on investments in the NDT fund.

(3) Initial deferred cost balance related to the Zion transaction as of September 1, 2010, net of amortization of costs.

(4) Reversal of accrued expenses previously recorded for incurred costs on decommissioning work at Zion Station for the month ended September 30, 2010.

Table of Contents

(5) To reflect an increase to the initial Zion Station ARO balance recorded at September 1, 2010, offset by accretion expense and Zion Station ARO settlement gains.

(6) Initial Zion Station deferred revenue balance, net of revenue earned.

(7) Reversal of the amount due to Exelon previously recorded.

(8) Net impact of the adjustments to the statement of operations.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended September 30, 2010
(in thousands)

	As Reported			Adjustment		As Restated
Revenue(1)	$	419,353		(1,697	)	$	417,656
Cost of Revenue(2)	(363,600		)	(5,054	)	(368,654		)
Gross profit	55,753			(6,751	)	49,002
Selling, general and administrative expenses(3)	(38,195		)	276		(37,919		)
Income from operations	21,510			(6,475	)	15,035
Other income (expense)(4)	1,025			28,898		29,923
Income (loss) before tax and noncontrolling interests	(11,296		)	22,423		11,127
Income tax expense(5)	(8,319		)	(7,734	)	(16,053		)
Net income (loss)	(19,615		)	14,689		(4,926		)
Net income (loss) per share
Basic	(0.23		)	0.17		(0.06		)
Diluted	(0.23		)	0.17		(0.06		)
Number of shares used in per share calculations:
Basic	88,582			88,582		88,582
Diluted	88,582			88,582		88,582

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2010
(in thousands)

	As Reported			Adjustment		As Restated
Revenue(1)	$	1,303,582		(1,697	)	$	1,301,885
Cost of Revenue(2)	(1,160,567		)	(5,054	)	(1,165,621		)
Gross profit	143,015			(6,751	)	136,264
Selling, general and administrative expenses(3)	(97,342		)	276		(97,066		)
Income from operations	20,838			(6,475	)	14,363
Other income (expense)(4)	2,045			28,898		30,943
Income (loss) before tax and noncontrolling interests	(29,491		)	22,423		(7,068		)
Income tax expense(5)	(12,344		)	(7,734	)	(20,078		)
Net income (loss)	(41,835		)	14,689		(27,146		)
Net income (loss) per share
Basic	(0.49		)	0.17		(0.32		)
Diluted	(0.49		)	0.17		(0.32		)
Number of shares used in per share calculations:
Basic	88,504			88,504		88,504
Diluted	88,504			88,504		88,504

Adjustments to restate selected financial data for the quarter ended September 30, 2010:

(1) Net impact of the recognition of the Zion Station deferred revenue using the proportional performance method, after consideration of the deferral of the $5.1 million gain related to the planning contract.

(2) Net impact of amortization of deferred costs plus Zion Station ARO accretion expense offset by Zion Station ARO settlement gains.

(3) Reversal of selling, general and administrative expenses allocated to the Zion Station project.

Table of Contents

(4) To record investment gains and losses earned in the NDT fund.

(5) To record the income tax impact of adjustments in (1) to (4).

The impact of the revised accounting for the Zion Station transaction did not affect the unaudited consolidated statements of cash flows as previously reported and as restated for the three and nine months ended September 30, 2010. There was no change to cash provided by or (used in) operating, investing and financing activities, or a net increase (decrease) in cash during the periods.

(4) Trust Fund Investments

The NDT fund was established solely to satisfy obligations related to the D&D of the Zion Station nuclear power plant. The NDT fund holds investments in marketable debt and equity securities directly and indirectly through commingled funds. Investments in the NDT fund are carried at fair value and are classified as trading securities. As of September 30, 2010, investments held by the NDT fund, net, totaled $830.3 million, and are included in current and other long-term assets in the accompanying condensed consolidated balance sheets, depending on expected timing of usage of funds.

We consolidate the NDT fund as a variable interest entity (“VIE”). We have a contractual interest in the NDT fund and this interest is a variable interest due to its exposure to the fluctuations caused by market risk. We are able to control the NDT fund by appointing the trustee and, subject to certain restrictions, we are able to direct the investment policies of the fund. We are the primary beneficiary of the NDT as we benefit from positive market returns and bear the risk of market losses. Gains and losses resulting from adjustments to the fair value of the NDT fund investments resulted in net gains of $28.9 million for the three and nine months ended September 30, 2010, and are included in other income (expense), net, in the accompanying consolidated statements of operations and comprehensive income. Of the $28.9 million net gains recorded from adjustments to the fair value, $10.7 million are related to realized gains on investment securities recorded for the three and nine months ended September 30, 2010.

NDT fund investments by major class consisted of the following (in thousands):

	As of September 30, 2010
	Amortized cost			Gross unrealized gains		Gross unrealized losses			Estimated fair value
Assets
Cash	$	689		—		—			$	689
Receivables for securities sold	39,630			—		—			39,630
Investments
Corporate debt securities	219,450			1,386		(398		)	220,438
Equity securities	172,204			16,704		(101		)	188,807
Commercial mortgage-backed securities	14,276			51		(12		)	14,315
Debt securities issued by states of the United States	12,948			45		(4		)	12,989
Commingled funds	177,799			—		1			177,800
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies	336,703			1,280		(767		)	337,216
	933,380			19,466		(1,281		)	951,565
Total assets	973,699			19,466		(1,281		)	991,884
Liabilities
Payables for securities purchased	(161,557		)	—		—			(161,557		)
Total liabilities	(161,557		)	—		—			(161,557		)
Total assets held by the NDT fund	$	812,142		$	19,466	$	(1,281	)	830,327
Less: current portion									(90,399		)
									$	739,928

(5) Fair Value Measurements

The Company has implemented the accounting requirements for financial assets, financial liabilities, non-financial assets and non-financial liabilities reported or disclosed at fair value. The requirements define fair value, establish a three level hierarchy for measuring fair value in generally accepted accounting principles, and expand disclosures about fair value measurements. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that a

Table of Contents

company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability.

This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company holds investments in the NDT fund that was established to satisfy the decommissioning obligations assumed in connection with the execution of the Exelon Agreements. The NDT fund holds debt and equity securities directly and indirectly through commingled funds. Investments with maturities of three months or less when purchased, including certain short-term fixed income securities, are considered cash equivalents and included in the recurring fair value measurements hierarchy as Level 1.

With respect to individually held equity securities, the trustee obtains prices from pricing services, whose prices are obtained from direct feeds from market exchanges. The fair values of equity securities held directly by the NDT fund are based on quoted prices in active markets and are categorized in Level 1. Equity securities held individually are primarily traded on the New York Stock Exchange and NASDAQ-Global Select Market, which contain only actively traded securities due to the volume trading requirements imposed by these exchanges.

For fixed income securities, multiple prices from pricing services are obtained from pricing vendors whenever possible, which enables cross-provider validations in addition to checks for unusual daily movements. A primary price source is identified based on asset type, class or issue for each security. The trustee monitors prices supplied by pricing services and may use a supplemental price source or change the primary price source of a given security if the portfolio managers challenge an assigned price and the trustee determines that another price source is considered to be preferable. U.S. Treasury securities are categorized as Level 1 because they trade in a highly liquid and transparent market. The fair values of fixed income securities, excluding U.S. Treasury securities, are based on evaluated prices that reflect observable market information, such as actual trade information or similar securities, adjusted for observable differences and are categorized in Level 2.

