ES-2013.06.30-10Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2013
Or
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¨ | 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)
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Delaware (State or Other Jurisdiction of Incorporation or Organization) | | 51-0653027 (I.R.S. Employer Identification Number) |
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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):
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Large accelerated filer o | | Accelerated filer x |
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Non-accelerated filer o (Do not check if a smaller reporting company) | | Smaller reporting company o |
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 August 14, 2013, there were 100 shares of the registrant’s common stock outstanding all of which were owned by Rockwell Holdco, Inc. the registrant’s parent holding company. The registrant’s common stock is not publicly traded.
ENERGYSOLUTIONS, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q
For the Three and Six Month Periods Ended June 30, 2013
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| PART II. OTHER INFORMATION | |
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PART I
Item 1. Financial Statements
EnergySolutions, Inc.
Condensed Consolidated Balance Sheets
June 30, 2013 and December 31, 2012
(in thousands of dollars, except share information) |
| | | | | | | |
| June 30, 2013 | | December 31, 2012 |
| (unaudited) | | |
Assets | |
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Current assets: | |
| | |
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Cash and cash equivalents | $ | 97,529 |
| | $ | 134,191 |
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Accounts receivable, net of allowance for doubtful accounts | 229,975 |
| | 259,913 |
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Costs and estimated earnings in excess of billings on uncompleted contracts | 88,479 |
| | 98,978 |
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Income tax receivable | 8,583 |
| | 6,427 |
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Prepaid expenses | 9,289 |
| | 11,022 |
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Nuclear decommissioning trust fund investments, current portion | 132,674 |
| | 152,507 |
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Deferred costs, current portion | 112,249 |
| | 127,573 |
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Other current assets | 4,723 |
| | 3,924 |
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Total current assets | 683,501 |
| | 794,535 |
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Property, plant and equipment, net | 114,993 |
| | 117,744 |
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Goodwill | 305,395 |
| | 308,608 |
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Other intangible assets, net | 223,844 |
| | 239,551 |
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Nuclear decommissioning trust fund investments | 378,011 |
| | 445,989 |
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Restricted cash and decontamination and decommissioning deposits | 315,692 |
| | 316,754 |
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Deferred costs | 310,559 |
| | 360,185 |
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Other noncurrent assets | 113,058 |
| | 72,096 |
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Total assets | $ | 2,445,053 |
| | $ | 2,655,462 |
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Liabilities and Stockholders’ Equity | |
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Current liabilities: | |
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Current portion of long-term debt | $ | 135,407 |
| | $ | 16,592 |
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Accounts payable | 107,929 |
| | 144,649 |
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Accrued expenses and other current liabilities | 212,571 |
| | 193,546 |
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Deferred income taxes | 1,082 |
| | 1,101 |
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Facility and equipment decontamination and decommissioning liabilities, current portion | 121,986 |
| | 138,757 |
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Unearned revenue, current portion | 132,464 |
| | 150,135 |
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Total current liabilities | 711,439 |
| | 644,780 |
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Long-term debt, less current portion | 664,653 |
| | 798,577 |
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Pension liability | 44,355 |
| | 31,043 |
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Facility and equipment decontamination and decommissioning liabilities | 426,984 |
| | 485,447 |
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Deferred income taxes | 18,542 |
| | 20,507 |
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Unearned revenue, less current portion | 314,547 |
| | 366,710 |
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Other noncurrent liabilities | 31,449 |
| | 7,479 |
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Total liabilities | 2,211,969 |
| | 2,354,543 |
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Commitments and contingencies | — |
| | — |
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Stockholders’ equity: | |
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Common stock, $0.01 par value, 100 and 1,000,000,000 shares authorized as of June 30, 2013 and December 31, 2012, respectively, and 100 and 90,253,242 shares issued and outstanding as of June 30, 2013 and December 31, 2012, respectively. | — |
| | 903 |
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Additional paid-in capital | 519,429 |
| | 511,503 |
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Accumulated other comprehensive loss | (31,384 | ) | | (21,956 | ) |
Accumulated deficit | (255,461 | ) | | (190,031 | ) |
Total EnergySolutions stockholders’ equity | 232,584 |
| | 300,419 |
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Noncontrolling interests | 500 |
| | 500 |
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Total equity | 233,084 |
| | 300,919 |
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Total liabilities and stockholders’ equity | $ | 2,445,053 |
| | $ | 2,655,462 |
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See accompanying notes to condensed consolidated financial statements.
EnergySolutions, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
Three and Six Month Periods Ended June 30, 2013 and 2012
(in thousands of dollars)
(unaudited)
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| Three Month Period Ended | | Six Month Period Ended |
| June 30, | | June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Revenue | $ | 411,038 |
| | $ | 392,621 |
| | $ | 937,246 |
| | $ | 883,313 |
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Cost of revenue | (363,641 | ) | | (356,718 | ) | | (843,429 | ) | | (815,730 | ) |
Gross profit | 47,397 |
| | 35,903 |
| | 93,817 |
| | 67,583 |
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Selling, general and administrative expenses | (69,397 | ) | | (34,220 | ) | | (101,618 | ) | | (67,882 | ) |
Equity in income (loss) of unconsolidated joint ventures | (98 | ) | | 2,406 |
| | 578 |
| | 3,136 |
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Income (loss) from operations | (22,098 | ) | | 4,089 |
| | (7,223 | ) | | 2,837 |
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Interest expense | (18,798 | ) | | (17,495 | ) | | (37,443 | ) | | (35,186 | ) |
Other income (expense), net | (13,610 | ) | | 15,443 |
| | (11,499 | ) | | 33,725 |
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Income (loss) before income taxes and noncontrolling interests | (54,506 | ) | | 2,037 |
| | (56,165 | ) | | 1,376 |
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Income tax benefit (expense) | (2,726 | ) | | 3,370 |
| | (9,265 | ) | | 3,366 |
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Net income (loss) | (57,232 | ) | | 5,407 |
| | (65,430 | ) | | 4,742 |
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Less: Net income attributable to noncontrolling interests | 2 |
| | 37 |
| | — |
| | 33 |
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Net income (loss) attributable to EnergySolutions | $ | (57,230 | ) | | $ | 5,444 |
| | $ | (65,430 | ) | | $ | 4,775 |
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Other comprehensive income (loss): | | | | | |
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Net income (loss) | $ | (57,232 | ) | | $ | 5,407 |
| | $ | (65,430 | ) | | $ | 4,742 |
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Foreign currency translation adjustments, net of taxes | (266 | ) | | (4,464 | ) | | (8,953 | ) | | 1,380 |
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Change in unrecognized actuarial gain (loss) | 3 |
| | (185 | ) | | (475 | ) | | (32 | ) |
Other comprehensive income (loss), net of taxes | (57,495 | ) | | 758 |
| | (74,858 | ) | | 6,090 |
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Less: net income attributable to noncontrolling interests | 2 |
| | 37 |
| | — |
| | 33 |
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Comprehensive income (loss) attributable to EnergySolutions | $ | (57,493 | ) | | $ | 795 |
| | $ | (74,858 | ) | | $ | 6,123 |
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See accompanying notes to condensed consolidated financial statements.
EnergySolutions, Inc.
Condensed Consolidated Statement of Changes in Stockholders’ Equity
Six Month Period Ended June 30, 2013
(in thousands of dollars, except share information)
(unaudited)
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| Common Stock | | Additional Paid-in | | Accumulated Other Comprehensive | | Accumulated | | Noncontrolling | | Total Stockholders’ |
| Shares | | Amount | | Capital | | Loss | | Deficit | | Interests | | Equity |
Balance at December 31, 2012 | 90,253,242 |
| | $ | 903 |
| | $ | 511,503 |
| | $ | (21,956 | ) | | $ | (190,031 | ) | | $ | 500 |
| | $ | 300,919 |
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Net loss | — |
| | — |
| | — |
| | — |
| | (65,430 | ) | | — |
| | (65,430 | ) |
Equity-based compensation | — |
| | — |
| | 3,945 |
| | — |
| | — |
| | — |
| | 3,945 |
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Vesting of restricted stock | 2,206,430 |
| | 22 |
| | (22 | ) | | — |
| | — |
| | — |
| | — |
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Minimum tax withholdings on restricted stock awards | (111,107 | ) | | (1 | ) | | (431 | ) | | — |
| | — |
| | — |
| | (432 | ) |
Capital contribution from Parent | — |
| | — |
| | 10,852 |
| | — |
| | — |
| | — |
| | 10,852 |
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Common stock repurchased by EnergySolutions and retired | (1,779,520 | ) | | (18 | ) | | (7,324 | ) | | — |
| | — |
| | — |
| | (7,342 | ) |
Common stock repurchased by Parent and retired | (90,569,045 | ) | | (906 | ) | | (374,956 | ) | | — |
| | — |
| | — |
| | (375,862 | ) |
Issuance of common stock | 100 |
| | — |
| | 375,862 |
| | — |
| | — |
| | — |
| | 375,862 |
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Change in unrecognized actuarial loss | — |
| | — |
| | — |
| | (475 | ) | | — |
| | — |
| | (475 | ) |
Foreign currency translation, net of taxes | — |
| | — |
| | — |
| | (8,953 | ) | | — |
| | — |
| | (8,953 | ) |
Balance at June 30, 2013 | 100 |
| | $ | — |
| | $ | 519,429 |
| | $ | (31,384 | ) | | $ | (255,461 | ) | | $ | 500 |
| | $ | 233,084 |
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See accompanying notes to condensed consolidated financial statements.
