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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



FORM 10-Q

(Mark One)ý

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31, 2011Oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
from                        to


Commission file number 001-33830

EnergySolutions, Inc.(Exact name of registrant as specified in its charter)

Delaware(State or Other Jurisdiction of
Incorporation or Organization)

51-0653027(I.R.S. Employer
Identification Number)423 West 300 South, Suite 200
Salt Lake City, Utah(Address of principal executive offices)

84101(Zip Code)


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

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

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

Large accelerated filer o

Accelerated filer ý

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 ý

As of May 10, 2011, 88,769,619 shares of the registrant's common stock were outstanding.



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Table of Contents



ENERGYSOLUTIONS, INC.  INDEX TO QUARTERLY REPORT ON FORM 10-Q  For the Three Month period ended March 31, 2011



PagePART I. FINANCIAL INFORMATIONItem 1.

Financial Statements

2Condensed Consolidated Balance Sheets

2Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

3Condensed Consolidated Statement of Changes in Stockholders' Equity

4Condensed Consolidated Statements of Cash Flow

5Notes to Condensed Consolidated Financial Statements

6Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

33Item 3.

Quantitative and Qualitative Disclosures about Market Risk

45Item 4.

Controls and Procedures

46PART II. OTHER INFORMATIONItem 1.

Legal Proceedings

47Item 1A.

Risk Factors

47Item 6.

Exhibits

47Signatures

48


i

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Table of Contents

PART I

Item 1.    Financial Statements



EnergySolutions, Inc.        Condensed Consolidated Balance Sheets        March 31, 2011 and
December 31, 2010        (in thousands of dollars, except per share information)

March 31,
2011

December 31,
2010(unaudited)AssetsCurrent assets:Cash and cash equivalents

$
69,574

$
60,192Accounts receivable, net of allowance for doubtful accounts


372,432


294,972Costs and estimated earnings in excess of billings on uncompleted contracts


97,635


102,287Prepaid expenses


8,900


8,059Deferred income taxes


4,233


4,770Nuclear decommissioning trust fund investments, current portion


113,336


110,328Deferred costs, current portion


102,685


100,149Other current assets


4,948


4,851Total current assets


773,743


685,608Property, plant and equipment, net


120,925


122,649Goodwill


482,214


480,398Other intangible assets, net


280,377


283,500Nuclear decommissioning trust fund investments


686,575


694,754Restricted cash and decontamination and decommissioning deposits


336,021


338,408Deferred costs


616,139


650,270Other noncurrent assets


182,487


169,912Total assets

$
3,478,481

$
3,425,499Liabilities and Stockholders' EquityCurrent liabilities:Current portion of long-term debt

$
5,600

$
5,600Accounts payable


142,195


101,229Accrued expenses and other current liabilities


236,398


197,034Facility and equipment decontamination and decommissioning liabilities, current portion


113,336


110,328Unearned revenue, current portion


121,699


117,802Total current liabilities


619,228


531,993Long-term debt, less current portion


833,744


834,560Pension liability


146,965


132,988Facility and equipment decontamination and decommissioning liabilities


679,204


711,419Deferred income taxes


80,148


77,956Unearned revenue, less current portion


620,380


654,643Other noncurrent liabilities


3,452


3,402Total liabilities


2,983,121


2,946,961Commitments and contingenciesStockholders' equity:Preferred stock, $0.01 par value, 100,000,000 shares authorized; no shares issued and outstanding





Common stock, $0.01 par value, 1,000,000,000 shares authorized; 88,769,403 and 88,667,843 shares issued and outstanding as of March 31, 2011 and
December 31, 2010, respectively,


888


887Additional paid-in capital


500,384


498,092Accumulated other comprehensive loss


(21,800
)

(25,511
)Retained earnings


12,077


2,168Total EnergySolutionsstockholders' equity


491,549


475,636Noncontrolling interests


3,811


2,902Total stockholders' equity


495,360


478,538Total liabilities and stockholders' equity

$
3,478,481

$
3,425,499


See accompanying notes to condensed consolidated financial statements.

2

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EnergySolutions, Inc.        Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
    Three Month Period Ended March 31, 2011 and 2010        (in thousands of dollars, except per share information)        (unaudited)

Three Month Period Ended
March 31,2011

2010Revenue

$
522,267

$
485,890Cost of revenue


(475,638
)

(440,719
)Gross profit


46,629


45,171Selling, general and administrative expenses


(33,407
)

(30,779
)Equity in income of unconsolidated joint ventures


1,400


2,363Income from operations


14,622


16,755Interest expense


(18,050
)

(8,676
)Other income (expenses), net


15,428


(173
)Income before income taxes and noncontrolling interests


12,000


7,906Income tax expense


(1,182
)

(1,922
)Net income


10,818


5,984Less: Net income attributable to noncontrolling interests


(909
)

(151
)Net income attributable to EnergySolutions

$
9,909

$
5,833Net income per common share of EnergySolutions:Basic

$
0.11

$
0.07Diluted

$
0.11

$
0.07Weighted average common shares outstanding:Basic


88,709,078


88,415,309Diluted


88,738,993


88,549,964Cash dividends declared per common share




$
0.025Comprehensive income (loss):Net income

$
10,818

$
5,984Foreign currency translation adjustment


3,586


(11,140
)Change in unrecognized actuarial gain (loss)


125


(136
)Comprehensive income (loss)


14,529


(5,292
)Comprehensive income attributable to noncontrolling interests


(909
)

(151
)Comprehensive income (loss) attributable to EnergySolutions

$
13,620

$
(5,443
)


See
accompanying notes to condensed consolidated financial statements.

3

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Table of Contents



EnergySolutions, Inc.        Condensed Consolidated Statement of Changes in Stockholders' Equity    
  Three Month Period Ended March 31, 2011        (in thousands of dollars, except per share information)        (unaudited)

Common Stock



Accumulated
Other
Comprehensive
Income (Loss)Additional
Paid-in
Capital

Retained
Earnings

Noncontrolling
Interests

Total
Stockholders'
EquityShares

AmountBalance at December 31, 2010


88,667,843

$
887

$
498,092

$
(25,511
)
$
2,168

$
2,902

$
478,538Net income














9,909


909


10,818Equity-based compensation








2,236











2,236Stock issued due to option exercise


10,350





57











57Vesting of restricted stock


91,210


1


(1
)










Change in unrecognized actuarial loss











125








125Foreign currency translation











3,586








3,586Balance at March 31, 2011


88,769,403

$
888

$
500,384

$
(21,800
)
$
12,077

$
3,811

$
495,360


See
accompanying notes to condensed consolidated financial statements.