Commingled funds and units of participation, which are similar to mutual funds, are maintained by investment companies and hold certain investments in accordance with a stated set of fund objectives. The fair values of short-term commingled funds held within the trust funds, which generally hold short-term fixed income securities and are not subject to restrictions regarding the purchase or sale of shares, are derived from observable prices. Commingled funds are categorized in Level 2 because the fair value of the funds are based on net asset values per fund share (the unit of account), primarily derived from the quoted prices in active markets on the underlying equity securities. Units of participation are categorized as Level 3 because the fair value of these securities is based partially on observable prices of the underlying securities as well as third party valuation models.

The following table presents the fair value of the NDT fund investments (in thousands):

	As of September 30, 2010
	Level 1			Level 2		Level 3	Total Investments at Fair Value
Assets
Cash	$	689		—		—	$	689
Securities sold	39,630			—		—	39,630
Investments
Cash equivalents	—			177,795		—	177,795
Fixed income securities	221,090			363,867		—	584,957
Equity securities	80,568			—		—	80,568
Units of participation	—			—		108,245	108,245
	301,658			541,662		108,245	951,565
Total assets	341,977			541,662		108,245	991,884
Liabilities
Payables for securities purchased	(161,557		)	—		—	(161,557		)
Total liabilities	(161,557		)	—		—	(161,557		)
Net assets held by the NDT fund	$	180,420		$	541,662	108,245	$	830,327

Table of Contents

The following table presents total realized and unrealized gains (losses) included in income for Level 3 assets and liabilities measured at fair value on a recurring basis during the three and nine months ended September 30, 2010:

	Level 3
	Units of Participation
Beginning balance	$	98,871
Change in unrealized gains and losses	9,374
Purchases, sales, issuances and settlements, net	—
	$	108,245

The carrying value of accounts receivable, costs and estimated earnings in excess of billings on uncompleted contracts, inventories, prepaid assets, accounts payable, accrued expenses and unearned revenues approximate their fair value principally because of the short-term nature of these assets and liabilities.

The fair market value of our debt is based on quoted market prices from the over-the-counter restricted market. The fair market value of our senior secured credit facility was approximately $523.4 million as of September 30, 2010, and $516.5 million as of December 31, 2009. The carrying value of our senior secured credit facility was $558.6 million as of September 30, 2010, and $519.1 million as of December 31, 2009. As of September 30, 2010, we also had outstanding senior notes obligations with a carrying amount of $300.0 million and a fair market value of approximately $357.9 million.

The fair value of our derivative instruments is determined using models that maximize the use of the observable market inputs including interest rate curves and both forward and spot prices for currencies. The carrying amount of our interest rate collar derivative approximates fair value. This instrument is included in accrued expenses in the accompanying balance sheets and is classified as Level 2 under the fair value hierarchy. The fair market value of our interest rate collar was $0.6 million as of September 30, 2010 and $1.7 million as of December 31, 2009.

(6) Goodwill

As of September 30, 2010 and December 31, 2009, the Company had recorded approximately $481.5 million and $516.8 million, respectively, of goodwill related to domestic and foreign acquisitions. Goodwill related to the acquisitions of foreign entities is translated into U.S. dollars at the exchange rate in effect at the balance sheet date. The related translation gains and losses are included as a separate component of stockholders’ equity in accumulated other comprehensive income (loss) in the consolidated balance sheets. For the nine months ended September 30, 2010, we recorded $0.4 million in translation losses related to goodwill denominated in foreign currencies.

In accordance with authoritative guidance, we evaluate goodwill for impairment annually and when an event occurs or circumstances change that indicates that the carrying value may not be recoverable. Our annual testing date is April 1. We test goodwill for impairment by first comparing the book value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the book value, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flow are based on our best estimate of future net revenues and operating expenses, based primarily on pricing, market segment share and general economic conditions. Changes in these forecasts could significantly change the amount of impairment recorded, if any.

We performed our annual goodwill analysis during the second quarter of 2010 and concluded that the goodwill within our Federal Services reporting unit was impaired. As a result, we recorded a $35.0 million non-cash goodwill impairment charge during the nine months ended September 30, 2010. Factors culminating in the impairment included a decrease in future expected cash flows and lower forecasted growth rates than those projected in the prior year. There was no tax benefit associated with this impairment charge as the goodwill was not deductible for tax purposes. The impairment charge did not impact our cash position, operating cash flow or debt covenants.

Table of Contents

(7) Other Intangible Assets

Other intangible assets subject to amortization consist principally of amounts assigned to permits, customer relationships, non-compete agreements and technology. We do not have intangible assets that are not subject to amortization.

Other intangible assets as of September 30, 2010 and December 31, 2009 consist of the following (in thousands):

	As of September 30, 2010						As of December 31, 2009
	Gross Carrying Amount		Accumulated Amortization			Weighted Average Remaining Useful Life	Gross Carrying Amount		Accumulated Amortization			Weighted Average Remaining Useful Life
Permits	$	239,883	$	(54,232	)	19.1 years	$	239,059	$	(46,845	)	19.8 years
Customer relationships	159,455		(62,413		)	7.5 years	160,106		(51,830		)	8.2 years
Technology and other	15,183		(6,712		)	5.3 years	15,183		(5,492		)	6.0 years
Non competition	1,030		(1,028		)	0.4 years	1,030		(1,008		)	0.4 years
Total amortizable intangibles	$	415,551	$	(124,385	)	14.8 years	$	415,378	$	(105,175	)	15.3 years

Amortization expense was $6.4 million and $19.2 million for the three and nine months ended September 30, 2010, respectively, as compared to $4.8 million and $18.7 million for the three and nine months ended September 30, 2009, respectively. In addition, for the nine months ended September 30, 2010, we recorded $0.6 million in translation losses related to intangible assets denominated in foreign currencies.

In conjunction with the performance of our annual goodwill impairment analysis, it was determined that an indicator of impairment existed with regard to the technology intangible assets allocated to the Federal Services reporting unit. We completed our analysis of these intangible assets during the quarter ended September 30, 2010. We compared the carrying amount of the intangible assets to the estimated undiscounted future cash flows expected to be generated by the intangible assets. The undiscounted future cash flows exceeded the carrying value; therefore, no impairment charge was required to be recorded.

(8) Credit Facilities

Senior Secured Credit Facility

On August 13, 2010, the Company entered into a senior secured credit facility with JPMorgan Chase Bank, N.A. (the administrative agent), consisting of a senior secured term loan (the “Term Loan”) in an aggregate principal amount of $560.0 million at a discount of 2.5% and a senior secured revolving credit facility (the “Revolving Credit Facility”) with availability of $105.0 million. The revolving portion of the senior secured credit facility includes a sublimit of $100.0 million for letters of credit, of which $9.6 million were issued as of September 30, 2010. The proceeds of the senior secured credit facility were used to: (a) repay outstanding indebtedness under the former credit agreements; (b) collateralize reimbursement obligations to the deposit issuing banks with respect to deposit letters of credit; (c) replace synthetic letters of credit issued under the former credit agreements; and (d) provide credit support for obligations acquired under the Exelon Agreements.

Borrowings under the senior secured credit facility bear interest at a rate equal to:

· Adjusted LIBOR plus 4.50%, or ABR plus 3.50%; in the case of the Term Loan,

· Adjusted LIBOR plus 4.50%, or ABR plus 3.50%; in the case of the Revolving Credit Facility, and

· a per annum fee equal to the spread over Adjusted LIBOR under the Revolving Credit Facility, along with a fronting fee and issuance and administration fees; in the case of revolving letters of credit.

“Adjusted LIBOR” is defined as, the London interbank offered rate for such interest period, adjusted for any applicable statutory reserve requirements; provided that Adjusted LIBOR, when used in reference to the Term Loan, will at no time be less than 1.75% per annum.

Table of Contents

“ABR” is defined as the highest of (a) the administrative agent’s Prime Rate, (b) the Federal Funds Effective Rate plus 1/2 of 1.00% and (c) the Adjusted LIBOR from time to time for an interest period of one month, plus 1.00%; provided that ABR, when used in reference to the Term Loan, will at no time be less than 2.75% per annum.