EnergySolutions, Inc.
Condensed Consolidated Statements of Cash Flows
Six Month Periods Ended June 30, 2013 and 2012
(in thousands of dollars)
(unaudited)
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| Six Month Period Ended |
| June 30, |
| 2013 | | 2012 |
Cash flows from operating activities | |
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Net income (loss) | $ | (65,430 | ) | | $ | 4,742 |
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Adjustments to reconcile net income (loss) to net cash used in operating activities: | |
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Depreciation, amortization and accretion | 34,949 |
| | 37,732 |
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Equity-based compensation expense | 3,945 |
| | 2,722 |
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Deferred income taxes | (1,984 | ) | | (15,185 | ) |
Amortization of debt financing fees and debt discount | 3,349 |
| | 2,454 |
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Loss (gain) on disposal of property, plant and equipment | 258 |
| | (363 | ) |
Realized and unrealized loss (gain) on nuclear decommissioning trust fund investments | 2,981 |
| | (34,613 | ) |
Changes in operating assets and liabilities: | |
| | |
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Accounts receivable | 18,760 |
| | 4,455 |
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Costs and estimated earnings in excess of billings on uncompleted contracts | 8,691 |
| | 20,594 |
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Prepaid expenses and other current assets | (1,955 | ) | | (307 | ) |
Accounts payable | (22,605 | ) | | (33,559 | ) |
Accrued expenses and other current liabilities | 25,133 |
| | (30,835 | ) |
Unearned revenue | (69,801 | ) | | (32,253 | ) |
Facility and equipment decontamination and decommissioning liabilities | (88,556 | ) | | (68,360 | ) |
Restricted cash and decontamination and decommissioning deposits | 1,062 |
| | (671 | ) |
Nuclear decommissioning trust fund | 82,245 |
| | 99,308 |
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Deferred costs | 64,950 |
| | 49,114 |
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Other noncurrent assets | (38,910 | ) | | (34,633 | ) |
Other noncurrent liabilities | 40,084 |
| | 27,662 |
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Net cash used in operating activities | (2,834 | ) | | (1,996 | ) |
Cash flows from investing activities | |
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Purchase of nuclear decommissioning trust fund investments | (430,211 | ) | | (457,279 | ) |
Proceeds from sales of nuclear decommissioning trust fund investments | 432,762 |
| | 459,488 |
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Purchases of property, plant and equipment | (6,425 | ) | | (11,116 | ) |
Proceeds from disposition of property, plant and equipment | — |
| | 5,195 |
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Net cash used in investing activities | (3,874 | ) | | (3,712 | ) |
Cash flows from financing activities | |
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Repayments of long-term debt | (16,592 | ) | | — |
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Distributions to noncontrolling interests partners | — |
| | (157 | ) |
Minimum tax withholding on restricted stock awards | (432 | ) | | (91 | ) |
Repurchase of common stock | (7,342 | ) | | — |
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Repayments of capital lease obligations | (362 | ) | | (313 | ) |
Debt financing fees | (3,160 | ) | | — |
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Net cash used in financing activities | (27,888 | ) | | (561 | ) |
Effect of exchange rate on cash | (2,066 | ) | | 334 |
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Net decrease in cash and cash equivalents | (36,662 | ) | | (5,935 | ) |
Cash and cash equivalents, beginning of period | 134,191 |
| | 77,213 |
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Cash and cash equivalents, end of period | $ | 97,529 |
| | $ | 71,278 |
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See accompanying notes to condensed consolidated financial statements.
EnergySolutions, Inc.
Notes to Condensed Consolidated Financial Statements
(1) Description of Business
References herein to "EnergySolutions," the "Company," "we," "us" or "our" refer to EnergySolutions, Inc. and its consolidated subsidiaries unless the context otherwise requires.
EnergySolutions, Inc., a Delaware corporation, provides a broad range of services both nationally and internationally, including (i) on-site decontamination and decommissioning ("D&D") services to commercial customers such as power and utility companies, pharmaceutical companies, research laboratories, universities, industrial facilities, state agencies and other commercial entities that are involved with nuclear materials; (ii) management and operation or clean-up of facilities with radioactive materials to government customers such as departments and administrations within the United States (the "U.S.") Department of Energy ("DOE") and U.S. Department of Defense ("DOD"); (iii) logistics, transportation, processing and disposal of radioactive waste at our facility in Clive, Utah, our four facilities in Tennessee, or our two facilities in Barnwell, South Carolina; and (iv) comprehensive long-term stewardship D&D work for shut-down nuclear power plants and similar operations. We also provide turn-key services such as water treatment and sell other products and technologies to utilities in the U.S. and abroad. Our international operations derive revenue primarily through contracts with the Nuclear Decommissioning Authority ("NDA") in the United Kingdom ("U.K.") to operate, manage and decommission ten Magnox sites with 22 nuclear reactors.
We report our results through two major operating groups: the Government Group and the Global Commercial Group. The Global Commercial Group reports its results under three separate operating business divisions: Commercial Services ("CS"), Logistics, Processing and Disposal ("LP&D") and International.
(2) Business Combinations
On January 7, 2013, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Rockwell Holdco, Inc., a Delaware corporation (the "Parent" or "Rockwell") and Rockwell Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent ("Merger Sub") established as an acquisition vehicle for the purpose of acquiring the Company. The Merger Agreement was later amended on April 5, 2013. Pursuant to the terms of the Merger Agreement, as amended, on May 24, 2013, (the "Merger Date"), Merger Sub merged with and into the Company, with the Company surviving as a wholly-owned subsidiary of Parent (the "Merger"). Parent is 100% owned by Energy Capital Partners II, LP and its parallel funds ("Energy Capital" or "ECP") a leading private equity firm focused on investing in North America’s energy infrastructure.
On the Merger Date, each issued and outstanding share of common stock of the Company (other than shares of Company common stock held in the treasury of the Company or owned by Parent, affiliates of Parent, Merger Sub, a subsidiary of the Company or by stockholders who had validly exercised and perfected their appraisal rights under Delaware law), was converted into the right to receive $4.15 in cash, without interest and subject to any required withholding of taxes. The Company's common stock ceased to be traded on the New York Stock Exchange after close of market on May 24, 2013. The Company continues its operations as a privately-held company. The Company has filed with the Securities and Exchange Commission (the "SEC"), or has had filed on its behalf, a Form 15 and Form 25 to deregister the Company's common stock under Sections 12(b) and (g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), respectively, which deregistration will become effective 90 days after the filing of the applicable form. Further, the Company's reporting obligations under Section 15(d) of the Exchange Act on account of its common stock will be suspended effective January 1, 2014, at which time the Company will no longer file periodic reports with the SEC on account of its common stock, but the Company will continue to have public reporting obligations with the SEC with respect to its 10.75% Senior Notes due 2018, as required by the indenture governing such Senior Notes.
Prior to the Merger, under our certificate of incorporation there were 1,000,000,000 shares of common stock authorized and 100,000,000 shares of preferred stock authorized. In connection with the completion of the Merger,
all shares of common stock outstanding at the time of the Merger were canceled and our certificate of incorporation was amended and restated to authorize only 100 shares of common stock, all of which are currently outstanding and owned by Parent. There are no shares of preferred stock authorized under our new amended and restated certificate of incorporation.