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EnergySolutions, Inc.        Condensed Consolidated Statements of Cash Flows        Three Month
Period Ended March 31, 2011 and 2010        (in thousands of dollars)        (unaudited)

Three Month Period
Ended
March 31,2011

2010Cash flows from operating activitiesNet income

$
10,818

$
5,984Adjustments to reconcile net income to net cash provided by operating activities:Depreciation, amortization and accretion


20,238


11,876Equity-based compensation expense


2,236


2,447Foreign currency transaction loss





280Deferred income taxes


2,729


208Amortization of debt financing fees and debt discount


1,120


1,463(Gain) on disposal of property, plant and equipment


(35
)

(35
)Unrealized gain on derivative contracts





(156
)Realized and unrealized (gain) on nuclear decommissioning trust fund investments


(15,673
)

Changes in operating assets and liabilities:Accounts receivable


(70,601
)

(60,306
)Costs and estimated earnings in excess of billings on uncompleted contracts


6,211


(43,351
)Prepaid expenses and other current assets


(128
)

(4,413
)Accounts payable


37,379


51,616Accrued expenses and other current liabilities


35,812


74,311Unearned revenue


(30,376
)

3,301Facility and equipment decontamination and decommissioning liabilities


(37,278
)

Restricted cash and decontamination and decommissioning deposits


2,406


(4
)Nuclear decommissioning trust fund


20,141


Deferred costs


34,131


Other noncurrent assets


(13,334
)

(16,018
)Other noncurrent liabilities


10,059


11,999Net cash provided by operating activities


15,855


39,202Cash flows from investing activitiesPurchase of investments in nuclear decommissioning trust fund


(351,410
)

Proceeds from sales of nuclear decommissioning trust fund investments


352,113


Purchases of property, plant and equipment


(3,800
)

(2,027
)Purchases of intangible assets


(330
)

Proceeds from disposition of property, plant and equipment


82


Net cash used in investing activities


(3,345
)

(2,027
)Cash flows from financing activitiesRepayments of long-term debt


(1,400
)

Net borrowings (repayments) under revolving credit facility





1,000Dividends/distributions to stockholders





(2,213
)Distributions to noncontrolling interests partners





(296
)Minimum tax withholding on restricted stock awards





(375
)Proceeds from exercise of stock options


57


Settlement of derivative contracts





(551
)Repayments of capital lease obligations


(58
)

(225
)Debt financing fees





(2,493
)Net cash used in financing activities


(1,401
)

(5,153
)Effect of exchange rate on cash


(1,727
)

(3,052
)Net increase in cash and cash equivalents


9,382


28,970Cash and cash equivalents, beginning of period


60,192


15,913Cash and cash equivalents, end of period

$
69,574

$
44,883


See accompanying notes to condensed consolidated financial statements.

5

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EnergySolutions, Inc.        Notes to Condensed Consolidated Financial Statements

(1) Description of Business

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

To
date, we have reported our results through four operating business divisions: Federal Services; Commercial Services; Logistics, Processing and Disposal ("LP&D"), and International.
Our Federal Services operations derive revenue from United States ("U.S.") government customers for the management and operation or clean-up of facilities with radioactive materials. Our
U.S. government customers are primarily individual offices, departments and administrations within the U.S. Department of Energy ("DOE") and U.S. Department of Defense ("DOD"). Our Commercial Services
operations provide a broad range of on-site services, including D&D services, to commercial customers. Our commercial customers include power and utility companies, pharmaceutical
companies, research laboratories, universities, industrial facilities, state agencies and other commercial entities that are involved with nuclear materials. Our LP&D operations provide a broad
range of logistics, transportation, processing and disposal services to both government and commercial customers. Our LP&D division also operates our facilities for the processing and disposal
of radioactive materials, including a facility in Clive, Utah, four facilities in Tennessee, and two facilities in Barnwell, South Carolina. Our International 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 twenty-two nuclear reactors.
In addition, our International operations also provide turn-key services and sub-contract services for the treatment, processing, storage and disposal of radioactive waste from
nuclear sites and
non-nuclear facilities such as hospitals, research facilities and other manufacturing and industrial facilities.

During
2010, a major strategic plan was initiated by senior management to improve the Company's performance and approach to the market. As a result, some organizational changes were
implemented which included the realignment of internal resources, the restructuring of processes and operational activities, and the execution of new initiatives for profitable growth. The strategic
plan also reorganized the Company's operating business divisions which resulted in the creation of two major operating groups to better serve our customers: the Government Group and the Global
Commercial Group. The Government group will continue to serve its government customers as the former Federal Services division did in the past, and will actively pursue new opportunities within the
government market. The Global Commercial Group will focus on increasing its customer base both nationally and internationally, and will consolidate the operations of our Commercial
Services, LP&D, and International divisions. However, we will continue to report separately each of our four operating business divisions to more fully present the results of our operations.

(2) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") for interim financial
information and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the
opinion of management, all

6

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(2) Basis of Presentation (Continued)

adjustments,
consisting only of normal recurring activities, considered necessary for a fair presentation have been included. These unaudited condensed consolidated financial statements should be read
in conjunction with the audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2010 filed
with the SEC on March 31, 2011.

The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. The results of operations for the three
month period ended March 31, 2011 are not necessarily indicative of results that can be expected for the full year.

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

Reclassifications

Certain minor reclassifications have been made to our prior period consolidated financial information in order to conform to the
current year presentation.

Accounting for the Exelon Transaction

In December 2007, we entered into certain agreements with Exelon Corporation ("Exelon") to dismantle the Zion Station nuclear power
plant located in Zion, Illinois, including a planning contract under which we were engaged to perform certain preparatory services with payment contingent upon closing of certain agreements. Although
we entered into this contract in December 2007, we postponed the closing of the transaction due to the financial crisis affecting the equity and fixed income markets at the time, and as a result, all
costs associated with the execution of the planning contract were deferred. The transaction closed on September 1, 2010, and after closing, we recognized the costs and the related revenue
associated with the planning contract in our consolidated statement of operations, with $5.1 million in revenue being deferred over the life of the agreement.

On
the date of the closing of the asset sale agreement with Exelon, the trust fund investments previously held by Exelon, for the purpose of decommissioning the Zion Station nuclear
power plant, were transferred to us and the use of those funds, and any investment returns arising from there, remain restricted solely for that purpose. The investments are classified as trading
securities and as such, the investment gains and losses are recorded in the income statement as other income (expense), net. As part of this transaction, we have assumed Exelon's cost basis in the
investments for tax purposes. To the extent that the trust fund assets exceed the total costs to perform the D&D work, we have a contractual obligation to return any excess funds to Exelon. Throughout
the period over which
we will perform the D&D work, we will assess whether such a contingent liability exists using the measurement thresholds under ASC 450-20.

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

7

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(2) Basis of Presentation (Continued)

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

(3) Recent Accounting Pronouncements

Accounting Pronouncements Issued

In October 2009, the Financial Accounting Standards Board ("FASB") issued an update to the authoritative guidance for
multiple-deliverable arrangements to enable vendors to account for products or services (deliverables) separately rather than as a combined unit. This update is effective prospectively for revenue
arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and may be applied retrospectively for all periods presented or prospectively to
arrangements entered into or materially modified after the adoption date. This guidance was effective for us on January 1, 2011. The new accounting standard has been applied prospectively to
arrangements entered into or materially modified after the date of adoption. The impact of the adoption of this guidance has not had a material impact on the Company's results of operations, financial
position or cash flows.

Our
contracts routinely include delivery of multiple products and services to our customers including management and operations or clean up of facilities with radioactive materials,
decommissioning and decontamination services, transportation, processing and disposal services. Typically, each of these elements is considered a unit of accounting and revenue is recognized for each
element when all of the following have occurred: (1) we have entered into an arrangement with a customer; (2) delivery has occurred; (3) customer payment is fixed or
determinable and free of contingencies and significant uncertainties; and (4) collection is reasonably assured.

For
all contractual arrangements containing multiple deliverables entered into after December 31, 2010, we recognize revenues using estimated selling prices of the delivered
products and services based on a hierarchy of methods contained in ASU 2009-13. We use vendor specific objective evidence (VSOE) for determination of estimated selling price of elements in each
arrangement if available, and since third party evidence (TPE) is not available for those elements where vendor specific objective evidence of
selling price cannot be determined, we evaluate factors to determine our estimated selling price (ESP) for all other elements.

8

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(3) Recent Accounting Pronouncements (Continued)

Application
of this new guidance may affect the timing of revenue recognition for some of our contracts as the relative value of each of the elements within the arrangement may change
when compared to our prior practices. However, we do not believe there will be a material impact to our results of operations or financial position as a result of adopting this guidance.