Borrowings under our senior secured credit facility and former credit facilities bear interest at variable rates. As of September 30, 2010 the interest rate on borrowings under our senior secured credit facility was 6.25%. As of December 31, 2009, the interest rate of borrowings under our former credit facilities was 4.01%.

The obligations under the senior secured credit facility are secured by a lien on substantially all of the assets of the Company and each of the Company’s domestic subsidiary guarantors, including a pledge of equity interests with the exception of the equity interests in our ZionSolutions subsidiary and other special purpose subsidiaries, whose organizational documentation prohibits or limits such pledge.

The Term Loan amortizes in equal quarterly installments of $1.4 million payable on the last day of each calendar quarter, which is equal to 0.25% of the original principal amount of the Term Loan, with the balance being payable on August 13, 2016. As of September 30, 2010, we have $5.6 million of scheduled payments due within the next 12 months.

In addition to the scheduled repayments, we are required to prepay borrowings under the senior secured credit facility with (1) 100% of the net cash proceeds received from non-ordinary course asset sales or other dispositions, or as a result of a casualty or condemnation, subject to reinvestment provisions and other customary adjustments, (2) 100% of the net proceeds received from the issuance of debt obligations other than certain permitted debt obligations, (3) 50% of excess cash flow (as defined in the senior secured credit facility), if the leverage ratio is equal to or greater than 3.0 to 1.0, or (ii) 25% of excess cash flow, if the leverage ratio is less than 3.0 to 1.0 but greater than 1.0 to 1.0, reduced by the aggregate amount of optional prepayments of Term Loans made during the applicable fiscal year. If the leverage ratio is equal to or less than 1.0 to 1.0, we are not required to prepay the Term Loans. The excess cash flow calculations (as defined in the senior secured credit facility), are prepared annually as of the last day of each fiscal year or, in the case of the fiscal year ending on December 31, 2010, as of and for the last day of the partial year commencing on October 1, 2010 and ending on December 31, 2010. Pre-payments of debt resulting from the excess cash flow calculations are due annually five days after the date that the Annual Report on Form 10-K for such fiscal year is filed with the SEC.

The senior secured credit facility requires the Company to maintain a leverage ratio (based upon the ratio of indebtedness for money borrowed to consolidated adjusted EBITDA, as defined in the senior secured credit facility) and an interest coverage ratio (based upon the ratio of consolidated adjusted EBITDA to consolidated cash interest expense), which are calculated quarterly. Failure to comply with these financial ratio covenants would result in an event of default under the senior secured credit facility and, absent a waiver or an amendment from the lenders, preclude us from making further borrowings under the senior secured credit facility and permit the lenders to accelerate all outstanding borrowings under the senior secured credit facility. Based on the formulas set forth in the senior secured credit facility, we are required to maintain a maximum total leverage ratio of 4.75 from the quarter ended September 30, 2010 through the quarter ending December 31, 2010, which is reduced by 0.25 on an annual basis through the maturity date. We are required to maintain a minimum cash interest coverage ratio of 2.0 from the quarter ended September 30, 2010 through the quarter ended September 30, 2014 and 2.25 through the maturity date. As of September 30, 2010, our total leverage and cash interest coverage ratios were 3.14 and 5.05, respectively.

The senior secured credit facility also contains a number of affirmative and restrictive covenants including limitations on mergers, consolidations and dissolutions; sales of assets; investments and acquisitions; indebtedness; liens; affiliate transactions; and dividends and restricted payments. Under the senior secured credit facility, we are permitted maximum annual capital expenditures of $40.0 million for 2010 and each year thereafter, plus for each year the lesser of (1) a one year carry-forward of the unused amount from the previous fiscal year and (2) 50% of the amount permitted for capital expenditures in the previous fiscal year. The senior secured credit facility contains events of default for non-payment of principal and interest when due, a cross-default provision with respect to other indebtedness having an aggregate principal amount of at least $5.0 million and an event of default that would be triggered by a change of control, as defined in the senior secured credit facility. Capital expenditures for the nine months ended September 30, 2010 were $11.6 million. As of September 30, 2010, we were in compliance with all of the covenants under our senior secured credit facility.

During the nine months ended September 30, 2010 and 2009, we made principal repayments totaling $1.4 million and $47.6 million, respectively. During the nine months ended September 30, 2010 and 2009, we made cash interest payments of $20.6 million and $18.5 million, respectively. In addition, during the nine months ended September 30, 2010 we paid fees of approximately $23.2 million to the lenders to obtain the new credit agreements, which are being amortized over

Table of Contents

the remaining term of the senior secured credit facility. Also, during the nine months ended September 30, 2010, we recorded a $19.1 million write-off of deferred financing fees as a result of retirement of our previous debt.

Senior Notes

On August 13, 2010, we completed a private offering of $300 million 10.75% Senior Notes due 2018 (the “Notes”) at a discount of 1.3%. The Notes are governed by an Indenture among EnergySolutions and Wells Fargo Bank, National Association, as trustee. Interest on the Notes is payable semiannually in arrears on February 15 and August 15 of each year beginning on February 15, 2011. The Notes rank in equal right of payment to all existing and future senior debt and to all future subordinated debt.

At any time prior to August 15, 2014, we are entitled to redeem all or a portion of the Notes at a redemption price equal to 100% of the principal amount of the Notes plus an applicable make-whole premium, as of, and accrued and unpaid interest to, the redemption date. In addition, prior to August 15, 2013, we may redeem up to 35% of the aggregate principal amount of the Notes with the net cash proceeds from certain public equity offerings at a redemption price of 110.75% of the principal amount, plus accrued and unpaid interest to the date of redemption. In addition, on or after August 15, 2014, we may redeem all or a portion of the Notes at the following redemption prices during the 12-month period commencing on August 15 of the years set forth below, plus accrued and unpaid interest to the redemption date.

Period	Redemption Price
2014	105.375	%
2015	102.688	%
2016 and thereafter	100.000	%

The Notes are guaranteed on a senior unsecured basis by all of our domestic restricted subsidiaries that guarantee the senior secured credit facility. The Notes and the related guarantees are effectively subordinated to our secured obligations, including the senior secured credit facility and related guarantees, to the extent of the value of assets securing such debt. The Notes will also be structurally subordinated to all liabilities of each of our subsidiaries that do not guarantee the Notes.

If a change of control of the Company occurs, each holder will have the right to require that we purchase all or a portion of such holder’s Notes at a purchase price of 101% of the principal amount, plus accrued and unpaid interest to the date of the purchase.

The Indenture contains, among other things, certain covenants limiting our ability and the ability of its restricted subsidiaries to incur or guarantee additional indebtedness; pay dividends or make other restricted payments; make certain investments; create or incur liens; sell assets and subsidiary stock; transfer all or substantially all of our assets or enter into a merger or consolidation transactions; and enter into transactions with affiliates.

In connection with the sale of the Notes, we entered into a registration rights agreement, dated August 13, 2010 (the “Registration Rights Agreement”), with the representative of the initial purchasers of the Notes. Under the Registration Rights Agreement, we agreed to use our commercially reasonable best efforts to file and cause to become effective a registration statement with respect to an exchange of the Notes. We also agreed to file, if obligated, a shelf registration statement relating to the resale of the Notes if the exchange offer is not consummated within the required time period stated in the Registration Rights Agreement.

(9) Facility and Equipment Decontamination and Decommissioning

We recognize AROs when we have a legal obligation to perform D&D and removal activities upon retirement of an asset. The fair value of an ARO liability is recognized in the period in which it is incurred, if a reasonable estimate of fair value can be made, and is added to the carrying amount of the associated asset, which is then depreciated over the remaining useful life of the asset in the case of all of our AROs except the Zion Station ARO as described below.