We refer to the May 24, 2013 acquisition of EnergySolutions by Rockwell as the "Merger Transaction". The following events describe the transactions that occurred in connection with the Merger Transaction:
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• | Parent and EnergySolutions purchased and retired all of the Company's outstanding common stock as of the Merger Date and paid approximately $383.2 million in cash to the Company's stockholders. Of the total amount paid, EnergySolutions directly purchased 1.8 million shares for $7.3 million from cash on hand. The 1.8 million shares were issued as a result of accelerated vesting of previously issued restricted stock awards due to change in control. |
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• | Parent paid $10.9 million of Merger Transaction related costs on behalf of EnergySolutions. Payments made by Parent on the Company's behalf were accounted for as capital contributions. Of the $10.9 million transaction costs, approximately $3.1 million was capitalized as debt issuance costs and the remainder was expensed on the Merger Date and is included in the condensed consolidated statements of operations and comprehensive income (loss) under selling, general and administrative ("SG&A") expenses. |
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• | EnergySolutions incurred $32.6 million of Merger Transaction related expenses. These expenses were comprised primarily of employee incentive compensation and related payroll taxes of $21.0 million and professional fees of $11.6 million. These expenses were included in the condensed consolidated statements of operations and comprehensive income (loss) under cost of revenue and SG&A expenses. |
The Merger Transaction was accounted for as a recapitalization, and accordingly, the Company will continue to apply its historical basis of accounting in its stand-alone financial statements after the Merger. This is based on our determination under Financial Accounting Standards Board ("FASB") accounting standards codification Topic 805 - Business Combinations, and SEC Staff Accounting Bulletin (SAB) No. 54, codified as Topic 5J, Push Down Basis of Accounting Required In Certain Limited Circumstances, that while the push down of Parent's basis in EnergySolutions is permissible, it was not required due to the existence of significant outstanding public debt securities at EnergySolutions.
(3) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and 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, 2012 (the "2012 Annual Report").
In the opinion of management, all material adjustments which are of a normal and recurring nature necessary for a fair presentation of the results for the periods presented have been reflected. Preparing financial statements requires management to make estimates and assumptions that affect the amounts that are reported in the consolidated financial statements and accompanying disclosures. Although these estimates are based on our best knowledge of current events and actions that we may undertake in the future, actual results may be different from these estimates. The results of operations for the three and six months ended June 30, 2013 are not necessarily indicative of the results to be expected for any future period or the full fiscal year.
We have majority voting rights for one of our minority-owned joint ventures. Accordingly, we have consolidated its operations in our consolidated financial statements and therefore, we recorded the noncontrolling interests, which reflect the portion of the earnings of operations which are applicable to other noncontrolling partners. Assets from our consolidated joint venture can only be used to settle its own obligations. Additionally, our assets cannot be used to settle the joint ventures’ obligations because this minority owned joint venture does not have recourse to our general credit.
(4) Recent Accounting Pronouncements
Accounting Pronouncements Issued
New accounting pronouncements implemented by the company during the six months ended June 30, 2013 or requiring implementation in future periods are discussed below or elsewhere in the notes, where appropriate.
In July 2013, the FASB issued guidance related to presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The guidance eliminates diversity in practice for presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is available to reduce the taxable income or tax payable that would result from disallowance of a tax position. This guidance is effective for interim and annual reporting periods beginning after December 15, 2013 and should be applied prospectively to all unrecognized tax benefits that exist at the effective date. The Company intends to adopt this guidance at the beginning of its first quarter of fiscal year 2014, and is currently evaluating the impact on its financial statements and disclosures.
In March 2013, the FASB issued guidance related to foreign currency matters. The standard update addresses the accounting for the release of cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a business unit or a group of assets that do not produce a profit within a foreign entity. Under such circumstances, a parent company is required to release any related currency adjustments to earnings. The currency adjustment is released into earnings only if the sale or transfer results in a complete or substantially complete liquidation of the foreign entity in question. The standard update is effective for interim and annual reporting periods beginning after December 15, 2013. We do not expect that the adoption of this guidance will have a material impact on the Company’s financial position, results of operations or cash flows.
In February 2013, the FASB issued an update to improve the transparency of reporting reclassifications out of accumulated other comprehensive income. The amendments in the update did not change the current requirements for reporting net income or other comprehensive income in financial statements. The new amendments require an organization to present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. Additionally, for other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP to provide additional detail about those amounts. The amendments are effective for reporting periods beginning after December 15, 2012. The adoption of this did not have a material impact on the Company’s financial position, results of operations or cash flows.
(5) Trust Fund Investments
The Nuclear Decommissioning Trust ("NDT") fund was established solely to satisfy obligations related to the D&D of the Zion Station. 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. 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 fund as we benefit from positive market returns and bear the risk of market losses.
NDT fund investments consisted of the following (in thousands):
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| As of June 30, 2013 | | As of December 31, 2012 |
| Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Estimated fair value | | Amortized cost | | Gross unrealized gains | | Gross unrealized losses | | Estimated fair value |
Assets | |
| | |
| | |
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| | |
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| | |
| | |
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Cash | $ | 326 |
| | $ | — |
| | $ | — |
| | $ | 326 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
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Receivables for securities sold | 5,433 |
| | — |
| | — |
| | 5,433 |
| | 7,422 |
| | — |
| | — |
| | $ | 7,422 |
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Investments | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
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Corporate debt securities | 184,538 |
| | 7,659 |
| | (2,597 | ) | | 189,600 |
| | 223,662 |
| | 17,940 |
| | (575 | ) | | 241,027 |
|
Equity securities | 400 |
| | 25 |
| | — |
| | 425 |
| | 10,117 |
| | 4,249 |
| | (61 | ) | | 14,305 |
|
Direct lending securities | 105,937 |
| | 10,344 |
| | (2,770 | ) | | 113,511 |
| | 98,138 |
| | 6,026 |
| | (1,721 | ) | | 102,443 |
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Debt securities issued by states of the U.S. | 23,734 |
| | 1,407 |
| | (122 | ) | | 25,019 |
| | 31,306 |
| | 3,806 |
| | — |
| | 35,112 |
|
Cash and cash equivalents | 28,556 |
| | — |
| | — |
| | 28,556 |
| | 23,686 |
| | — |
| | — |
| | 23,686 |
|
Commingled funds | — |
| | — |
| | — |
| | — |
| | 4,017 |
| | 527 |
| | — |
| | 4,544 |
|
Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies | 154,451 |
| | 447 |
| | (7,083 | ) | | 147,815 |
| | 166,925 |
| | 3,912 |
| | (880 | ) | | 169,957 |
|
Total investments | 497,616 |
| | 19,882 |
| | (12,572 | ) | | 504,926 |
| | 557,851 |
| | 36,460 |
| | (3,237 | ) | | 591,074 |
|
Net assets held by the NDT fund | $ | 503,375 |
| | $ | 19,882 |
| | $ | (12,572 | ) | | 510,685 |
| | $ | 565,273 |
| | $ | 36,460 |
| | $ | (3,237 | ) | | 598,496 |
|
Less: current portion | |
| | |
| | |
| | (132,674 | ) | | |
| | |
| | |
| | (152,507 | ) |
Long-term investments | |
| | |
| | |
| | $ | 378,011 |
| | |
| | |
| | |
| | $ | 445,989 |
|
Investments held by the NDT fund, net, totaled $510.7 million and $598.5 million as of June 30, 2013 and December 31, 2012, respectively, and are included in current and other long-term assets in the accompanying condensed consolidated balance sheets, depending on the expected timing of usage of funds. We have withdrawn from the NDT fund approximately $82.2 million and $158.3 million, for the six month period ended June 30, 2013 and for the year ended December 31, 2012, respectively, to pay for Zion Station D&D project expenses, estimated trust income taxes and trust management fees.
For the six month periods ended June 30, 2013 and 2012, we recorded $25.9 million of unrealized losses and $6.9 million of unrealized gains, respectively, resulting from adjustments to the fair value of the NDT investments. For the three month periods ended June 30, 2013 and 2012, we recorded $19.9 million of unrealized losses and $0.9 million of unrealized gains, respectively, resulting from adjustments to the fair value of the NDT fund investments. For the realized gains related to sales of investments, dividends and interest payments received from investments held by the NDT fund were $22.9 million and $27.7 million, for the six months ended June 30, 2013 and 2012, respectively and $11.6 million and $14.2 million for the three month periods ended June 30, 2013 and 2012, respectively. Both, unrealized and realized gains and losses on the NDT fund investments are included in other income (expense), net, in the condensed consolidated statements of operations and comprehensive income (loss).
(6) Fair Value Measurements
We have 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 GAAP, and expand disclosures about fair value measurements. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that a 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 assets or liabilities.
This hierarchy requires us 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 we believe our 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 their fair value measurement.
The carrying value of accounts receivable, costs, and estimated earnings in excess of billings on uncompleted contracts, prepaid assets, accounts payable, and accrued expenses approximate their fair value principally because of the short-term nature of these assets and liabilities.
The fair market value of our term loan is estimated utilizing market quotations for debt that have quoted prices in active markets. Since our term loan does not trade on a daily basis in an active market, the fair value estimates are based on market observable inputs based on borrowing rates currently available for debt with similar terms and average maturities and is categorized as Level 2. The fair value of our term loan is calculated by taking the mid-point of the trading prices and multiplying it by the outstanding principal balance of our term loan. The fair market value of our term loan was approximately $517.4 million as of June 30, 2013 and $508.6 million as of December 31, 2012. The carrying value of our term loan was $510.4 million as of June 30, 2013 and $527.0 million as of December 31, 2012.