(4) Trust Fund Investments

The nuclear decommissioning trust ("NDT") fund was established solely to satisfy obligations related to the D&D of the Zion Station nuclear power plant. The NDT fund holds investments in
marketable debt and equity securities directly and indirectly through commingled funds. Investments in the NDT fund are carried at fair value and are classified as trading securities. As of
March 31, 2011, investments held by the NDT fund, net, totaled $799.9 million, and are included in current and other long-term assets in the accompanying balance sheets,
depending on expected timing of usage of funds.

We
consolidate the NDT fund as a variable interest entity ("VIE"). We have a contractual interest in the NDT fund and this interest is a variable interest due to its exposure to the
fluctuations caused by market risk. We are able to control the NDT fund by appointing the trustee and, subject to certain restrictions, we are able to direct the investment policies of the fund. We
are the primary beneficiary of the NDT as we benefit from positive market returns and bear the risk of market losses.

Trust
fund investments consisted of the following (in thousands):

As of March 31, 2011Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair valueAssetsReceivables for securities sold

$
7,853

$


$


$
7,853InvestmentsCorporate debt securities


309,943


4,358


(5,313
)

308,988Equity securities


55,985


17,096


(169
)

72,912Direct lending funds


30,815








30,815Debt securities issued by states of the United States


62,330


439


(3,482
)

59,287Commingled funds


91,575


12,514





104,089Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies


219,150


449


(3,062
)

216,537769,798


34,856


(12,026
)

792,628Total assets


777,651


34,856


(12,026
)

800,481LiabilitiesPayables for securities purchased


(570
)







(570
)Total liabilities


(570
)







(570
)Net assets held by the NDT fund

$
777,081

$
34,856

$
(12,026
)

799,911Less: current portion











(113,336
)Long-term investments










$
686,575


9

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(4) Trust Fund Investments (Continued)



As of December 31, 2010Amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Estimated
fair valueAssetsReceivables for securities sold

$
6,321

$


$


$
6,321InvestmentsCorporate debt securities


296,984


1,521


(6,024
)

292,481Equity securities


73,712


16,253


(79
)

89,886Debt securities issued by states of the United States


58,481


109


(2,981
)

55,609Commingled funds


99,377


12,362





111,739Debt securities issued by the U.S. Treasury and other U.S. government corporations and agencies


254,622


243


(3,812
)

251,053783,176


30,488


(12,896
)

800,768Total assets


789,497


30,488


(12,896
)

807,089LiabilitiesPayables for securities purchased


(2,007
)







(2,007
)Total liabilities


(2,007
)







(2,007
)Net assets held by the NDT fund

$
787,490

$
30,488

$
(12,896
)

805,082Less: current portion











(110,328
)Long-term investments










$
694,754


Gains
and losses resulting from adjustments to the fair value of the NDT fund investments resulted in net gains of $5.2 million for the three month period ended March 31,
2011, and are included in other income (expense), net, in the condensed consolidated statements of operations and comprehensive income (loss). We began consolidating the operations of the NDT fund on
September 1, 2010; therefore, no gains and losses associated with the NDT fund were recorded for the three month period ended March 31, 2010. For the three month period ended
March 31, 2011, we also recorded $10.4 million in realized gains related to sales of investments, and dividends and interest payments received from investments held by the NDT fund.

(5) Fair Value Measurements

The Company has implemented the accounting requirements for financial assets, financial liabilities, non-financial assets and non-financial liabilities reported
or disclosed at fair value. The requirements define fair value, establish a three level hierarchy for measuring fair value in generally accepted accounting principles, and expand disclosures about
fair value measurements. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that a company has the ability to access at the measurement date.
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are
unobservable inputs for the asset or liability.

This
hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The methods described above
may produce a fair value calculation that may not be indicative of net realizable value or reflective of

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EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(5) Fair Value Measurements (Continued)

future
fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to
determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Assets are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement.

The
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 debt is based on quoted market prices from the over-the-counter restricted market. The fair market value of our senior secured credit
facility was approximately $557.6 million as of March 31, 2011, and $562.8 million as of December 31, 2010. The carrying value of our senior secured credit facility was
$555.8 million as of March 31, 2011, and $557.2 million as of December 31, 2010. We also had outstanding senior notes obligations with a carrying amount of
$300.0 million as of March 31, 2011 and December 31, 2010, and fair market value of approximately $328.5 million as of March 31, 2011 and $327.4 million as of
December 31, 2010.

The
fair value of our derivative instruments is determined using models that maximize the use of the observable market inputs including interest rate curves and both forward and spot
prices for currencies. The carrying amount of our interest rate collar derivative approximates fair value. The fair market value of our interest rate collar was $0.1 million liability as of
December 31, 2010. This contract ended on January 2, 2011.

Investments
in the NDT fund include debt and equity securities held directly and indirectly through commingled funds. Investments with maturities of three months or less when purchased,
including certain short-term fixed income securities, are considered cash equivalents and are categorized as Level 1.

With
respect to individually held equity securities, the trustee obtains prices from pricing services, whose prices are obtained from direct feeds from market exchanges. The fair values
of equity securities held directly by the 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 exchanges.

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

Commingled
funds and units of participation, which are similar to mutual funds, are maintained by investment companies and hold certain investments in accordance with a stated set of
fund objectives.

11

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(5) Fair Value Measurements (Continued)

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

Direct
lending funds maintain securities sold directly to institutional lenders or investors. They may be bonds, private issues of stock, limited partnership interests, mortgage-backed
securities, venture capital investments, or other sophisticated instruments. Such securities may or may not be registered with the Securities and Exchange Commission. Direct lending funds are
categorized as Level 3 because the fair value of these securities is based partially on observable prices of the underlying securities as well as third party valuation models.

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

As of March 31, 2011Level 1

Level 2

Level 3

Total
Investments
at Fair ValueAssetsReceivables for securities sold

$
7,853

$


$


$
7,853InvestmentsCommingled funds





27,071





27,071Fixed income securities


86,506


498,306





584,812Equity securities


72,912








72,912Direct lending funds








30,815


30,815Units of participation








77,018


77,018159,418


525,377


107,833


792,628Total assets


167,271


525,377


107,833


800,481LiabilitiesPayables for securities purchased


(570
)







(570
)Total liabilities


(570
)







(570
)Net assets held by the NDT fund

$
166,701

$
525,377

$
107,833

$
799,911


12

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(5) Fair Value Measurements (Continued)



As of December 31, 2010Level 1

Level 2

Level 3

Total
Investments
at Fair ValueAssetsSecurities sold

$
6,321

$


$


$
6,321InvestmentsCommingled funds





23,325





23,325Fixed income securities


128,738


470,405





599,143Equity securities


89,886








89,886Units of participation








88,414


88,414218,624


493,730


88,414


800,768Total assets


224,945


493,730


88,414


807,089LiabilitiesPayables for securities purchased


(2,007
)







(2,007
)Total liabilities


(2,007
)







(2,007
)Net assets held by the NDT fund

$
222,938

$
493,730


88,414

$
805,082


The
following table presents the roll-forward for Level 3 assets and liabilities measured at fair value on a recurring basis (in thousands):

For The Three Month period ended March 31, 2011

Units of
Participation

Direct
Lending
Funds

TotalBeginning balance

$
88,414

$


$
88,414Purchases and issuances





30,815


30,815Sales, dispositions and settlements


(13,633
)




(13,633
)Realized gains and losses


2,086





2,086Change in unrealized gains and losses


151





151$
77,018

$
30,815

$
107,833


(6) 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. 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.