Each of our AROs is based on a cost estimate for a third party to perform the D&D work. This estimate is inflated with an appropriate inflation rate to the expected time at which the D&D activity will occur, and then it is discounted back using our credit adjusted risk free rate to a present value. Subsequent to the initial measurement, the ARO is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligations.

Our facility and equipment decontamination and decommissioning liabilities consist of the following (in thousands):

Table of Contents

	September 30, 2010			December 31, 2009
	(As restated)
Facilities and equipment ARO—Zion	$	764,827		$	—
Facilities and equipment ARO—Clive, UT	27,800			26,039
Facilities and equipment ARO—other	25,892			25,497
Total facilities and equipment ARO	818,519			51,536
Barnwell Closure	10,269			11,952
	828,788			63,488
Less: current portion	(95,462		)	—
	$	733,326		$	63,488

The following is a reconciliation of our facility and equipment ARO as of September 30, 2010 (in thousands):

	September 30, 2010			December 31, 2009
	(As restated)
Beginning Balance as of January 1	$	51,536		$	46,850
Liabilities incurred	767,088			609
Liabilities settled	(4,093		)	(110		)
Accretion expense	2,493			1,589
ARO estimate adjustments	1,495			2,598
Ending liability	$	818,519		$	51,536

For certain of our D&D obligations, we are required to provide financial assurance in the form of a restricted cash account, a deposit in escrow, a trust fund, or an insurance policy. Restricted cash and decontamination and decommissioning deposits consists principally of: (i) funds held in trust for completion of various site clean-up projects and (ii) funds deposited in connection with landfill closure, post-closure and remediation obligations. Accordingly, as of September 30, 2010, we have non-current restricted cash of $0.3 million related to our Clive facility, and it is included in restricted cash and decontamination and decommissioning deposits in the accompanying balance sheets. We also have the NDT fund to fund the decommissioning obligation for the Zion Station. The NDT fund balance as of September 30, 2010 was $830.3 million, and is included in NDT fund investments in the accompanying consolidated balance sheets. We are also required to maintain a trust fund to cover the closure obligation for the Barnwell, South Carolina facility. The trust fund balance as of September 30, 2010 was $10.3 million which is included in restricted cash and decontamination and decommissioning deposits in the accompanying condensed consolidated balance sheets. In connection with the execution of the Exelon agreements and in fulfillment of NRC regulations, we secured a $200.0 million letter of credit facility to further support the D&D activities at the Zion Station. This letter of credit is cash-collateralized, with the funds included in non-current restricted cash in the accompanying condensed consolidated balance sheets.

Although we are required to provide assurance to satisfy some of our D&D obligations in the form of insurance policies, restricted cash accounts, escrows or trust funds, these assurance mechanisms do not extinguish our D&D liabilities.

The ARO established in connection with the Zion transaction differs somewhat from our traditional AROs. The assets acquired in the Zion transaction have no fair value, no future useful life and are in a shut-down, non-operating state. As a result, the ARO established in connection with the Zion transaction is not accompanied by a related depreciable asset. Changes to the ARO liability due to accretion expense and changes in cost estimates are recorded in cost of revenue in our condensed consolidated statements of operations and comprehensive income (loss).

In addition, as we will perform most of the work related to the Zion Station ARO with our own resources, a gain will be recognized for the difference between our actual costs incurred and the recorded ARO which includes an element of profit. Due to the nature of this contract and the purpose of the license stewardship initiative, we have presented this gain in cost of revenue rather than as a credit to operating expense, as we would with our other AROs.

(10) Derivative Financial Instruments

We have entered into derivative contracts to help offset our exposure to movements in interest rates in relation to our variable rate debt. These contracts are not designated as accounting hedges. On December 18, 2008, we entered into an interest rate collar agreement with a notional amount of $200.0 million. As of September 30, 2010 and December 31, 2009,

Table of Contents

the fair value liability of the interest rate collar contract was $0.6 million and $1.7 million, respectively. Unrealized gains and losses resulting from adjustments to the fair value of the contracts are included in other income (expense), net, and resulted in net gains of $0.2 million and net losses of $0.5 million for the three months ended September 30, 2010 and 2009, respectively, and net gains of $1.1 million for the nine months ended September 30, 2010, and net losses of $1.7 million for the nine months ended September 30, 2009. We do not use interest rate derivatives for trading or speculative purposes.

We have foreign currency exposure related to our operations in the U.K. as well as other foreign locations. Foreign currency gains and losses are included in other income (expenses), net, in the accompanying condensed consolidated statements of operations and comprehensive income. During the three and nine months ended September 30, 2010, we recognized gains of $0.5 million and $0.1 million, respectively. During the three and nine months ended September 30, 2009, we recognized gains of $0.7 million and $5.1 million, respectively.

In the past, we have entered into derivative contracts to help offset our exposure to movements in foreign currency rates in relation to our U.S. dollar denominated intercompany loan with our U.K. subsidiary. These foreign currency derivative contracts were not designated as accounting hedges. The most recent contract was terminated on December 23, 2009. Unrealized gains and losses resulting from adjustments to the fair value of the contracts were included in other income (expenses), net and resulted in a net gain of $0.4 million and a loss of $5.2 million for the three and nine months ended September 30, 2009. We had no foreign currency derivative contracts for the nine months ended September 30, 2010.

(11) Net Income (Loss) Per Share

Basic net income (loss) per share is computed by dividing net income (loss) attributable to EnergySolutions by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) attributable to EnergySolutions by the weighted-average number of common shares outstanding during the period and potentially dilutive common stock equivalents. Potential common stock equivalents that have been issued by us relate to outstanding stock options and non-vested restricted stock awards and are determined using the treasury stock method.

The following table sets forth the computation of the common shares outstanding in determining basic and diluted net income (loss) per share:

	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2010	2009	2010	2009
Weighted average common shares—basic	88,582,398	88,315,158	88,504,525	88,308,870
Dilutive effect of restricted stock and stock options	—	242,673	—	81,669
Weighted average common shares—diluted	88,582,398	88,557,831	88,504,525	88,390,569
Anti-dilutive securities not included above	7,760,777	5,847,979	7,419,496	5,858,879

(12) Equity-Based Compensation

Stock Options and Restricted Stock

In November 2007, we adopted the EnergySolutions, Inc. 2007 Equity Incentive Plan (the “Plan”). The Plan authorizes our Board of Directors to grant equity awards to directors, officers, employees and consultants. The aggregate number of shares of common stock that may be issued pursuant to awards granted under the Plan is 10,440,000. We recorded non-cash compensation expense related to our stock option and restricted stock grants of $3.0 million and $8.0 million for the three and nine months ended September 30, 2010, respectively, as compared to $3.2 million and $8.4 million for the three and nine months ended September 30, 2009, respectively. For the nine months ended September 30, 2009, we also had $0.3 million of compensation expense related to other equity awards. As of September 30, 2010, we had $13.9 million of unrecognized compensation expense related to outstanding stock options, which will be recognized over a weighted-average period of 1.7 years. As of September 30, 2010, there was $3.6 million of unrecognized compensation expense related to non-vested restricted stock which is expected to be recognized over a weighted-average period of 2.2 years.

(13) Pension Plans

Net periodic benefit costs for the three and nine months ended September 30, 2010 and 2009 consisted of the following (in thousands):

Table of Contents

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2010			2009			2010			2009
Service cost	$	12,592		$	8,865		$	37,400		$	24,991
Interest cost	40,992			39,361			121,753			110,957
Expected return on plan assets	(39,791		)	(33,245		)	(118,185		)	(93,718		)
Net actuarial loss	39			—			115			—
	$	13,832		$	14,981		$	41,083		$	42,230

The preceding information relates only to the Magnox Plan and does not include amounts related to benefit plans applicable to employees associated with certain contracts with the U.S. Department of Energy because we are not responsible for the current or future funded status of these plans.