In the case of our senior notes, we estimate fair value based on quoted market prices from active markets as they are publicly traded and are categorized as Level 1. As of June 30, 2013 and December 31, 2012, we had outstanding senior notes obligations with a carrying amount of $300.0 million, respectively, with a fair market value of approximately $325.5 million as of June 30, 2013 and $283.5 million as of December 31, 2012.
The following table presents the NDT fund investments measured at fair value (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| As of June 30, 2013 | | As of December 31, 2012 |
| Total Investments at Fair Value | | Quoted Prices in Active Markets for Identical Assets Level 1 | | Significant Other Observable Inputs Level 2 | | Significant Unobservable Inputs Level 3 | | Total Investments at Fair Value | | Quoted Prices in Active Markets for Identical Assets Level 1 | | Significant Other Observable Inputs Level 2 | | Significant Unobservable Inputs Level 3 (revised) |
Assets | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Cash | $ | 326 |
| | $ | 326 |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
| | $ | — |
|
Receivables for securities sold | 5,433 |
| | 5,433 |
| | — |
| | — |
| | 7,422 |
| | 7,422 |
| | — |
| | — |
|
Investments | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Cash and cash equivalents | 28,556 |
| | 28,556 |
| | — |
| | — |
| | 23,686 |
| | 23,686 |
| | — |
| | — |
|
Fixed income securities(1) | 362,434 |
| | 132,636 |
| | 229,798 |
| | — |
| | 446,096 |
| | 125,605 |
| | 320,491 |
| | — |
|
Equity securities(2) | 425 |
| | 425 |
| | — |
| | — |
| | 14,305 |
| | 14,305 |
| | — |
| | — |
|
Direct lending securities(3) | 113,511 |
| | — |
| | — |
| | 113,511 |
| | 102,443 |
| | — |
| | — |
| | 102,443 |
|
Units of participation(4) | — |
| | — |
| | — |
| | — |
| | 4,544 |
| | — |
| | 4,544 |
| | — |
|
Total investments | 504,926 |
| | 161,617 |
| | 229,798 |
| | 113,511 |
| | 591,074 |
| | 163,596 |
| | 325,035 |
| | 102,443 |
|
Net assets held by the NDT fund | $ | 510,685 |
| | $ | 167,376 |
| | $ | 229,798 |
| | $ | 113,511 |
| | $ | 598,496 |
| | $ | 171,018 |
| | $ | 325,035 |
| | $ | 102,443 |
|
_____________________________
| |
(1) | 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. Investments with maturities of three months or less when purchased, including certain short-term fixed income securities, are considered cash equivalents and are also categorized as Level 1. 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. |
| |
(2) | 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 trust 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 national securities exchanges. |
| |
(3) | Direct lending securities are investments in managed funds that invest in private companies for long-term capital appreciation. The fair value of these securities is determined using either an enterprise value model or a bond valuation model. The enterprise value model develops valuation estimates based on valuations of comparable public companies, recent sales of private and public companies, discounting the forecasted cash flows of the portfolio company, estimating the liquidation or collateral value of the portfolio company or its assets, considering offers from third parties to buy the portfolio company, its historical and projected financial results, as well as other factors that may impact value. Significant judgment is required in the applications of discounts or premiums applied to the prices of comparable companies for factors such as size, marketability and relative performance. Under the bond valuation model, expected future cash flows are discounted using a discount rate. The discount rate is composed of a market based rate for similar credits in the public market and an internal credit rate based on the underlying risk of the credit. Investments in direct lending funds are categorized as Level 3 because the fair value of these securities is based largely on inputs that are unobservable and also utilize complex valuation models. Investments in direct lending securities typically cannot be redeemed until maturity of the term loan. |
Management determines the value of Level 3 investments by considering third party valuations and have concluded that quantitative information about significant unobservable inputs used in valuing these investments is not reasonably available. This includes information regarding the sensitivity of the fair values to changes in the unobservable inputs. We obtain annual valuations from the fund managers and gain an understanding of the inputs and assumptions used in preparing the valuations. We also conclude on the reasonableness of the fair value of these investments. We obtain quarterly reports from the fund managers and review for consistency and reasonableness with regards to the valuations of these investments that were analyzed at the most recent year-end.
| |
(4) | Units of participation, which are similar to mutual funds, are maintained by investment companies and hold certain investments in accordance with stated 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. Units of participation are categorized as Level 2 because the fair value of these securities is based primarily on observable prices of the underlying securities. |
The following table presents the rollforward for Level 3 assets and liabilities measured at fair value on a recurring basis (in thousands):
|
| | | | | | | |
Direct Lending Securities | June 30, 2013 | | December 31, 2012 |
Beginning balance | $ | 102,443 |
| | $ | 61,998 |
|
Purchases and issuances | 26,033 |
| | 82,285 |
|
Sales, dispositions and settlements | (18,338 | ) | | (39,706 | ) |
Realized gains and losses | 104 |
| | (2,940 | ) |
Change in unrealized gains and losses | 3,269 |
| | 806 |
|
Ending balance | $ | 113,511 |
| | $ | 102,443 |
|
(7) Joint Ventures
We use the equity method of accounting for our unconsolidated joint ventures. Under the equity method, we recognize our proportionate share of the net earnings of these joint ventures as a single line item under "Equity in income of unconsolidated joint ventures" in our condensed consolidated statements of operations and comprehensive income (loss). In accordance with authoritative guidance, we analyzed all of our joint ventures and classified them into two groups: (a) joint ventures that must be consolidated because we hold the majority voting interest, or because they are VIEs of which we are the primary beneficiary; and (b) joint ventures that do not need to be consolidated because we hold only a minority voting or other ownership interest, or because they are VIEs of which we are not the primary beneficiary. For the six month period ended June 30, 2013, we performed an assessment of our joint ventures and concluded that no unconsolidated joint ventures should be consolidated and that no consolidated joint ventures should be deconsolidated.
The table below presents unaudited financial information, for our unconsolidated joint ventures (in thousands):
|
| | | | | | | |
| As of | | As of |
| June 30, 2013 | | December 31, 2012 |
Current assets | $ | 52,338 |
| | $ | 49,979 |
|
Current liabilities | 27,499 |
| | 25,127 |
|
|
| | | | | | | | | | | | | | | |
| For The Three Month | | For The Six Month |
| Period Ended | | Period Ended |
| June 30, | | June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Revenue | $ | 32,241 |
| | $ | 47,234 |
| | $ | 58,747 |
| | $ | 70,953 |
|
Gross profit | 570 |
| | 6,234 |
| | 3,136 |
| | 8,317 |
|
Net income | 413 |
| | 6,195 |
| | 2,688 |
| | 8,104 |
|
Net income (loss) attributable to EnergySolutions | (98 | ) | | 2,406 |
| | 578 |
| | 3,136 |
|
For the six month periods ended June 30, 2013 and 2012, we received $1.0 million and $0.8 million, respectively, in cash dividend distributions from our unconsolidated joint ventures.
(8) Goodwill
As of June 30, 2013 and December 31, 2012, we had recorded $305.4 million and $308.6 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 condensed consolidated
balance sheets. For the six and twelve month periods ended June 30, 2013 and December 31, 2012, we recorded $3.2 million of translation losses and $2.2 million of translation gains, respectively, related to goodwill denominated in foreign currencies.
In accordance with authoritative guidance for accounting for Goodwill and Other Intangible Assets, we perform a qualitative assessment on our goodwill annually, as of April 1, or more often when events occur or circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its carrying value. We consider such factors as: macroeconomic and market conditions, industry specific considerations, cost factors, overall financial performance, relevant entity-specific events (such as the Merger Transaction announced in January 2013 and closed in May 2013), share price considerations and other factors as deemed necessary. As of June 30, 2013, there were no events or circumstances that indicated that impairment existed in any of our reporting units.