13

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(6) Joint Ventures (Continued)

The table below presents financial information, derived from the most recent financial statements provided to us, in aggregate, for our unconsolidated joint ventures (in thousands):

As of
March 31,
2011

As of
December 31,
2010Current assets

$
54,615

$
63,251Current liabilities


36,935


43,023




For the Three Month
period ended
March 31,2011

2010Revenue

$
55,189

$
68,609Gross profit


3,619


6,786Net income


3,476


6,674Net income attributable to EnergySolutions

$
1,400

$
2,363


Our
percentage of ownership of unconsolidated joint ventures as of March 31, 2011and December 31, 2010 was:

Percentage of
OwnershipGlobal Threat Reduction Solutions, LLC


49.00
%EnergySolutions Environmental Services, LLC


49.00
%LATA/Parallax Portsmouth, LLC


49.00
%Washington River Protection Solutions, LLC


40.00
%Weskem LLC


27.64
%West Valley Environmental Services LLC


10.00
%SempraSafe LLC


49.00
%


We
received $2.6 million of dividend distributions from our unconsolidated joint ventures during the three month period ended March 31, 2011. We did not receive dividend
distributions from our unconsolidated joint ventures during the three month period ended March 31, 2010.

Noncontrolling interest

We have majority voting rights for two of our minority owned joint ventures. Accordingly, we have reported their operations in our
consolidated financial statements. Assets from our consolidated joint ventures can only be used to settle their own obligations. Additionally, the Company's assets cannot be used to settle the joint
ventures' obligations because these minority owned joint ventures do not have recourse to the general credit of the Company.

We
record noncontrolling interest income which reflects the portion of the earnings of operations which are applicable to other minority interest partners. Cash payments, representing
the distributions of the investors' share of cash generated by operations, are recorded as a reduction in noncontrolling interests. Noncontrolling interest income for the three month period ended
March 31, 2011 and 2010 was $0.9 million and $0.2 million, respectively. Distributions to noncontrolling interest shareholders for

14

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(6) Joint Ventures (Continued)

the
three month period ended March 31, 2010 were $0.3 million. No distributions were made for the three month period ended March 31, 2011.

(7) Goodwill

As of March 31, 2011 and December 31, 2010, we had recorded $482.2 million and $480.4 million of goodwill related to domestic and foreign acquisitions.
Goodwill related to the acquisitions of foreign entities is translated into U.S. dollars at the exchange rate in effect at the balance sheet date. The related translation gains and losses are included
as a separate component of stockholders' equity in accumulated other comprehensive income (loss) in the consolidated balance sheets. For the three month period ended March 31, 2011 and 2010, we
recorded $1.8 million gains and $2.8 million losses, respectively, on translation related to goodwill denominated in foreign currencies.

In
accordance with authoritative guidance for accounting of Goodwill and Other Intangible Assets, we perform an impairment test on the Company's goodwill, when events occur or
circumstances change that would, more likely than not, reduce the fair value of a reporting unit below its carrying value. Our annual testing date is April 1. Goodwill is assigned to each of
our reporting units based on which of the reporting units derive the benefits of an acquired company. If multiple reporting units benefit from an acquisition, goodwill is allocated to each reporting
unit based on an allocation of revenue between the reporting units at the acquisition date.

We
test goodwill for impairment by first comparing the book value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the book value,
a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units
using discounted cash flows. Forecasts of future cash flow are based on our best estimate of future net revenue and operating expenses, based primarily on pricing, market segment share and general
economic conditions. Changes in these forecasts could significantly change the amount of impairment recorded, if any. In determining the fair value of the reporting units we probability weight the
future business opportunities based on our internal assessments. However, some of the proposals are for very substantial contract awards and either winning or losing those bids can have a significant
impact on our fair value calculations. There were no events or circumstances from the date of our assessment through the date of this report that indicated that impairment exists in any of our
reporting units. However, deterioration of market conditions accompanied with a decrease in our share of government funded contracts could potentially result in future impairment losses within our
government group.

(8) Other Intangible Assets

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

15

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(8) Other Intangible Assets (Continued)

Other
intangible assets consisted of the following (in thousands):

As of March 31, 2011

As of December 31, 2010Gross
Carrying
Amount

Accumulated
Amortization

Weighted
Average
Remaining
Useful Life

Gross
Carrying
Amount

Accumulated
Amortization

Weighted
Average
Remaining
Useful LifePermits

$
240,574

$
(59,157
)

18.6 years

$
240,243

$
(56,694
)

18.8 yearsCustomer relationships


160,679


(69,620
)

7.0 years


157,594


(66,012
)

7.2 yearsTechnology and other


15,490


(7,589
)

4.8 years


15,490


(7,121
)

5.1 yearsNon competition


1,030


(1,030
)

0 years


1,030


(1,029
)

0.2 yearsTotal amortizable intangibles

$
417,773

$
(137,396
)

14.5 years

$
414,357

$
(130,857
)

14.7 years


Amortization
expense was $6.6 million and $6.4 million for the three month period ended March 31, 2011 and 2010, respectively. In addition, for the three month
period ended March 31, 2011 and 2010, we recorded translation gains of $3.1 million and translation losses of $4.7 million, respectively, related to intangible assets denominated
in foreign currencies.

(9) Senior Credit Facilities and Senior Notes

Our outstanding long-term debt consisted of the following (in thousands):

As of
March 31,
2011

As of
December 31,
2010Term loan facilities due through 2016(1)

$
555,800

$
557,200Term loan unamortized discount


(12,727
)

(13,231
)Senior notes, 10.75% due through 2018


300,000


300,000Senior notes unamortized discount


(3,727
)

(3,809
)Revolving credit facility





Total debt


839,346


840,160Less: current portion


(5,600
)

(5,600
)Total long-term debt

$
833,746

$
834,560


(1)As
of March 31, 2011 and December 31, 2010, the variable interest rate on borrowings under our senior secured credit facility was 6.25%.


On
August 13, 2010, the Company entered into a senior secured credit facility with JPMorgan Chase Bank, N.A. (the administrative agent), consisting of a senior secured term loan
(the "Term Loan") in an aggregate principal amount of $560 million at a discount rate of 2.5% and a senior secured revolving credit facility (the "Revolving Credit Facility") with availability
of $105 million, of which $15.9 million was used to fund letters of credit issued as of March 31, 2011. Borrowings under the senior secured credit facility bear interest at a rate
equal to: (a) Adjusted LIBOR plus 4.50%, or ABR plus 3.50%; in the case of the Term Loan; (b) Adjusted LIBOR plus 4.50%, or ABR plus 3.50%; in the case of the Revolving Credit Facility,
and (c) a per annum fee equal to the spread over Adjusted LIBOR under the Revolving Credit Facility, along with a fronting fee and issuance and administration

16

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(9) Senior Credit Facilities and Senior Notes (Continued)

fees;
in the case of revolving letters of credit. The proceeds of the senior secured credit facility were used to repay outstanding indebtedness under the former credit agreements, collateralize
reimbursement obligations to the deposit issuing banks with respect to deposit letters of credit, replace synthetic letters of credit issued under the former credit agreements and provide credit
support for obligations acquired under the Exelon agreements. As of March 31, 2011, borrowings of $310.2 million under the term loan in the senior secured credit facility are held in a
restricted cash account as collateral for the Company's reimbursement obligations with respect to letters of credit.

On
August 13, 2010, we also completed a private offering of $300 million 10.75% Senior Notes at a discount rate of 1.3%. The senior notes are governed by an Indenture among
EnergySolutionsand 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 to all future
subordinated debt.

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 Price2014


105.375
%2015


102.688
%2016 and thereafter


100.000
%


The
Term Loan amortizes in equal quarterly installments of $1.4 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 Term Loans made during the applicable fiscal year. If the leverage ratio is equal to or less than 1.0 to 1.0, we are not required to prepay the Term Loans. The excess cash flow
calculations (as defined in the senior secured credit facility), are prepared annually as of the last day of each fiscal year or, in the case of the fiscal year ending on December 31, 2010, as
of and for the last day of the partial year commencing on October 1, 2010 and ending on December 31, 2010. Prepayments of debt resulting from the excess cash flow calculations are due
annually five days after the date that the Annual Report on Form 10-K for such fiscal year is filed with the SEC.