(14) Income Taxes

We recognized income tax expense of $16.1 million for the three months ended September 30, 2010, and $20.1 million for the nine months ended September 30, 2010, based on an effective tax rate on our consolidated operations of negative 243.2%. Our negative effective tax rate is the combined result of a pretax book loss for the nine months ended September 30, 2010, and tax expense for the same period resulting primarily from the realization of income and tax expense in certain foreign subsidiaries and losses in certain other foreign subsidiaries for which we could not record a tax benefit, the goodwill impairment charge that is not deductible for tax, and the recording of tax expense related to an increase of $8.6 million in the valuation allowance for certain existing domestic and foreign deferred tax assets.

During the three and nine months ended September 30, 2010, we also recorded a benefit for prior year domestic and foreign research and development credits. Our expected annual effective tax rate of approximately 37% is higher than the U.S. statutory rate of 35% due primarily to the tax expense items listed above, excluding the impact of the goodwill impairment charge which is not deductible for tax, and state income taxes, net of federal taxes, partially offset by lower tax on earnings in certain foreign jurisdictions. We recognized income tax expense of $1.7 million for the three months ended September 30, 2009 and $8.4 million for the nine months ended September 30, 2009, based on an effective tax rate on our consolidated operations of 22.8% which is lower than the U.S. statutory rate of 35% due primarily to lower tax on income in foreign jurisdictions and the tax benefit of domestic and foreign research and development credits. During the nine months ended September 30, 2010 and 2009, we made income tax payments of $8.9 million and $7.8 million, respectively.

As of September 30, 2010 and December 31, 2009, we had $2.7 million and $2.0 million, respectively, of gross unrecognized tax benefits, which may impact our annual effective tax rate in future years. These tax benefits were accounted for under guidance for accounting for uncertainties in income taxes. The Company and its U.S. subsidiaries are subject to U.S. federal and state income tax. The Company is currently in various stages of multiple year examinations by federal and state taxing authorities. The Company does not anticipate a significant impact to the unrecognized tax benefits balance with respect to current tax examinations in the next 12 months, although the timing of the resolution and/or the changes that may be required by the audits are highly uncertain.

(15) Segment Reporting and Business Concentrations

We provide our services through four segments: Federal Services (“FS”), Commercial Services (“CS”), Logistics, Processing and Disposal (“LP&D”), and International. The following table presents segment information as of and for the three and nine months ended September 30, 2010 and 2009 (in thousands):

	For the Three Months Ended September 30, 2010 (As Restated)
	FS		CS		LP&D		International		Corporate Unallocated Items			Consolidated
Revenues from external customers(1)	$	81,158	$	43,958	$	70,417	$	222,123	$	—		$	417,656
Income (loss) from operations(2)	6,660		2,080		28,543		1,328		(23,576		)	15,035
Depreciation, amortization and accretion expense	685		2,302		4,399		1,863		3,602			12,851
Purchases of property, plant and equipment	163		403		4,498		46		547			5,657

Table of Contents

	For the Three Months Ended September 30, 2009
	FS		CS		LP&D		International		Corporate Unallocated Items			Consolidated
Revenues from external customers(1)	$	77,007	$	21,254	$	52,681	$	213,911	$	—		$	364,853
Income (loss) from operations(3)	8,690		4,699		18,189		3,631		(14,078		)	21,131
Depreciation and amortization expense	475		459		6,069		226		3,072			10,301
Purchases of property, plant and equipment	—		1,633		2,242		170		2,359			6,404

	As of and for the Nine Months Ended September 30, 2010 (As Restated)
	FS			CS		LP&D		International		Corporate Unallocated Items			Consolidated
Revenues from external customers(1)	$	262,828		$	89,500	$	189,397	$	760,160	$	—		$	1,301,885
Income (loss) from operations(2)	(13,258		)	8,176		59,286		18,873		(58,714		)	14,363
Depreciation, amortization and accretion expense	2,029			3,099		15,460		5,543		10,114			36,245
Goodwill	108,514			90,129		231,325		51,546		—			481,514
Other long-lived assets(4)	31,121			19,411		272,062		61,937		27,960			412,491
Purchases of property, plant and equipment	200			1,128		6,872		46		3,419			11,665
Total assets(5)	247,269			1,928,961		603,598		456,108		233,444			3,469,380

	As of and for the Nine Months Ended September 30, 2009
	FS		CS		LP&D		International		Corporate Unallocated Items			Consolidated
Revenues from external customers(1)	$	217,809	$	66,084	$	160,299	$	731,355	$	—		$	1,175,547
Income (loss) from operations(3)	22,081		11,659		53,592		23,272		(50,520		)	60,084
Depreciation and amortization expense	1,102		1,305		16,608		4,995		9,886			33,896
Goodwill	143,514		90,129		233,193		51,915		—			518,751
Other long-lived assets(4)	34,452		17,969		218,309		79,681		90,952			441,363
Purchases of property, plant and equipment	3,968		1,897		2,786		282		6,126			15,059
Total assets(5)	278,679		151,616		537,221		450,801		166,241			1,584,558

(1) Intersegment revenues have been eliminated for the three and nine months ended September 30, 2010 and 2009. Intersegment revenues were $3.1 million and $4.9 million for the three and nine months ended September 30, 2010 and were $8.4 million and $17.2 million for the three and nine months ended September 30, 2009. Revenues by segment represent revenues earned based on third-party billings to customers.

(2) Included in income (loss) from operations from our Federal Services segment is a $35.0 million impairment of goodwill recorded during the nine months ended September 30, 2010.

(3) Prior to the fourth quarter of 2009, we included equity in income of unconsolidated joint ventures in other expense, net. For the three and nine months ended September 30, 2009, we reclassified these amounts from other expense, net to operating income in the accompanying condensed consolidated statements of operations. Accordingly, income (loss) from operations was increased by $2.8 million and $5.9 million for the three and nine months ended September 30, 2009, respectively. Income from unconsolidated joint ventures is included in our Federal Services segment operations.

(4) Other long-lived assets include property, plant and equipment and other intangible assets.

(5) Corporate unallocated assets relate primarily to income tax receivables, deferred tax assets, deferred financing costs, prepaid expenses, property, plant and equipment that benefit the entire Company and cash.

(16) Employee Termination Benefits

An initial organizational review of our Magnox sites identified an opportunity to reduce the existing workforce, primarily at three sites that are in the process of defueling, which involves removing fuel from the reactor, loading it into casks and transporting it for processing with a third party and a site at which decommissioning is relatively close to completion with only a few projects remaining. As a result of the overstaffing at the Magnox sites, we presented a termination plan to the NDA to terminate approximately 200 employees on a voluntary basis at these sites in the quarter ended March 31, 2009. During the quarter ended March 31, 2010, a second phase of the organizational review was performed and an additional reduction in force of approximately 100 positions was identified. Phase 2 is a structural reorganization across the whole business affecting all sites. The termination plan related to phase 2 has also been presented to and approved by the NDA.

Table of Contents

During the quarter ended September 30, 2010, at the request of the NDA, a full organizational review of the Magnox business was undertaken which supersedes the previously reported Phase 2 structural review. The review has recommended the re-combination of Magnox North Limited and Magnox South Limited into a single entity; the proposal has been approved by the NDA and plans are being developed to implement the change in early 2011. The manpower consequences of the review are still being evaluated; however, it is expected to result in an additional reduction in force of in excess of 1,000 employees over the next 4 to 5 years. This is a structural reorganization across the whole business affecting all sites. The high level termination plan related to the reorganization has also been presented to the NDA.