(9) Other Intangible Assets
Other intangible assets consisted of the following (in thousands):
|
| | | | | | | | | | | | | | | | | | | |
| As of June 30, 2013 | | As of December 31, 2012 |
| Gross Carrying Amount | | Accumulated Amortization | | Weighted Average Remaining Useful Life | | Gross Carrying Amount | | Accumulated Amortization | | Weighted Average Remaining Useful Life |
Permits | $ | 243,067 |
| | $ | (81,337 | ) | | 16.3 years | | $ | 243,130 |
| | $ | (76,406 | ) | | 16.9 years |
Customer relationships | 154,890 |
| | (96,885 | ) | | 5.1 years | | 161,429 |
| | (93,552 | ) | | 5.6 years |
Technology and other | 15,490 |
| | (11,381 | ) | | 2.6 years | | 15,490 |
| | (10,540 | ) | | 3.1 years |
Total amortizable intangibles | $ | 413,447 |
| | $ | (189,603 | ) | | 13.1 years | | $ | 420,049 |
| | $ | (180,498 | ) | | 13.4 years |
All of our other intangible assets are subject to amortization. Amortization expense was $6.5 million for each of the three month periods ended June 30, 2013 and 2012, and $12.9 million for each of the six month periods ended June 30, 2013 and 2012. Amortization expense is included in cost of revenue and SG&A expenses within the condensed consolidated statement of operations and comprehensive income (loss).
We recorded $2.8 million of translation losses and $0.8 million of translation gains related to other intangible assets denominated in foreign currencies for the six month periods ended June 30, 2013 and 2012, respectively. The related translation gains and losses are included as a separate component of stockholders’ equity in accumulated other comprehensive income (loss) in the condensed consolidated balance sheets.
(10) Senior Credit Facilities and Senior Notes
Our outstanding long-term debt consists of the following (in thousands):
|
| | | | | | | |
| June 30, 2013 | | December 31, 2012 |
Term loan facilities due through 2016(1) | $ | 510,407 |
| | $ | 527,000 |
|
Term loan unamortized discount | (7,461 | ) | | (8,741 | ) |
Senior notes, 10.75% due through 2018 | 300,000 |
| | 300,000 |
|
Senior notes unamortized discount | (2,886 | ) | | (3,090 | ) |
Revolving credit facility | — |
| | — |
|
Total debt | 800,060 |
| | 815,169 |
|
Less: current portion | (135,407 | ) | | (16,592 | ) |
Total long-term debt | $ | 664,653 |
| | $ | 798,577 |
|
___________________________________
| |
(1) | The variable interest rate on borrowings under our senior secured credit facility was 6.75% as of June 30, 2013 and 6.25% as of December 31, 2012. |
On August 13, 2010, the Company entered into a senior secured credit facility with JPMorgan Chase Bank, N.A., as the administrative agent and collateral agent, consisting of a senior secured term loan in an aggregate principal amount of $560.0 million at a discount rate of 2.5% and a senior secured revolving credit facility with availability of $105.0 million, of
which $63.8 million was used to fund letters of credit issued as of June 30, 2013. Borrowings of $310.5 million and $310.6 million were held in a restricted cash account as collateral for the Company’s reimbursement obligations with respect to deposit letters of credit for each of the periods ended June 30, 2013 and December 31, 2012.
On February 15, 2013, we entered into Amendment No. 2 to the Credit Agreement and Consent and Waiver (the "Loan Amendment"). The Loan Amendment became effective on May 24, 2013 upon the consummation of the Merger. Pursuant to the Loan Amendment, the lenders and the administrative agent consented to i) a waiver of the change of control provisions and certain other covenants and provisions under the senior secured credit facility; ii) any repayment of our 10.75% Senior Notes due 2018, provided that any payments are funded from equity contributions made to us by ECP or its affiliates; iii) an extension to the maturity date of our senior secured revolving credit facility, subject to certain conditions and acceptance by the extending revolving lenders; and iv) 1% prepayment premium if any senior secured term loans are refinanced prior to the date that is one year following the execution date of the Loan Amendment. We incurred $6.1 million of debt financing fees in connection with the Loan Amendment all of which were capitalized and are included in other noncurrent assets within the condensed consolidated balance sheet as of June 30, 2013. Parent paid directly to the lenders $3.1 million of these debt financing fees. For the six month period ended June 30, 2013, we also incurred $7.0 million of lead arranger banker fees with respect to the Loan Amendment, all of which were included in other income (expense), net, within the condensed consolidated statement of operations and comprehensive income (loss). Parent paid $4.3 million of these lead arranger banker fees.
Borrowings under the senior secured credit facility bear interest at a rate equal to: (a) Adjusted LIBOR plus 5.00% (subject to a LIBOR floor of 1.75%), or ABR plus 4.00% in the case of the senior secured term loan; (b) Adjusted LIBOR plus 4.50% (subject to a LIBOR floor of 1.75%), or ABR plus 3.50% in the case of the senior secured revolving credit facility, and (c) a per annum fee equal to the spread over Adjusted LIBOR under the senior secured revolving credit facility, along with a fronting fee and issuance and administration fees in the case of revolving letters of credit. On May 24, 2013, upon the closing of the Merger and pursuant the Loan Amendment, the interest rate on our senior secured credit facility was increased by 0.5%.
The senior secured term loan amortizes in equal quarterly installments of $1.3 million payable on the last day of each calendar quarter with the balance being payable on August 13, 2016. 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 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 senior secured term loan 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 senior secured term loan. 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. Prepayments of debt resulting from the excess cash flow calculations are due annually 5 days after the date that the Annual Report on Form 10-K for such fiscal year is filed with the SEC. Each optional and mandatory prepayment is applied first, in direct order of maturities, to the next four scheduled principal repayment installments of the senior secured term loan and second, to the other principal repayment installments of senior secured term loans on a pro rata basis.
Upon completion of the Merger Transaction and pursuant to the Loan Amendment we are required to reduce our debt with respect to our senior secured term loans and our 10.75% Senior Notes due 2018, to $675.0 million or less within 150 days. As of June 30, 2013, the aggregate outstanding principal amount of our debt was $810.4 million. As such, as of June 30, 2013, we had a mandatory principal repayment $135.4 million due by October 21, 2013. We expect to fund this payment with our cash flows from operations and a shortfall, if any, will be funded by equity contributions to the Company by ECP or its affiliates. During the six month period ended June 30, 2013, we made principal debt payments totaling $16.6 million. On August 6, 2013 we also made a $35.0 million principal debt payment on our term loan.
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), both of 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 repayment of 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 4.0 for the quarter ending June 30, 2013, 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 2.00 from the quarter ended June 30, 2013 through the quarter ended September 30, 2014 and 2.25 through the maturity date. As of June 30, 2013,
our total leverage and cash interest coverage ratios were 3.07 and 2.53 respectively. Pursuant to the Loan Amendment, the definition of change of control and reporting requirements under the senior secured credit facility were amended.
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 2013 and each year thereafter, plus for each year the lesser of (1) a one year carryforward 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 six month period ended June 30, 2013 were $6.4 million. As of June 30, 2013, we were in compliance with all of the covenants under our senior secured credit facility.
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, which includes investments in the NDT fund of approximately $510.7 million as of June 30, 2013, and other special purpose subsidiaries, whose organizational documentation prohibits or limits such pledge.
On August 13, 2010, we completed a $300.0 million private offering of 10.75% senior notes at a discount rate of 1.3%. The senior notes are governed by an indenture among EnergySolutions and Wells Fargo Bank, National Association, as trustee. Interest on the senior notes is payable semiannually in arrears on February 15 and August 15 of each year beginning on February 15, 2011. The senior notes rank in equal right of payment to all existing and future senior debt and senior in right of payment to all future subordinated debt. In May 2011, we filed a registration statement under the Securities Act, pursuant to a registration rights agreement entered into in connection with the senior notes offering. The SEC declared the registration statement relating to the exchange offer effective on May 27, 2011, and the exchange of the registered senior notes for the unregistered senior notes was consummated on May 31, 2011. We did not receive any proceeds from the exchange offer transaction.
At any time prior to August 15, 2014, we are entitled to redeem all or a portion of the senior notes at a redemption price equal to 100% of the principal amount of the senior 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 senior 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 senior 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 senior notes are guaranteed on a senior unsecured basis by all of our domestic restricted subsidiaries that guarantee the senior secured credit facility. The senior notes and 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 senior notes are structurally subordinated to all liabilities of each of our subsidiaries that do not guarantee the senior 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 senior 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 one restricted subsidiary 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.
Each subsidiary co-issuer and guarantor of our senior notes is exempt from reporting under the Exchange Act, pursuant to Rule 12h-5 under the Exchange Act, as the subsidiary co-issuer and each of the subsidiary guarantors is 100% owned by us, and the obligations of the co-issuer and the guarantees of our subsidiary guarantors are full and unconditional and
joint and several. There are no significant restrictions on our ability or any subsidiary guarantor to obtain funds from its subsidiaries.
During the six month periods ended June 30, 2013 and 2012, we made cash interest payments totaling $35.4 million and $34.2 million, respectively, related to our outstanding debt obligations as of those dates.
(11) 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 our AROs except the Zion Station ARO.
The ARO established in connection with the Zion Station project differs somewhat from our traditional AROs. The assets acquired in the Zion Station 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 Station project 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 consolidated statements of operations and comprehensive income (loss). Also, since we perform most of the work related to the Zion Station ARO with internal resources, we recognized an ARO gain 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.