17

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(9) Senior Credit Facilities and Senior Notes (Continued)

As
of March 31, 2011, we had mandatory principal repayments based on our excess cash flow and scheduled repayments of $5.6 million due within the next 12 months. We
made principal repayments totaling $1.4 million during the three month period ended March 31, 2011 and made no principal repayments during the three month period ended March 31,
2010. We made cash interest payments of $25.5 million and $7.1 million, for the three month period ended March 31, 2011 and 2010, respectively. In addition, we paid fees to the
lenders of approximately $2.5 million during the first quarter of 2010, to obtain amendments on our former credit facility agreements, which were written off during the third quarter of 2010,
in conjunction with our refinancing. No fees have been paid during the current year.

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 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 4.5 for quarter ending March 31, 2011, which is reduced by 0.25 on an
annual basis through the maturity date. We are required to maintain a minimum cash interest coverage ratio of 2.0 from the quarter ended March 31, 2011 through the quarter ended
September 30, 2014 and 2.25 through the maturity date. As of March 31, 2011, our total leverage and cash interest coverage ratios were 2.65 and 3.67, respectively.

The
senior secured credit facility also contains a number of affirmative and restrictive covenants including limitations on mergers, consolidations and dissolutions; sales of assets;
investments and acquisitions; indebtedness; liens; affiliate transactions; and dividends and restricted payments. Under the senior secured credit facility, we are permitted maximum annual capital
expenditures of $40.0 million for 2011 and each year thereafter, plus for each year the lesser of (1) a one year carry-forward of the unused amount from the previous fiscal year and
(2) 50% of the amount permitted for capital expenditures in the previous fiscal year. The senior secured credit facility contains events of default for non-payment of principal and
interest when due, a cross-default provision with respect to other indebtedness having an aggregate principal amount of at least $5.0 million, and an event of default that would be triggered by
a change of control, as defined in the senior secured credit facility. Capital expenditures for the three month period ended March 31, 2011 totaled $3.8 million. As of March 31,
2011, 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 ZionSolutionssubsidiary and other special purpose
subsidiaries, whose organizational documentation prohibits or limits such a pledge.

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

18

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(9) Senior Credit Facilities and Senior Notes (Continued)

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.

In
connection with the sale of the senior notes, we entered into a registration rights agreement, dated August 13, 2010 (the "Registration Rights Agreement"), with the
representative of the initial purchasers of the senior notes. Under the Registration Rights Agreement, we agreed to use our commercially reasonable best efforts to file and cause to become effective a
registration statement with respect to an exchange of the senior notes. We also agreed to file, if obligated, a shelf registration statement relating to the resale of the senior notes if the exchange
offer is not consummated within the required time period stated in the Registration Rights Agreement. We have delayed the filing of the registration statement and since February 14, 2011, we
have been incurring an interest penalty in the amount of 0.25 basis points.

The
senior notes have not been registered under the Securities Act, and unless so registered, may not be offered or sold in the U.S. absent registration or an applicable exemption from,
or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.

(10) Facility and Equipment Decontamination and Decommissioning

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

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

19

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(10) Facility and Equipment Decontamination and Decommissioning (Continued)

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

As of
March 31,
2011

As of
December 31,
2010Facilities and equipment AROZion

$
726,723

$
755,827Facilities and equipment AROClive, UT


28,359


28,320Facilities and equipment AROother


28,393


27,967Total facilities and equipment ARO


783,475


812,114Barnwell Closure


9,065


9,633792,540


821,747Less: current portion


(113,336
)

(110,328
)$
679,204

$
711,419


The
following is a reconciliation of our facility and equipment ARO (in thousands):

March 31,
2011

December 31,
2010Beginning balance

$
812,114

$
51,536Liabilities incurred


89


768,072Liabilities settled


(36,748
)

(23,374
)Accretion expense


7,981


8,226ARO estimate adjustments


39


7,654Ending liability

$
783,475

$
812,114


For
certain of our D&D obligations, we are required to provide financial assurance in the form of a restricted cash account, a deposit in escrow, a trust fund, or an insurance policy.
Restricted cash and decontamination and decommissioning deposits consists principally of: (i) funds held in trust for completion of various site clean-up projects and
(ii) funds deposited in connection with landfill closure, post-closure and remediation obligations. Accordingly, as of March 31, 2011, we have non-current
restricted cash of $0.3 million related to our Clive facility, and it is included in restricted cash and decontamination and decommissioning deposits in the accompanying balance sheets. We also
have the NDT fund to fund the decommissioning obligation for
the Zion Station. The NDT fund balance as of March 31, 2011 was $799.9 million, and is included in NDT fund investments in the accompanying consolidated balance sheets. We are also
required to maintain a trust fund to cover the closure obligation for the Barnwell, South Carolina facility. The trust fund balance as of March 31, 2011 was $9.1 million which is
included in restricted cash and decontamination and decommissioning deposits in the accompanying condensed consolidated balance sheets. In connection with the execution of the Exelon agreements and in
fulfillment of NRC regulations, we secured a $200.0 million letter of credit facility to further support the D&D activities at the Zion Station. This letter of credit is
cash-collateralized, with the funds included in non-current restricted cash in the accompanying condensed consolidated balance sheets.

20

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(10) Facility and Equipment Decontamination and Decommissioning (Continued)

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

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

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

(11) Derivative Financial Instruments

We have entered into derivative contracts to help offset our exposure to movements in interest rates in relation to our variable rate debt. These contracts are not designated as
accounting hedges. On December 18, 2008, we entered into an interest rate collar agreement with a notional amount of $200.0 million. This contract was terminated on January 2,
2011. The fair value liability of the interest rate collar contract as of December 31, 2010, was $0.1 million. Unrealized gains and losses resulting from adjustments to the fair value of
the contracts are included in other income (expense), net, and resulted in net gains of $0.2 million three month period ended March 31, 2010.

We
have foreign currency exposure related to our operations in the U.K. as well as other foreign locations. Foreign currency gains and losses are included in other income (expenses),
net, in the accompanying condensed consolidated statements of operations and comprehensive income. For the three month period ended March 31, 2010, we recognized foreign currency losses
$0.2 million. In January 2011 we implemented a foreign currency risk management program to hedge the operating income of one of our subsidiaries in the U.K.,
EnergySolutionsLtd., to mitigate our exposure to foreign exchange rates as those results are consolidated in US dollars. As a result, we
recognized losses of $0.1 million for the three month period ended March 31, 2011.

(12) Net Income (Loss) Per Share

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

21

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(12) Net Income (Loss) Per Share (Continued)

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

For the Three Month
Period ended March 31,2011

2010Weighted average common sharesbasic


88,709,078


88,415,309Dilutive effect of restricted stock and stock options


29,915


134,655Weighted average common sharesdiluted


88,738,993


88,549,964Anti-dilutive securities not included above


7,291,817


5,858,168


(13) Equity-Based Compensation

Stock Options and Restricted Stock

In November 2007, we adopted the EnergySolutions, Inc. 2007 Equity Incentive
Plan (the "Plan"). The Plan authorizes our Board of Directors to grant equity awards to directors, officers, employees and consultants. The aggregate number of shares of common stock that may be
issued pursuant to awards granted under the Plan is 10,440,000. We recorded non-cash compensation expense related to our stock option and restricted stock grants of $2.2 million for
the three month period ended March 31, 2011, as compared to $2.4 million for the three month period ended March 31, 2010. As of March 31, 2011, we had $9.8 million
of unrecognized compensation expense related to outstanding stock options, which will be recognized over a weighted-average period of 1.6 years. As of March 31, 2011, there was
$4.9 million of unrecognized compensation expense related to non-vested restricted stock which is expected to be recognized over a weighted-average period of 2.3 years.