The termination plan and employee termination benefits to be paid for the termination of these employees are in accordance with the existing employee and the trade union agreements and were pre-approved by the NDA. All employee termination benefits are treated as part of the normal Magnox cost base and will be reimbursed by the NDA.

For the nine months ended September 30, 2010, we recognized $34.7 million of expected employee termination benefits related to Phase 2, which are included in cost of revenues in the accompanying condensed consolidated statements of operations for our International segment. We have recognized a corresponding liability, which is included in accrued expenses and other current liabilities. In addition, we have recognized revenues and a receivable from the NDA for the reimbursement of the employee termination benefits. The remaining unpaid termination benefits are expected to be paid over approximately 24 months.

The following is a reconciliation of beginning and ending liability balances (in thousands):

	September 30, 2010			December 31, 2009
Beginning liability	$	24,260		$	—
Additions	34,747			35,703
Payments	(18,285		)	(16,015		)
Effect of exchange rate	(129		)	4,572
Ending liability	$	40,593		$	24,260

(17) Commitments and Contingencies

We may become subject to various claims and legal proceedings covering matters that may arise in the ordinary course of our business activities. As of September 30, 2010, we are not involved in any legal proceedings that we believe would have a material adverse effect on our consolidated financial position, operating results and cash flows.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the financial condition and results of our operations should be read together with the condensed consolidated financial statements and the related notes of EnergySolutions included elsewhere in this quarterly report, as amended, and with our audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2009.

The information presented in the following tables has been adjusted to reflect our restatement resulting from our review of our accounting treatment for the Zion Station transaction as is more fully described in the “Explanatory Note” immediately preceding Part I, Item 1.

Cautionary Statement Regarding Forward-Looking Statements

Certain statements made herein, including statements regarding our projected revenues, expenses, income and the implementation of strategic initiatives and the risks associated therewith are forward-looking in nature. These forward-looking statements reflect current analysis of existing information and are subject to various risks and uncertainties. As a result, caution must be exercised in relying on forward-looking statements. Due to known and unknown risks, our actual results may differ materially from our expectations or projections.

While most risks affect only future revenues or expenses, some risks may relate to accruals that have already been reflected in earnings. Our failure to receive payments of accrued amounts or incurrence of liabilities in excess of amounts previously recognized could result in a charge against future earnings.

Additional information concerning these and other factors can be found in our periodic filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K filed March 1, 2010 and this report under “Item 1A—Risk Factors.” Our SEC filings are available publicly on the SEC’s website at www.sec.gov, on EnergySolutions’

Table of Contents

website at www.energysolutions.com or upon request from EnergySolutions’ Investor Relations Department at ir@energysolutions.com. We disclaim any obligation to update the forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a leading provider of specialized, technology-based nuclear services to government and commercial customers. Our customers rely on our expertise to address their needs throughout the lifecycle of their nuclear operations. Our broad range of nuclear services includes engineering, operation of nuclear reactors, in-plant support services, spent nuclear fuel management, decontamination and decommissioning (“D&D”), logistics, transportation, processing and disposal. We derive almost 100% of our revenues from the provision of nuclear services.

We provide our services through four segments: Federal Services, Commercial Services, Logistics, Processing and Disposal (“LP&D”) and International. Our Federal Services segment derives revenues from United States (“U.S.”) government customers for the management and operation or clean-up of facilities with radioactive materials. Our U.S. government customers are primarily individual offices, departments and administrations within the U.S. Department of Energy (“DOE”) and the U.S. Department of Defense (“DOD”). Our Commercial Services segment provides a broad range of on-site services, including D&D, to commercial customers. Our commercial customers include power and utility companies, pharmaceutical companies, research laboratories, universities, industrial facilities and other commercial entities with nuclear materials, as well as state agencies in the U.S. Our LP&D segment provides a broad range of logistics, transportation, processing and disposal services to government and commercial customers. This segment also operates our facilities for the safe processing and disposal of radioactive materials, including a facility in Clive, Utah, four facilities in Tennessee and two facilities in Barnwell, South Carolina. In cases where a project involves the provision of both specialized nuclear services and processing and disposal services, our Federal Services or Commercial Services segment, depending on the type of customer, and our LP&D segment will coordinate to provide integrated services. Our International segment has contracts with the Nuclear Decommissioning Authority (“NDA”) in the United Kingdom (“U.K.”) to operate, manage and decommission 10 Magnox sites with 22 nuclear reactors. In addition, our International segment provides turn-key services and sub-contract services for the treatment, processing, storage and disposal of radioactive waste from nuclear sites and non-nuclear facilities such as hospitals, research facilities and other manufacturing and industrial facilities.

Exelon Transaction

On December 11, 2007, we, through our subsidiary ZionSolutions, LLC (“ZionSolutions”), entered into certain agreements with Exelon Generation Company LLC (“Exelon”), (“the Exelon Agreements”) to dismantle Exelon’s Zion nuclear facility located in Zion, Illinois (“Zion Station”), which ceased operation in 1998. The transaction closed on September 1, 2010. Upon closing, Exelon transferred to ZionSolutions substantially all of the assets (other than land) associated with Zion Station, including assets held in nuclear decommissioning trusts. In consideration for Exelon’s transfer of those assets, ZionSolutions agreed to assume decommissioning and other liabilities associated with Zion Station. ZionSolutions also took possession and control of the land associated with Zion Station pursuant to a lease agreement executed at the closing. ZionSolutions is under contract to complete the required decommissioning work according to an established schedule and to construct a dry cask storage facility on the land for spent nuclear fuel currently held in spent fuel pools at Zion Station. Exelon retains ownership of the land and the spent nuclear fuel and associated operational responsibilities following completion of the Zion Station D&D project. The Nuclear Regulatory Commission (“NRC’) approved the transfer of the facility operating licenses and conforming license amendments from Exelon to ZionSolutions (“License Transfer”).

To satisfy the conditions of the NRC order approving the License Transfer, we (i) secured a $200 million letter of credit facility, (ii) granted an irrevocable easement of disposal capacity of 7.5 million cubic feet at our Clive disposal facility and (iii) purchased the insurance required of a licensee under the NRC’s regulations.

Table of Contents

Results of Operations

The following table shows certain items from our income statements for the three and nine months ended September 30, 2010 and 2009 (in thousands):