Our ARO is based on a cost estimate for a third party to perform the D&D work. This estimate is inflated, using an inflation rate, to the expected time at which the D&D activity will occur, and then discounted back, using our credit adjusted risk free rate, to the 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 D&D liabilities consist of the following (in thousands):
|
| | | | | | | |
| June 30, 2013 | | December 31, 2012 |
Facilities and equipment ARO—Zion Station | $ | 479,102 |
| | $ | 553,302 |
|
Facilities and equipment ARO—Clive, UT | 29,758 |
| | 29,300 |
|
Facilities and equipment ARO—other | 35,307 |
| | 35,757 |
|
Total facilities and equipment ARO | 544,167 |
| | 618,359 |
|
Barnwell Closure | 4,803 |
| | 5,845 |
|
| 548,970 |
| | 624,204 |
|
Less: current portion | (121,986 | ) | | (138,757 | ) |
| $ | 426,984 |
| | $ | 485,447 |
|
The following is a rollforward of our facilities and equipment ARO liabilities (in thousands):
|
| | | | | | | |
| June 30, 2013 | | December 31, 2012 |
Beginning Balance as of January 1 | $ | 618,359 |
| | $ | 750,649 |
|
Liabilities incurred | 238 |
| | 187 |
|
Liabilities settled | (87,586 | ) | | (159,776 | ) |
Accretion expense | 13,156 |
| | 30,017 |
|
ARO estimate adjustments | — |
| | (2,718 | ) |
Ending liability | $ | 544,167 |
| | $ | 618,359 |
|
For certain of our D&D obligations, we are required to deposit cash relating to our D&D obligation in the form of a restricted cash account, a deposit in escrow, or in a trust fund. D&D deposits consist 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. 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. D&D deposits and restricted cash are included in non-current assets in the accompanying condensed consolidated balance sheets.
The following table presents a summary of the D&D cash deposits available exclusively to fund closure and post-closure obligations related to our ARO liabilities (in thousands):
|
| | | | | | | |
| June 30, 2013 | | December 31, 2012 |
Zion Station plant—restricted cash(1)(2) | $ | 200,000 |
| | $ | 200,000 |
|
Clive, Utah facility—restricted cash(2) | 97,633 |
| | 85,606 |
|
Tennessee facilities—escrow account(3) | 5,569 |
| | 13,363 |
|
Barnwell, South Carolina facility—trust fund | 4,804 |
| | 5,845 |
|
Others—restricted cash | 637 |
| | 662 |
|
__________________________________
| |
(1) | 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 Zion Station. This letter of credit is cash-collateralized with proceeds obtained from our senior secured credit facility. |
| |
(2) | Letters of credit issued against our deposit restricted cash account are 101% cash collateralized pursuant to our senior secured credit facility. |
| |
(3) | To fund our obligation to clean and remediate our Tennessee facilities and equipment, we have also purchased insurance policies. |
(12) Equity-Based Compensation
On May 22, 2013, the board of directors and stockholders of Parent approved the Stock Option Plan of Rockwell Holdco, Inc. (the "Rockwell Plan"), pursuant to which stock options may be granted to the employees, consultants, non-employee directors of Parent or its subsidiaries. Under the Rockwell Plan, 36,087 shares of Parent common stock have been reserved for issuance. Any option granted under the Rockwell Plan will be subject to terms and conditions contained in a written stock option agreement, and any shares of Parent common stock received upon exercise of an option under the Rockwell Plan will be subject to Parent’s Stockholders Agreement. The board of directors of Parent administers the Rockwell Plan and may amend, suspend or terminate the Rockwell Plan at any time.
As of June 30, 2013, 34,867 options had been issued under the Rockwell Plan. Our estimates of fair value for the stock options was made using the Black‑Scholes model based upon the fair value of the stock price on the date of grant, volatility of 72.2%, risk-free interest rate of 1.39% per year and expected life of 6.5 years. We are currently using the simplified method to calculate expected holding periods, which is based on the average term of the options and the weighted‑average graded vesting period because we do not have sufficient exercise history to calculate an expected holding period. The risk-free rate is based on the U.S. Treasury rate for the expected life at the time of grant.
We recognize equity based compensation expense over the instruments' vesting periods based on the instruments' fair values on the measurement date, in SG&A expenses in the consolidated statements of operations and comprehensive income (loss). We recorded $0.4 million stock based compensation expense related to stock option grants issued for each of the three and six month periods ended June 30, 2013, respectively. As of June 30, 2013, we had $22.5 million of unrecognized compensation expense related to outstanding stock options, which will be recognized over a weighted-average period of 4.9 years.
On May 24, 2013, as a result of the completion of the Merger, a change in control occurred that resulted in immediate vesting of all outstanding share based awards. The acceleration in vesting resulted from a preexisting change in control provision included in the terms of the awards issued under the former plans. Payments to grant holders due to the change in control provision were approximately $21.0 million as of June 30, 2013.
For the six month periods ended June 30, 2013 and 2012, we recorded stock based compensation expense related to former plans of $3.5 million and $2.7 million, respectively. For the three month periods ended June 30, 2013 and 2012, we recorded equity-based compensation expense related to our former plans of $3.0 million and $2.1 million, respectively.
As of June 30, 2013 and December 31, 2012, we had recorded liabilities of $9.9 million and $2.5 million, respectively, related to phantom stock awards to be settled in cash, which are included in accrued expenses and other current liabilities in the condensed consolidated balance sheets. For the three and six month periods ended June 30, 2013, we recorded $18.2 million and $19.8 million, respectively, of compensation expense related to these awards. For the three and six month periods ended June 30, 2012, we recorded $0.2 million and $0.9 million, respectively, of compensation expense related to these awards. Compensation expense related to phantom stock awards has been fully recognized as of June 30, 2013.
(13) Income Taxes
We recognized income tax expense of $9.3 million and an income tax benefit of $3.4 million for the six month periods ended June 30, 2013 and 2012, respectively, for year-to-date effective rates of negative 16.5% and negative 238.9%, respectively, based on an estimated annual effective tax rate method. Income tax expense arises from income in certain jurisdictions in the U.K. and for the Zion NDT fund. No benefits from losses in the U.S. and other jurisdictions in the U.K. are available to offset tax expense due to their respective full valuation allowance positions.
The 2013 effective tax rate differs from the statutory rate of 35% primarily as a result of the amount of income tax expense relative to the amount of pretax book losses, lower tax on income in foreign jurisdictions and the NDT fund, the tax benefit of foreign research and development credits, and valuation allowances recorded on benefits in loss jurisdictions.
The 2012 effective tax rate differs from the statutory rate of 35% primarily as a result of the amount of income tax expense relative to the amount of pretax book income, lower tax on income in foreign jurisdictions and the NDT fund, the tax benefit of foreign research and development credits, income tax expense due to the change in management's assertion with respect to unremitted foreign earnings, offset by foreign tax credits and further offset by the release of a domestic valuation allowance on net operating losses resulting from an increase in taxable income due to the partial change in the reinvestment assertion, and the reversal of certain unrecognized tax benefits.
During the six month period ended June 30, 2013, an extension of the research and development credit in the U.S. was signed into law. While the Company fully intends to take advantage of the research and development credit for the 2012 and 2013 tax years, no benefit has been recorded in the financial statements due to the full valuation allowance position in the U.S.
During the six month periods ended June 30, 2013 and 2012, we made income tax payments of $12.2 million and $13.1 million, respectively.
As of June 30, 2013 and December 31, 2012, we had $0.1 million and $0.1 million, respectively, of gross unrecognized tax benefits. These tax benefits were accounted for under guidance for accounting for uncertainties in income taxes. During the three month period ended June 30, 2012, the Company recognized an income tax benefit of $1.1 million, due to the expiration of the statute of limitations to examine and challenge our tax positions by the taxing authorities in the jurisdictions in which we operate.
(14) Segment Reporting and Business Concentrations
We report our results through two major operating groups: the Government Group and the Global Commercial Group. The Government Group derives its revenue from government customers in the U.S., whereas the Global Commercial Group provides a broad range of services both nationally and internationally and reports its results under three separate operating business divisions: Commercial Services ("CS"), Logistics, Processing and Disposal ("LP&D") and International.