(14) Income Taxes

We recognized income tax expense of $1.2 million and $1.9 million for the three month period ended March 31, 2011 and 2010, respectively, based on an estimated
annual effective tax rate on our consolidated operations of 10.7% and 24.8%, respectively, which is lower than the U.S. statutory rate of 35% primarily as a result of lower tax on income in foreign
jurisdictions, the tax benefit of domestic and foreign research and development credits, and the recognition of certain unrecognized tax benefits. During the three month period ended March 31,
2011 and 2010, we made income tax payments of $2.7 million and $3.2 million, respectively.

As
of March 31, 2011 and December 31, 2010, we had $3.7 million and $6.1 million, respectively, of gross unrecognized tax benefits, of which approximately
$3.0 million is expected to reverse within the next 12 months. Of the $3.7 million gross unrecognized tax benefits, approximately $0.8 million will impact our annual
effective tax rate in future years. These tax benefits were accounted for under guidance for accounting for uncertainties in income taxes. The Company and its U.S. subsidiaries are subject to U.S.
federal and state income tax. During the three month period ended March 31, 2011, the Company finalized multiple year examinations by U.S. Federal taxing authorities. The results of these
examinations included a reduction to certain net operating loss carry-forward deferred tax assets of approximately $3.0 million, and various other adjustments with a combined impact of
approximately $0.3 million. These adjustments were estimated and included in prior period financial statements. The

22

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(14) Income Taxes (Continued)

additional
impact on the current quarter, resulting from the finalization of these examinations, was the recording of non-cash tax benefits of approximately $2.4 million related to
the reversal of certain tax reserves.

(15) Segment Reporting and Business Concentrations

During 2010, a major strategic plan was initiated by senior management to improve the Company's performance and approach to the market. As a result, some organizational changes were
implemented which included the realignment of internal resources, the restructuring of processes and operational activities, and the execution of new initiatives for profitable growth. The strategic
plan also reorganized the Company's operating business divisions which resulted in the creation of two major operating groups to better serve our customers: the Government Group and the Global
Commercial Group. The Government group will continue to serve its government customers as the former Federal Services division did in the past, and will actively pursue new opportunities within the
government market. The Global Commercial Group will focus on increasing its customer base both nationally and internationally, and will consolidate the operations of our Commercial
Services, LP&D, and International divisions. However, we will continue to report separately each of our four operating business divisions to more fully present the results of our operations.

Certain
reclassifications have been made to the segment information reported for the prior year quarter ended March 31, 2010, to conform to current year presentation.

The
following table presents the Company's segment information (in thousands):

As of and for the Three Month Period ended March 31, 2011Global Commercial GroupGovernment
Group

Corporate
Unallocated
ItemsCS

LP&D

International

ConsolidatedRevenue from external customers(1)

$
79,350

$
46,537

$
54,266

$
342,114

$


$
522,267Income from operations(2)(5)


3,322


1,009


10,719


17,637


(18,065
)

14,622Depreciation, amortization and accretion expense


663


8,113


5,802


1,943


3,717


20,238Goodwill


106,594


90,129


230,548


54,943





482,214Other long-lived assets(3)


28,586


17,013


276,420


59,907


19,376


401,302Purchases of property, plant and equipment


76


417


1,989


482


836


3,800Total assets(4)


234,360


1,848,525


698,006


596,820


100,770


3,478,481


23

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(15) Segment Reporting and Business Concentrations (Continued)



As of and for the Three Month Period ended March 31, 2010Global Commercial GroupGovernment
Group

Corporate
Unallocated
ItemsCS

LP&D

International

ConsolidatedRevenue from external customers(1)

$
88,626

$
20,240

$
51,807

$
325,217

$


$
485,890Income from operations(2)(5)


6,129


1,669


9,923


17,217


(18,183
)

16,755Depreciation, amortization and accretion expense


672


388


5,652


1,887


3,277


11,876Goodwill


141,594


90,129


230,548


51,788





514,059Other long-lived assets(3)


33,570


22,467


202,881


61,420


98,433


418,771Purchases of property, plant and equipment


30


344


394





1,259


2,027Total assets(4)


302,812


159,257


524,068


483,325


160,326


1,629,788


(1)We
eliminate intersegment revenue in consolidation. Intersegment revenue for the three month period ended March 31, 2011 and 2010 were
$2.6 million and $1.7 million, respectively. Revenue by segment represent revenue earned based on third-party billings to customers.(2)We
include income from our unconsolidated joint ventures in income from operations from our Government Group. Equity income from unconsolidated joint
ventures for the three month period ended March 31, 2011 and 2010 was $1.4 million and $2.4 million, respectively.(3)Other
long-lived assets include property, plant and equipment and other intangible assets.(4)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.(5)Results
of our operations for services provided by our Global Commercial Group to our customers in Canada, Asia and Europe are included in our international
operations.


(16) Pension Plans

Net periodic benefit costs consisted of the following (in thousands):

For the Three Month
Period ended March 31,2011

2010Service cost

$
14,126

$
12,687Interest cost


43,219


41,300Expected return on plan assets


(45,580
)

(40,090
)Net actuarial loss





39$
11,765

$
13,936


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

24

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(17) Employee Termination Benefits

In 2009 we began an organizational review of our Magnox sites which identified an opportunity to reduce the existing workforce at three sites that are in the process of defueling and at
an additional site at which decommissioning work is relatively close to completion. As a result of the overstaffing at the Magnox sites, we presented an initial restructuring program to the NDA, which
included the termination of approximately 200 employees on a voluntary basis at these sites. This plan was approved by the NDA during the first quarter of 2010. A second phase of the organizational
review was performed during the first quarter of 2010, and an additional reduction in force of approximately 100 positions was identified. The termination plan related to the second phase was also
presented and approved by the NDA.

Additionally,
as a result of the organizational review of the Magnox business and at the request of the NDA, it was also recommended to combine the Magnox North Limited and Magnox South
Limited entities into a single entity. We successfully re-combined these two entities into a single entity, Magnox Limited, during the first quarter of 2011. This event delivered the first
major milestone in the Magnox organizational restructuring program previously agreed to by our customer the NDA. We have now reorganized the business into three operating divisions within the single
legal entity, which has enabled the commencement of the next phase: a review of corporate support structures and associated manpower.

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

The
full organizational review for all ten Magnox sites is continuing in conjunction with the Magnox Optimized Decommissioning Plan ("MODP"), and it is expected to result in an
additional reduction in force in excess of 1,000 employees over the next four to five years. The MODP has been approved by the NDA and forms part of the NDA funding settlement which in turn is
part of the U.K. Government's recently announced Comprehensive Spending Review ("CSR").

During
the CSR period through 2015, the MODP includes approximately 12 changes of organization across the ten Magnox sites. As a result of these changes and the drive to reduce support
and overhead costs, there will be significant manpower reductions, expected to be approximately 1,000 employees, during the period through 2015 followed by a further reduction of approximately 600
employees in the period from 2016 to 2020. The initial re-combination of the Magnox entities together with reduced support and overhead will result in reductions of approximately 300
employees in the next 12 months followed by further reductions as sites go from generation to defueling, or from defueling to decommissioning.

The
total termination benefit costs included within the MODP over the CSR period to 2015 is approximately £200 million and is expected to be paid over
four years. These amounts are estimates and have not yet been recorded.