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
	(As restated)						(As restated)
Revenues:
Federal Services Segment	$	81,158		$	77,007		$	262,828		$	217,809
Commercial Services Segment	43,958			21,254			89,500			66,084
LP&D Segment	70,417			52,681			189,397			160,299
International Segment	222,123			213,911			760,160			731,355
Total revenues	417,656			364,853			1,301,885			1,175,547
Cost of revenues:
Federal Services Segment	(73,121		)	(66,195		)	(238,701		)	(189,976		)
Commercial Services Segment	(40,815		)	(15,181		)	(76,641		)	(49,421		)
LP&D Segment	(39,845		)	(33,176		)	(124,035		)	(100,996		)
International Segment	(214,873		)	(206,358		)	(726,244		)	(694,285		)
Total cost of revenues	(368,654		)	(320,910		)	(1,165,621		)	(1,034,678		)
Gross profit:
Federal Services Segment	8,037			10,812			24,127			27,833
Commercial Services Segment	3,143			6,073			12,859			16,663
LP&D Segment	30,572			19,505			65,362			59,303
International Segment	7,250			7,553			33,916			37,070
Total gross profit	49,002			43,943			136,264			140,869
Segment selling, general and administrative expenses:
Federal Services Segment	(5,329		)	(4,941		)	(12,550		)	(11,697		)
Commercial Services Segment	(1,063		)	(1,374		)	(4,683		)	(5,004		)
LP&D Segment	(2,029		)	(1,316		)	(6,076		)	(5,711		)
International Segment	(5,922		)	(3,922		)	(15,043		)	(13,798		)
Total segment selling, general and administrative expenses	(14,343		)	(11,553		)	(38,352		)	(36,210		)
Segment operating income:
Federal Services Segment	2,708			5,871			11,577			16,136
Commercial Services Segment	2,080			4,699			8,176			11,659
LP&D Segment	28,543			18,189			59,286			53,592
International Segment	1,328			3,631			18,873			23,272
Total segment operating income	34,659			32,390			97,912			104,659
Corporate selling, general and administrative expenses	(23,576		)	(14,078		)	(58,714		)	(50,520		)
Impairment of goodwill(1)	—			—			(35,000		)	—
Equity in income of unconsolidated joint ventures(1)	3,952			2,819			10,165			5,945
Total income from operations	15,035			21,131			14,363			60,084
Interest expense	(33,831		)	(6,368		)	(52,374		)	(21,789		)
Other income (expense), net	29,923			169			30,943			(730		)
Income (loss) before income taxes and noncontrolling interests	11,127			14,932			(7,068		)	37,565
Income tax expense	(16,053		)	(1,742		)	(20,078		)	(8,367		)
Net income (loss)	(4,926		)	13,190			(27,146		)	29,198
Less: Net income attributable to noncontrolling interests	(735		)	(334		)	(1,188		)	(885		)
Net income (loss) attributable to EnergySolutions	$	(5,661	)	$	12,856		$	(28,334	)	$	28,313

(1) Amounts attributable to the Federal Services segment.

Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009

Federal Services Segment

Revenues and cost of revenues in our Federal Services segment increased $4.2 million and $6.9 million, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. Gross profit decreased $2.8 million while gross margin decreased to 9.9% for the three months ended September 30, 2010 from 14.0% for the three months ended September 30, 2009 primarily due to increased activity on lower margin contracts.

Table of Contents

Revenues and cost of revenues from our subsidiary, EnergySolutions Performance Strategies, increased $6.6 million and $5.8 million, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 primarily due to additional American Recovery and Reinvestment Act (“ARRA”) funding received to support increased environmental remediation activities at the Portsmouth Gaseous Diffusion Plant in Piketon, Ohio. As a result, gross profit increased $0.8 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Revenues and cost of revenues from our Moab project increased $6.6 million and $6.5 million, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 primarily due to additional ARRA funding received to support accelerated shipping and disposal volume to clean up the Atlas mill tailings near Moab, Utah. As a result gross profit increased $0.1 million for the three months ended September 30, 2010.

Revenues and cost of revenues from our Hanford site operations increased $3.7 million and $3.5 million, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 due to increased activity in our Savannah River Remediation Liquids contract during 2010. As a result, gross profit increased $0.2 million during the three months ended September 30, 2010.

These increases were offset, in part, by decreased revenues and cost of revenues of $5.4 million and $4.7 million, respectively, from our Isotek Systems joint venture for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 primarily due to decreased activities related to the design and construction of dissolution and downblending systems. The Isotek contract allows for the reimbursement of costs plus a fee. Gross profit, representing the fee less unallowable costs, decreased $0.7 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Revenues and cost of revenues related to engineering and technology projects within Federal Services decreased $5.2 million and $3.9 million, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 primarily due to completion of technical and testing support activities for the DOE Waste Treatment Plant in Richland, Washington, during the three months ended September 30, 2010. As a result, gross profit decreased $1.3 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Segment selling, general and administrative expenses in our Federal Services segment increased $0.4 million to $5.3 million for the three months ended September 30, 2010 from $4.9 million for the three months ended September 30, 2009. The increase is primarily attributable to higher labor costs incurred during the three months ended September 30, 2010.

Commercial Services Segment

Revenues and cost of revenues in our Commercial Services segment increased $22.7 million and $25.6 million, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. Gross profit decreased $2.9 million and gross margin decreased to 7.1% for the three months ended September 30, 2010 from 28.6% for the three months ended September 30, 2009 due primarily to the relative profitability of the major projects being performed in each period.

On September 1, 2010, we closed the agreement with Exelon and began the decommissioning work to dismantle the Zion Station nuclear power plant located in Zion, Illinois. As such, we recognized revenue and cost of revenue in the amounts of $23.5 million and $24.9 million, respectively, for the period ended September 30, 2010. A gross loss in the amount of $1.4 million was incurred for the period ended September 30, 2010 primarily as a result of the impact of accretion expense recorded for the related ARO exceeding the ARO settlement gain, both of which are recorded in cost of revenues. All other costs incurred between December 2007 and August 2010, associated with the execution of the planning phase of the contract, were deferred and will be recognized over the life of the decommissioning project along with the corresponding revenue and it is expected to contribute approximately $5.1 million in gross margin to the project.

Revenues and cost of revenues related to our large commercial engineering and technology waste design and fabrication projects increased $2.1 million and $1.7 million, respectively, due to increased support activities on our Chinese new build reactor projects for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. As a result, gross profit increased $0.4 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Table of Contents

These increases were offset, in part, by decreased revenues and cost of revenues from our commercial decommissioning services of $2.1 million and $0.7 million, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 due to completion of work on our Federated Metal project during September 2010. As a result, gross profit decreased $1.4 million for the three months ended September 30, 2010.

Revenues and cost of revenues related to our large components utility operations decreased $2.6 million and $2.4 million, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 primarily due to substantial completion of work on our Duke McGuire and Fermi projects during the three months ended September 30, 2009. As a result, gross profit decreased $0.2 million for the three months ended September 30, 2010.

Segment selling, general and administrative expenses in our Commercial Services segment remained steady at $1.3 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.

LP&D Segment

Revenues and cost of revenues in our LP&D segment increased $17.7 million and $6.7 million, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. Gross profit increased $11.0 million and gross margin increased to 43.4% for the three months ended September 30, 2010 from 37.0% for the three months ended September 30, 2009 primarily due to increased shipments and higher volumes of waste.

Revenues at our Clive, Utah facility increased $11.8 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 due to higher volumes of waste receipts on DOE projects. The majority of costs at our Clive facility are fixed, resulting in a disproportionate increase in cost of revenues when compared to revenues. Cost of revenues at our Clive facility increased $3.8 million due to higher waste taxes on higher receipts and higher mixed waste treatment costs incurred for the three months ended September 30, 2010. As a result, gross profit increased $8.0 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Revenues and cost of revenues related to our manufacturing division increased $4.4 million and $1.2 million, respectively, for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 due to a large shipment of manufactured depleted uranium tubes during the three months ended September 30, 2010. Accordingly, gross profit increased $3.2 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Revenues from our Bear Creek, Tennessee facility increased $1.6 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009, primarily due to additional processing of backlog caused by the temporary suspension of operations in February 2010 as a result of an onsite accident. Cost of revenue at our Bear Creek facility increased $1.7 million for the three months ended September 30, 2010 compared to September 30, 2009, primarily due to additional labor costs and outside contract costs related to development of new processing capabilities. As a result, gross profit decreased $0.1 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Segment selling, general and administrative expenses in our LP&D segment increased $0.7 million to $2.0 million for the three months ended September 30, 2010 from $1.3 million for the three months ended September 30, 2009, primarily due to higher incentive compensation expense for the three months ended September 30, 2010.

International Segment

Revenues in our International segment increased $8.2 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. Our revenues, prior to considering the effects of fluctuations in pound sterling exchange rates, increased $20.2 million. However, this increase was offset by a $12.0 million decrease due to the decline in the pound sterling exchange rates during the three months ended September 30, 2010 compared to the same period in 2009. Of the $20.2 million increase in revenues, our revenues from the Magnox contracts increased $20.7 million primarily due to higher reimbursable contract cost base and increased generation fees offset by a $0.5 million decrease in other U.K. operations.