The following table presents our segment information (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | |
| As of and for the Three Month Period ended June 30, 2013 |
| Government | | Global Commercial Group | | Corporate Unallocated | | |
| Group | | CS | | LP&D | | International | | Items | | Consolidated |
Revenue from external customers(1)(2) | $ | 44,136 |
| | $ | 43,172 |
| | $ | 56,533 |
| | $ | 267,197 |
| | — |
| | $ | 411,038 |
|
Income (loss) from operations(2)(3) | 2,973 |
| | 3,892 |
| | 17,912 |
| | 2,189 |
| | (49,064 | ) | | (22,098 | ) |
Depreciation, amortization and accretion expense(4) | 934 |
| | 6,939 |
| | 6,570 |
| | 1,971 |
| | 1,135 |
| | 17,549 |
|
Purchases of property, plant and equipment | 43 |
| | 110 |
| | 3,055 |
| | 26 |
| | 20 |
| | 3,254 |
|
|
| | | | | | | | | | | | | | | | | | | | | | |
| As of and for the Three Month Period ended June 30, 2012 |
| Government | | Global Commercial Group | | Corporate Unallocated | | |
| Group | | CS | | LP&D | | International | | Items | | Consolidated |
Revenue from external customers(1)(2) | $ | 38,383 |
| | $ | 39,522 |
| | $ | 48,972 |
| | $ | 265,744 |
| | — |
| | $ | 392,621 |
|
Income (loss) from operations(2)(3) | 7,160 |
| | 1,798 |
| | 9,249 |
| | 7,341 |
| | (21,459 | ) | | 4,089 |
|
Depreciation, amortization and accretion expense(4) | 1,118 |
| | 7,936 |
| | 6,368 |
| | 1,980 |
| | 1,313 |
| | 18,715 |
|
Purchases of property, plant and equipment | — |
| | 1,302 |
| | 1,898 |
| | 288 |
| | 647 |
| | 4,135 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| As of and for the Six Month Period ended June 30, 2013 |
| Government | | Global Commercial Group | | Corporate Unallocated | | |
| Group | | CS | | LP&D | | International | | Items | | Consolidated |
Revenue from external customers(1)(2) | $ | 87,683 |
| | $ | 84,084 |
| | $ | 99,947 |
| | $ | 665,532 |
| | $ | — |
| | $ | 937,246 |
|
Income (loss) from operations(2)(3) | 7,384 |
| | 6,055 |
| | 24,884 |
| | 22,977 |
| | (68,523 | ) | | (7,223 | ) |
Depreciation, amortization and accretion expense(4) | 1,867 |
| | 13,879 |
| | 13,066 |
| | 3,957 |
| | 2,180 |
| | 34,949 |
|
Goodwill | 73,594 |
| | 90,129 |
| | 89,548 |
| | 52,124 |
| | — |
| | 305,395 |
|
Other long-lived assets(5) | 14,058 |
| | 16,954 |
| | 259,274 |
| | 42,500 |
| | 6,051 |
| | 338,837 |
|
Purchases of property, plant and equipment | 43 |
| | 169 |
| | 5,906 |
| | 26 |
| | 281 |
| | 6,425 |
|
Total assets(6) | 150,741 |
| | 1,262,480 |
| | 509,259 |
| | 463,601 |
| | 58,972 |
| | 2,445,053 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| As of and for the Six Month Period ended June 30, 2012 |
| Government | | Global Commercial Group | | Corporate Unallocated | | |
| Group | | CS | | LP&D | | International | | Items | | Consolidated |
Revenue from external customers(1)(2) | $ | 80,772 |
| | $ | 80,479 |
| | $ | 93,361 |
| | $ | 628,701 |
| | $ | — |
| | $ | 883,313 |
|
Income (loss) from operations(2)(3) | 2,790 |
| | 2,704 |
| | 11,802 |
| | 26,288 |
| | (40,747 | ) | | 2,837 |
|
Depreciation, amortization and accretion expense(4) | 2,445 |
| | 15,837 |
| | 13,003 |
| | 3,854 |
| | 2,593 |
| | 37,732 |
|
Goodwill | 73,594 |
| | 90,129 |
| | 89,548 |
| | 53,614 |
| | — |
| | 306,885 |
|
Other long-lived assets(5) | 19,127 |
| | 23,980 |
| | 264,888 |
| | 52,083 |
| | 16,301 |
| | 376,379 |
|
Purchases of property, plant and equipment | 2 |
| | 3,939 |
| | 5,460 |
| | 761 |
| | 954 |
| | 11,116 |
|
Total assets(6) | 168,427 |
| | 1,511,568 |
| | 547,699 |
| | 578,269 |
| | 90,797 |
| | 2,896,760 |
|
______________________
| |
(1) | We eliminate intersegment revenue in consolidation. Intersegment revenue for the three month periods ended June 30, 2013, and 2012 was $4.6 million and $5.9 million, respectively. Intersegment revenue for the six month periods ended June 30, 2013, and 2012 was $10.1 million and $13.3 million, respectively. Revenue by segment represent revenue earned based on third-party billings to customers. |
| |
(2) | Results of our operations for services provided to our customers in Canada, Asia and Europe are included in our are included in our International division. |
| |
(3) | For the three month period ended June 30, 2013, we recorded a $0.1 million loss from our unconsolidated joint ventures of which $0.6 million loss is attributable to our LP&D operations and $0.5 million income is attributable to the Government Group. For the three month period ended June 30, 2012, we recorded $2.4 million of income from our unconsolidated joint ventures of which $0.1 loss is attributable to LP&D operations and $2.3 million income is attributable to the Government group. For the six month period ended June 30, 2013, we recorded a $0.6 million income from our unconsolidated joint ventures of which 0.8 million loss is attributable to our LP&D operations and $1.4 million income is attributable to the Government Group. For the six month period ended June 30, 2012, we recorded $3.1 million of income from our unconsolidated joint ventures of which $54,282 loss is attributable to LP&D operations and $3.1 million income is attributable to the Government Group. |
| |
(4) | Depreciation, amortization and accretion expenses ("DA&A") are included in cost of revenue and SG&A expenses in the accompanying condensed consolidated statements of operations and comprehensive income (loss). DA&A expenses included in cost of revenue for the three month periods ended June 30, 2013, and 2012 were $12.3 million and $13.1 million, respectively. DA&A expenses included in cost of revenue for the six month periods ended June 30, 2013, and 2012 were $24.4 million and $26.6 million, respectively. DA&A expenses included in SG&A for the three month periods ended June 30, 2013, and 2012 were $5.2 million and $5.6 million, respectively. DA&A expenses included in SG&A for the six month periods ended June 30, 2013, and 2012 were $10.5 million and $11.1 million, respectively. |
| |
(5) | Other long-lived assets include property, plant and equipment and other intangible assets. |
| |
(6) | Corporate unallocated assets relate primarily to income tax receivables, deferred tax assets, deferred financing costs, prepaid expenses, and property, plant and equipment that benefit the entire Company and cash. |
(15) Pension Plans
Net periodic benefit costs related to the Magnox pension plan consisted of the following (in thousands):
|
| | | | | | | | | | | | | | | |
| For The Three Month | | For The Six Month |
| Period ended June 30, | | Period ended June 30, |
| 2013 | | 2012 | | 2013 | | 2012 |
Service cost | $ | 14,056 |
| | $ | 14,054 |
| | $ | 28,273 |
| | $ | 27,997 |
|
Interest cost | 38,290 |
| | 39,788 |
| | 77,016 |
| | 79,259 |
|
Expected return on plan assets | (44,780 | ) | | (42,955 | ) | | (90,071 | ) | | (85,569 | ) |
Net actuarial loss | 77 |
| | 119 |
| | 154 |
| | 237 |
|
| $ | 7,643 |
| | $ | 11,006 |
| | $ | 15,372 |
| | $ | 21,924 |
|
(16) Restructuring
In 2012, we initiated a restructuring plan (the "Restructuring Plan") to reduce operating costs and improve profitability within our operations in the U.S. Under the Restructuring Plan, we reduced our facility footprint and implemented a reduction of force across multiple business segments and functions. For the six month period ended June 30, 2013 we recognized $1.8 million in restructuring charges associated with lease and contract terminations, which is included in the condensed consolidated statements of operations and comprehensive income (loss) under cost of revenue related to our LP&D operations. For the six month period ended June 30, 2012 we recognized $5.9 million in restructuring charges related to severance and employee termination benefits, which is included in the condensed consolidated statements of operations and comprehensive income (loss) under corporate SG&A. The corresponding liabilities as of June 30, 2013 and December 31, 2012 were $5.3 million and $6.2 million, respectively, and are included in accrued expenses and other current liabilities and other noncurrent liabilities in the condensed consolidated balance sheets. In February 2013, we announced that we had substantially completed the Restructuring Plan. The remaining unpaid termination benefits are expected to be paid within the next 12 months.