During
the three month period ended March 31, 2011, we recognized $9.7 million on new employee termination benefits. These benefits are included in cost of revenue in the
condensed consolidated statements of operations for our International division. We have recognized a corresponding liability, which is included in accrued expenses and other current liabilities. In
addition, we have recognized revenue and a receivable from the NDA for the reimbursement of the employee termination benefits. The remaining unpaid termination benefits are expected to be paid over a
period of approximately 24 months.

25

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(17) Employee Termination Benefits (Continued)

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

March 31,
2011

December 31,
2010Beginning liability

$
36,753

$
24,260Additions


9,697


34,855Payments


(4,042
)

(21,431
)Effect of exchange rate


1,342


(931
)Ending liability

$
43,750

$
36,753


(18) 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 March 31, 2011, we are not
involved in any legal proceedings that we believe would have a material adverse effect on our consolidated financial position, operating results and cash flows.

(19) Guarantor and Non-Guarantor Supplemental Financial Information

The senior notes due 2018 were issued by EnergySolutions, Inc. (The "Parent"), and
EnergySolutions, LLC together ("the Issuers"). The senior notes are guaranteed by each of the Parent's current and future domestic subsidiaries
that are guarantors under the senior credit facility, other than ZionSolutionsLLC, 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 the Parent company in the Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries using the equity method of accounting.

26

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Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(19) Guarantor and Non-Guarantor Supplemental Financial Information (Continued)

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS  For The Three Month Period ended March 31, 2011  (in thousands)

Parent

EnergySolutionsLLC

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

ConsolidatedRevenue

$


$
28,598

$
99,326

$
404,015

$
(9,672
)
$
522,267Cost of revenue





(20,969
)

(88,140
)

(376,201
)

9,672


(475,638
)Gross profit





7,629


11,186


27,814





46,629Selling, general and administrative expenses





(17,024
)

(7,363
)

(9,020
)




(33,407
)Equity in income of unconsolidated joint ventures








1,400








1,400Operating income (loss)





(9,395
)

5,223


18,794





14,622Interest expense





(14,511
)




(3,539
)




(18,050
)Income from subsidiaries


6,562


30,675








(37,237
)

Other, net





(207
)

15


15,620





15,428Income (loss) before income taxes


6,562


6,562


5,238


30,875


(37,237
)

12,000Benefit from (provision for) income taxes


3,347








(4,529
)




(1,182
)Net income (loss)


9,909


6,562


5,238


26,346


(37,237
)

10,818Net income attributable to noncontrolling interests











(909
)




(909
)Net income (loss) attributable toEnergySolutions

$
9,909

$
6,562

$
5,238

$
25,437

$
(37,237
)
$
9,909


27

---



Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(19) Guarantor and Non-Guarantor Supplemental Financial Information (Continued)

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS  For The Three Month Period ended March 31, 2010  (in thousands)

Parent

EnergySolutionsLLC

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

ConsolidatedRevenue

$


$
29,822

$
106,139

$
360,704

$
(10,775
)
$
485,890Cost of revenue





(17,872
)

(101,949
)

(331,673
)

10,775


(440,719
)Gross profit





11,950


4,190


29,031





45,171Selling, general and administrative expenses





(17,750
)

(4,856
)

(8,173
)




(30,779
)Equity in income of unconsolidated joint ventures








2,363








2,363Operating income (loss)





(5,800
)

1,697


20,858





16,755Interest expense





(5,881
)

(2,795
)

(102
)

102


(8,676
)Income from subsidiaries


6,461


17,788








(24,249
)

Other, net





354


4


(429
)

(102
)

(173
)Income (loss) before income taxes


6,461


6,461


(1,094
)

20,327


(24,249
)

7,906Benefit from (provision for) income taxes


(628
)







(1,294
)




(1,922
)Net income (loss)


5,833


6,461


(1,094
)

19,033


(24,249
)

5,984Net income attributable to noncontrolling interests











(151
)




(151
)Net income (loss) attributable toEnergySolutions

$
5,833

$
6,461

$
(1,094
)
$
18,882

$
(24,249
)
$
5,833


28

---



Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(19) Guarantor and Non-Guarantor Supplemental Financial Information (Continued)

SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEET  As of March 31, 2011  (in thousands)

Parent

EnergySolutionsLLC

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

ConsolidatedAssetsTotal current assets

$
4,233

$
69,986

$
152,099

$
587,421

$
(39,996
)
$
773,743Property, plant and equipment, net





70,111


49,665


1,149





120,925Goodwill





138,365


288,639


55,210





482,214Intangibles, net





179,996


40,995


59,386





280,377Restricted cash





113,716


22,130


200,175





336,021Nuclear decommissioning trust fund











686,575





686,575Deferred costs











616,139





616,139Investment in subsidiaries


249,894


633,518








(883,412
)

Intercompany receivable


287,952











(287,952
)

Other long term assets





14,826


9,265


158,396





182,487TOTAL ASSETS

$
542,079

$
1,220,518

$
562,793

$
2,364,451

$
(1,211,360
)
$
3,478,481Liabilities and Stockholders' EquityIntercompany loan payable





229,622


58,330





(287,952
)

Intercompany payable











30,908


(30,908
)

Total current liabilities


7,750


72,382


25,192


522,992


(9,088
)

619,228Long-term debt, less current portion





638,307





195,437





833,744Facility and equipment decontamination and decommissioning liabilities, less current portion





29,354


36,208


613,642





679,204Unearned revenue, less current portion











620,380





620,380Deferred income taxes


42,780








37,368





80,148Other liabilities, net





959


2,494


146,964





150,417Stockholders' equity


491,549


249,894


440,569


192,949


(883,412
)

491,549Net income attributable to noncontrolling interests











3,811





3,811TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
542,079

$
1,220,518

$
562,793

$
2,364,451

$
(1,211,360
)
$
3,478,481


29

---



Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(19) Guarantor and Non-Guarantor Supplemental Financial Information (Continued)

SUPPLEMENTAL CONDENSED CONSOLIDATED BALANCE SHEET  As of December 31, 2010  (in thousands)

Parent

EnergySolutionsLLC

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

ConsolidatedAssetsTotal current assets

$
4,770

$
75,139

$
176,143

$
459,863

$
(30,307
)
$
685,608Property, plant and equipment, net





74,343


47,586


719





122,648Goodwill





138,365


288,906


53,127





480,398Intangibles, net





182,640


43,176


57,684





283,500Restricted cash





115,376


23,020


200,012





338,408Nuclear decommissioning trust fund











694,754





694,754Deferred costs











650,270





650,270Investment in subsidiaries


239,622


596,716








(836,338
)

Intercompany receivable


277,902











(277,902
)

Other long term assets





15,343


10,697


143,873





169,913TOTAL ASSETS

$
522,294

$
1,197,922

$
589,528

$
2,260,302

$
(1,144,547
)
$
3,425,499Liabilities and Stockholders' EquityIntercompany loan payable





209,514


68,388





(277,902
)

Intercompany payable











21,706


(21,706
)

Total current liabilities





78,731


47,476


414,387


(8,601
)

531,993Long-term debt, less current portion





639,296





195,264





834,560Facility and equipment decontamination and decommissioning liabilities, current portion





29,303


36,363


645,753





711,419Unearned revenue, less current portion











654,643





654,643Deferred income taxes


46,658








31,298





77,956Other liabilities, net





1,455


1,971


132,964





136,390Stockholders' equity


475,636


239,623


435,330


161,385


(836,338
)

475,636Net income attributable to noncontrolling interests











2,902





2,902TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

$
522,294

$
1,197,922

$
589,528

$
2,260,302

$
(1,144,547
)
$
3,425,499


30

---



Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(19) Guarantor and Non-Guarantor Supplemental Financial Information (Continued)

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW  For The Three Month Period ended March 31, 2011  (in thousands)