Cost of revenues in our International segment increased $8.5 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. Our cost of revenues, prior to considering the effects of fluctuations in pound sterling exchange rates, increased $20.1 million. However, this increase was offset by an $11.6 million

Table of Contents

decrease due to a decline in the pound sterling exchange rates during three months ended September 30, 2010 compared to the same period in 2009. Of the $20.1 million increase in cost of revenues, our cost of revenues from the Magnox contracts increased $20.6 million primarily due to acceleration of work on major projects and increased decommissioning activities during the three months ended September 30, 2010. This increase was offset by a $0.5 million decrease in other U.K. operations.

Gross profit in our International segment decreased $0.3 million for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. Our gross profit, prior to considering the effects of fluctuations in pound sterling exchange rates, increased $0.1 million. In addition, gross profit decreased $0.4 million due to an increase in pound sterling exchange rates during the three months ended September 30, 2010 compared to the same period in 2009. Gross margin in our International segment was 3.3% for the three months ended September 30, 2010.

Segment selling, general and administrative expenses in our International segment increased $2.0 million for the three months ended September 30, 2010 as compared to 2009 primarily due to a $2.2 million decrease of amortization expense of intangible assets recorded during the three months ended September 30, 2009 as a result of a determination in 2009 that we had inappropriately applied authoritative guidance for accounting of intangible assets denominated in foreign currencies.

Corporate selling, general and administrative expenses

Corporate selling, general and administrative expenses increased $9.5 million, or 67%, to $23.6 million for the three months ended September 30, 2010 from $14.1 million for the three months ended September 30, 2009. This increase is primarily attributable to a combination of a reduction of incentive compensation expense of approximately $3.0 million during the three months ended September 30, 2009 due to a projected shortfall of performance targets for 2009 and increases of $2.0 million related to tax contingency losses and $1.2 million related to separation agreements of former employees, recorded during the three months ended September 30, 2010.

Equity in income of unconsolidated joint ventures

Income from unconsolidated joint ventures increased $1.1 million, or 39.3%, to $3.9 million for the three months ended September 30, 2010 from $2.8 million for the three months ended September 30, 2009. The increase is mostly attributable to an increase of $1.1 million from our proportional share of income from our Washington River Protection Solutions joint venture at the Hanford site in which we have a noncontrolling interest.

Interest expense

Interest expense increased $27.5 million to $33.8 million for the three months ended September 30, 2010 from $6.4 million for the three months ended September 30, 2009. The increase is primarily attributable to a $19.1 million write-off of deferred financing fees due to the refinance of long term debt during the three months ended September 30, 2010, and an increase in interest rates and outstanding borrowings during the three months ended September 30, 2010 compared to the same period in 2009. In addition, the Company issued $300 million of senior unsecured notes with an interest rate of 10.75% during the three months ended September 30, 2010.

Other income (expense), net

Other income (expense), net, increased $29.8 million to $29.9 million for the three months ended September 30, 2010 from $0.1 million for the three months ended September 30, 2009. The increase is primarily attributable to a $28.9 million net increase in investment income earned on our investments in the nuclear decommissioning trust (“NDT”) fund for the three months ended September 30, 2010, and to $0.7 million increase in the fair value liability of our interest rate collar contract for the three months ended September 30, 2010 compared to the three months ended September 30, 2009, and $0.8 million increase in foreign exchange transaction gains recorded for the three months ended September 30, 2010 compared to the three months ended September 30, 2009. These increases were offset by $0.6 million decrease in other interest income for the three months ended September 30, 2010 compared to the three months ended September 30, 2009.

Income taxes

For the three months ended September 30, 2010, we recognized income tax of $16.1 million based on an estimated annual effective tax rate of 243.2% on our consolidated operations. For the three months ended September 30, 2009, we recognized income tax expense of $1.7 million based on an estimated annual effective tax rate of 22.8% on our consolidated

Table of Contents

operations. The income tax expense results primarily from having taxable income in certain foreign subsidiaries and losses in certain other foreign subsidiaries for which the Company could not record a tax benefit and the recording of $8.6 million tax expense related to an increase in the valuation allowance for certain existing domestic and foreign deferred tax assets.

Nine Months Ended September 30, 2010 Compared to Nine Months Ended September 30, 2009

Federal Services Segment

Revenues and cost of revenues in our Federal Services segment increased $45.0 million and $48.7 million, respectively, for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. Gross profit decreased $3.7 million while gross margin decreased to 9.2% for the nine months ended September 30, 2010 from 12.8% for the nine months ended September 30, 2009 primarily due to increased activity on lower margin contracts.

Revenues and cost of revenues from our subsidiary, EnergySolutions Performance Strategies, increased $14.9 million and $12.7 million, respectively, for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 primarily due to additional ARRA funding received to support increased environmental remediation activities at the Portsmouth Gaseous Diffusion Plant in Piketon, Ohio during the nine months ended September 30, 2010. As a result, gross profit increased $2.2 million for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.

Revenues and cost of revenues generated by our contract with the DOE to clean up the Atlas mill tailings near Moab, Utah increased $19.0 million and $18.4 million, respectively, for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 primarily due to increased shipments of uranium mill tailings during the nine months ended September 30, 2010. As a result, gross profit increased $0.6 million for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.

Revenues and cost of revenues for our Uranium Disposition Services, LLC, joint venture increased $2.2 million and $1.4 million, respectively, for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 due to substantial efforts to complete the operational readiness review phase of the project during the nine months ended September 30, 2010. As a result, gross profit increased $0.8 million for the nine months ended September 30, 2010 compared to September 30, 2009.

Revenues and cost of revenues for our Hanford site operations increased $4.1million and $4.0 million, respectively, for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 due to increased design activities. As a result, gross profit increased $.1 million for the nine months ended September 30, 2010 compared to September 30, 2009.

Revenue and gross profit from our Salt Waste Processing facility contract increased $1.7 million and $0.4 million, respectively, for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009, due to commencement of the construction phase at the facility during the nine months ended September 30, 2010. Cost of revenues increased $1.3 million for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009, due to increased subcontractor labor and purchase of materials.

Revenues for our operations in the Southwest region increased $3.0 million for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 due to the award of new contracts for waste characterization, packaging, and disposal of waste in various areas of Los Alamos National Laboratory in northern New Mexico. Cost of revenues increased $3.7 million for the nine months ended September 30, 2010, primarily due to schedule delays. As a result, gross profit decreased $0.7 million for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.

These increases were offset, in part, by decreases in revenues and gross profit of $1.7 million and $3.1 million, respectively, for the nine months ended September 30, 2010 compared to September 30, 2009, related to engineering and technology support services to the Federal Services group. The decrease is primarily due to a combination of completion of technical and testing support activities to the DOE Waste Treatment Plant in Richland, Washington during the nine months ended September 30, 2010 and a revenue rate adjustment on a major contract during 2009. Cost of revenue increased $1.4 million for the nine months ended September 30, 2010, primarily due to increased costs on fixed price contracts and additional costs incurred on projects due to schedule delays.

Table of Contents

Segment selling, general and administrative expenses in our Federal Services segment increased $0.9 million to $12.6 million for the nine months ended September 30, 2010 from $11.7 million for the nine months ended September 30, 2009. The increase is primarily attributable to higher incentive compensation costs and labor costs incurred during the nine months ended September 30, 2010 compared to the same period in 2009.

Commercial Services Segment

Revenues and cost of revenues in our Commercial Services segment increased $23.4 million and $27.2 million, respectively, for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. Gross profit decreased $3.8 million and gross margin decreased to 14.4% for the nine months ended September 30, 2010 from 25.2% for the nine months ended September 30, 2009 due primarily to the relative profitability of the major projects being performed in each period.