In 2009, we started an initial organizational review of our Magnox sites and identified an opportunity to reduce the existing workforce, primarily at three sites at which decommissioning was relatively close to completion with only a few projects remaining. The termination plan was presented in two phases and was approved by the NDA. As a result of overstaffing at the Magnox sites, approximately 300 employees left us on a voluntary basis. For the six month period ended June 30, 2013 we recognized an additional $55.6 million of expected employee termination benefits related to the termination of approximately 200 employees at the Bradwell site, which is rapidly moving into the early care and maintenance phase. Additionally, we also accrued employee termination benefits for the Chapelcross site, which is decreasing in size following
completion of defueling activities and is preparing for further decommissioning, as well as the Dungeness, Oldbury, Trawsfynydd sites, which are getting ready to re-shape the workforce following cessation of power generation in 2014. No termination benefits were recognized for the six month period ended June 30, 2012. These benefits are included in cost of revenue in the accompanying condensed consolidated statements of operations and comprehensive income (loss) related to our International operations. The corresponding liability as of June 30, 2013 and December 31, 2012 was $55.0 million and $5.7 million, respectively, and is included in accrued expenses and other current liabilities and other long term liabilities in the condensed consolidated balance sheets. The remaining liability is expected to be paid over approximately the next 24 months.
The following is a reconciliation of the beginning and ending liability balances related to the Magnox employee termination benefits (in thousands):
|
| | | | | | | |
| June 30, 2013 | | December 31, 2012 |
Beginning liability | $ | 5,695 |
| | $ | 32,659 |
|
Additions | 55,555 |
| | — |
|
Payments | (7,610 | ) | | (27,888 | ) |
Effect of exchange rate | 1,376 |
| | 924 |
|
Ending liability | 55,016 |
| | 5,695 |
|
Less current portion | (28,208 | ) | | — |
|
| $ | 26,808 |
| | $ | 5,695 |
|
The termination plan and employee benefits 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 are reimbursed by the NDA.
(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 June 30, 2013, we were not involved in any legal proceedings that we believe would have a material adverse effect on our consolidated financial position, operating results or cash flows.
Except as set forth below, there have been no material developments to the legal proceedings disclosed under Part I, Item 3. "Legal Proceedings" in our 2012 Annual Report and Part II, Item 1. "Legal Proceedings" in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2013.
False Claim Act Proceeding
As previously disclosed, on September 14, 2012, we and the plaintiffs in False Claims Act proceeding reached an agreement in principle to resolve all claims made by the plaintiffs in their complaint underlying the proceeding. The agreement does not contain an admission of guilt or other wrongdoing on the part of the Company, or our officers, directors or affiliates. On May 31, 2013, the U.S. government approved the settlement agreement and on June 7, 2013, the U.S. District Court for the District of Utah dismissed the proceeding.
(18) Guarantor and Non-Guarantor Financial Information
The 2018 senior notes were issued by EnergySolutions, Inc., the parent company, and EnergySolutions, LLC (together with EnergySolutions, Inc., the "Issuers"). The senior notes are jointly and severally guaranteed on a full and unconditional basis by each of the EnergySolutions, Inc.’s current and future domestic 100% owned subsidiaries that are guarantors under the senior secured credit facility, other than ZionSolutions LLC, which was established for the purpose of the Company’s license stewardship initiative, as well as up to five other special purpose subsidiaries that may be established for similar license stewardship projects, and certain other non-operating or immaterial subsidiaries.
Presented below is the condensed consolidating financial information of the issuers, our subsidiaries that are guarantors (the "Guarantor Subsidiaries"), and our subsidiaries that are not guarantors (the "Non-Guarantor Subsidiaries"). The condensed consolidating financial information reflects the investments of EnergySolutions, Inc. in the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries using the equity method of accounting.
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For The Three Month Period ended June 30, 2013
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Energy Solutions, Inc. | | Energy Solutions, LLC | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated |
Revenue | $ | — |
| | $ | 17,380 |
| | $ | 94,508 |
| | $ | 314,997 |
| | $ | (15,847 | ) | | $ | 411,038 |
|
Cost of revenue | — |
| | (4,004 | ) | | (76,823 | ) | | (298,661 | ) | | 15,847 |
| | (363,641 | ) |
Gross profit | — |
| | 13,376 |
| | 17,685 |
| | 16,336 |
| | — |
| | 47,397 |
|
Selling, general and administrative expenses | — |
| | (49,483 | ) | | (13,715 | ) | | (6,199 | ) | | — |
| | (69,397 | ) |
Equity in income of unconsolidated joint ventures | — |
| | — |
| | (98 | ) | | — |
| | — |
| | (98 | ) |
Operating income (loss) | — |
| | (36,107 | ) | | 3,872 |
| | 10,137 |
| | — |
| | (22,098 | ) |
Interest expense | — |
| | (15,159 | ) | | — |
| | (3,639 | ) | | — |
| | (18,798 | ) |
Income (loss) from subsidiaries | (56,228 | ) | | (879 | ) | | — |
| | — |
| | 57,107 |
| | — |
|
Other, net | — |
| | (4,083 | ) | | 3 |
| | (9,530 | ) | | — |
| | (13,610 | ) |
Income (loss) before income taxes | (56,228 | ) | | (56,228 | ) | | 3,875 |
| | (3,032 | ) | | 57,107 |
| | (54,506 | ) |
Provision for income taxes | (1,002 | ) | | — |
| | — |
| | (1,724 | ) | | — |
| | (2,726 | ) |
Net income (loss) | (57,230 | ) | | (56,228 | ) | | 3,875 |
| | (4,756 | ) | | 57,107 |
| | (57,232 | ) |
Less: net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
|
Net income (loss) attributable to EnergySolutions | $ | (57,230 | ) | | $ | (56,228 | ) | | $ | 3,875 |
| | $ | (4,754 | ) | | $ | 57,107 |
| | $ | (57,230 | ) |
| | | | | | | | | | | |
Other comprehensive income (loss): | |
| | |
| | |
| | |
| | |
| | |
|
Net income (loss) | (57,230 | ) | | (56,228 | ) | | 3,875 |
| | (4,756 | ) | | 57,107 |
| | (57,232 | ) |
Foreign currency translation adjustments, net of taxes | — |
| | — |
| | — |
| | (266 | ) | | — |
| | (266 | ) |
Change in unrecognized actuarial loss | — |
| | — |
| | — |
| | 3 |
| | — |
| | 3 |
|
Other comprehensive income (loss) | (57,230 | ) | | (56,228 | ) | | 3,875 |
| | (5,019 | ) | | 57,107 |
| | (57,495 | ) |
Less: net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | 2 |
| | — |
| | 2 |
|
Comprehensive income (loss) attributable to EnergySolutions | $ | (57,230 | ) | | $ | (56,228 | ) | | $ | 3,875 |
| | $ | (5,017 | ) | | $ | 57,107 |
| | $ | (57,493 | ) |
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For The Six Month Period ended June 30, 2013
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Energy Solutions, Inc. | | Energy Solutions, LLC | | Guarantor Subsidiaries | | Non- Guarantor Subsidiaries | | Eliminations | | Consolidated |
Revenue | $ | — |
| | $ | 28,655 |
| | $ | 191,403 |
| | $ | 746,049 |
| | $ | (28,861 | ) | | $ | 937,246 |
|
Cost of revenue | — |
| | (11,199 | ) | | (156,900 | ) | | (704,191 | ) | | 28,861 |
| | (843,429 | ) |
Gross profit | — |
| | 17,456 |
| | 34,503 |
| | 41,858 |
| | — |
| | 93,817 |
|
Selling, general and administrative expenses | — |
| | (66,975 | ) | | (23,690 | ) | | (10,953 | ) | | — |
| | (101,618 | ) |
Equity in income of unconsolidated joint ventures | — |
| | — |
| | 578 |
| | — |
| | — |
| | 578 |
|
Operating income (loss) | — |
| | (49,519 | ) | | 11,391 |
| | 30,905 |
| | — |
| | (7,223 | ) |
Interest expense | — |
| | (30,349 | ) | | — |
| | (7,094 | ) | | — |
| | (37,443 | ) |
Income (loss) from subsidiaries | (62,464 | ) | | 23,893 |
| | — |
| | — |
| | 38,571 |
| | — |
|
Other, net | — |
| | (6,489 | ) | | 166 |
| | (5,176 | ) | | — |
| | (11,499 | ) |
Income (loss) before income taxes | (62,464 | ) | | (62,464 | ) | | 11,557 |
| | 18,635 |
| | 38,571 |
| | (56,165 | ) |
Provision for income taxes | (2,966 | ) | | — |
| | — |
| | (6,299 | ) | | — |
| | (9,265 | ) |
Net income (loss) | (65,430 | ) | | (62,464 | ) | | 11,557 |
| | 12,336 |
| | 38,571 |
| | (65,430 | ) |
Less: net income attributable to noncontrolling interests | — |
| | — |
| | — |
| | — |
| | — |
| | |