Parent

EnergySolutionsLLC

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

ConsolidatedCash flow from operating activitiesNet cash provided by (used in) operating activities

$
14,318

$
23,711

$
5,298

$
9,983

$
(37,455
)
$
15,855Cash flow from investing activitiesPurchases of property, plant and equipment





(1,405
)

(2,214
)

(181
)




(3,800
)Purchases of intangible assets





(330
)










(330
)Purchase of investments in nuclear decommissioning trust fund











(351,410
)




(351,410
)Proceeds from sales of nuclear decommissioning trust fund investments











352,113





352,113Proceeds from disposition of property, plant and equipment








82








82Net cash provided by (used in) investing activities





(1,735
)

(2,132
)

522





(3,345
)Cash flows from financing activitiesRepayments of long-term debt





(1,400
)










(1,400
)Intercompany loan receivable


(7,813
)

(2,236
)

6,000





4,049


Intercompany loan payable





20,107


(16,058
)




(4,049
)

Investment in subsidiary


(10,272
)

(36,802
)







47,074


Proceeds from exercise of stock options


57














57Repayments of capital lease obligations





(58
)










(58
)Net cash provided by (used in) financing activities


(18,028
)

(20,389
)

(10,058
)




47,074


(1,401
)Effect of exchange rate on cash


3,710


3,710


718


(246
)

(9,619
)

(1,727
)Net increase in cash and cash equivalents





5,297


(6,174
)

10,259





9,382Cash and cash equivalents, beginning of period





18,587


11,048


30,557





60,192Cash and cash equivalents, end of period

$


$
23,884

$
4,874

$
40,816

$


$
69,574


31

---



Table of Contents

EnergySolutions, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(19) Guarantor and Non-Guarantor Supplemental Financial Information (Continued)

SUPPLEMENTAL CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW  For The Three Month Period ended March 31, 2010  (in thousands)

Parent

EnergySolutionsLLC

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

ConsolidatedCash flow from operating activitiesNet cash provided by (used in) operating activities

$
8,530

$
25,567

$
(23,943
)
$
28,370

$
678

$
39,202Cash flow from investing activitiesPurchases of property, plant and equipment





(1,653
)

(373
)

(1
)




(2,027
)Net cash used in investing activities





(1,653
)

(373
)

(1
)




(2,027
)Cash flows from financing activitiesNet borrowings under revolving credit facility





1,000











1,000Intercompany loan receivable


519


(2,447
)

23,620





(21,692
)

Intercompany loan payable





2,933








(2,933
)

Investment in subsidiary


4,815


(10,879
)







6,064


Dividend distributions to stockholders


(2,213
)













(2,213
)Distributions to noncontrolling interests partners











(296
)




(296
)Minimum tax withholding on restricted stock awards


(375
)













(375
)Settlement of interest rate derivative contracts





(551
)










(551
)Repayments of capital lease obligations





(225
)










(225
)Deferred financing costs





(2,493
)










(2,493
)Net cash provided by (used in) financing activities


2,746


(12,662
)

23,620


(296
)

(18,561
)

(5,153
)Effect of exchange rate on cash


(11,276
)

(11,277
)




1,618


17,883


(3,052
)Net increase in cash and cash equivalents





(25
)

(696
)

29,691





28,970Cash and cash equivalents, beginning of period





1,606


2,892


11,415





15,913Cash and cash equivalents, end of period

$


$
1,581

$
2,196

$
41,106

$


$
44,883


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

The following discussion and analysis of the financial condition and results of our operations should be read
together with the condensed consolidated financial statements and the related notes of EnergySolutions included elsewhere in this Quarterly Report on Form 10-Q and with our audited
consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the year ended December 31, 2010.

Cautionary Statement Regarding Forward-Looking Statements

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

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

Additional
information concerning these and other factors can be found in our periodic filings with the Securities and Exchange Commission ("SEC"), including our Annual Report on
Form 10-K filed March 31, 2011 and this report under "Item 1ARisk Factors." Our SEC filings are available publicly on the SEC's website at www.sec.gov, on EnergySolutions'website at www.energysolutions.comor upon request from EnergySolutions'Investor Relations Department at ir@energysolutions.com. We disclaim any obligation to update the forward-looking statements, whether as a result of new information, future events or
otherwise.

Overview

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

We
provide our services through two customer groups: the Government Group and the Global Commercial Group. Within the Global Commercial Group, we provide services through three operating
business divisions: Commercial Services, Logistics, Processing and Disposal ("LP&D") and International. Our Government Group provides services to United States ("U.S.") government customers for the
management and operation, and/or clean-up of facilities with radioactive materials. Our Government Group customers are primarily individual offices, departments and administrations within
the U.S. Department of Energy ("DOE") and the U.S. Department of Defense ("DOD"). Our Commercial Services operations provide a broad range of on-site services, including D&D services, to
commercial customers. Our commercial customers include power and utility companies, pharmaceutical companies, research laboratories, universities, industrial facilities, state agencies and other
commercial entities that are involved with nuclear materials. Our LP&D operations provide a broad range of logistics, transportation, processing and disposal services to both government and
commercial customers. Our LP&D division also operates our facilities for the processing and disposal of radioactive materials, including a facility in Clive, Utah, four facilities in Tennessee,
and two facilities in Barnwell, South Carolina. Our International operations derive revenue primarily through contracts with the

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Nuclear
Decommissioning Authority ("NDA") in the United Kingdom ("U.K.") to operate, manage and decommission ten Magnox sites with twenty-two nuclear reactors. In addition, our
International operations also provide turn-key services and sub-contract services for the treatment, processing, storage and disposal of radioactive waste from nuclear sites
and non-nuclear facilities such as hospitals, research facilities and other manufacturing and industrial facilities.

Results of Operations

The following table shows certain items from our income statements for the three month period ended March 31, 2011 and 2010 (in
thousands):

Three Month Period
ended March 31,2011

2010Revenue:Government Group

$
79,350

$
88,626Global Commercial GroupCommercial Services Operations


46,537


20,240LP&D Operations


54,266


51,807International Operations


342,114


325,217Total revenue


522,267


485,890Cost of revenue:Government Group


(73,242
)

(81,872
)Global Commercial GroupCommercial Services Operations


(44,094
)

(16,869
)LP&D Operations


(42,464
)

(39,740
)International Operations


(315,838
)

(302,238
)Total cost of revenue


(475,638
)

(440,719
)Gross profit:Government Group


6,108


6,754Global Commercial GroupCommercial Services Operations


2,443


3,371LP&D Operations


11,802


12,067International Operations


26,276


22,979Total gross profit


46,629


45,171Group selling, general and administrative expenses:Government Group


(4,186
)

(2,988
)Global Commercial Group


(11,156
)

(9,608
)Total group selling, general and administrative expenses(2)


(15,342
)

(12,596
)Group operating income:Government Group


1,922


3,766Global Commercial Group


29,365


28,809Total group operating income


31,287


32,575Corporate selling, general and administrative expenses(2)


(18,065
)

(18,183
)Equity in income of unconsolidated joint ventures(1)


1,400


2,363Total income from operations


14,622


16,755Interest expense


(18,050
)

(8,676
)Other income (expense), net


15,428


(173
)Income before income taxes and noncontrolling interests


12,000


7,906Income tax expense


(1,182
)

(1,922
)Net income


10,818


5,984Less: Net income attributable to noncontrolling interests


(909
)

(151
)Net income attributable to EnergySolutions

$
9,909

$
5,833


(1)Amounts
attributable to the Government Group.


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(2)Together,
group and corporate selling, general and administrative expenses represent total Company's SG&A as reported in the accompanying condensed
consolidated statement of operations. As such, both amounts are needed to compute total consolidated income from operations for the three month periods ended March 31, 2011 and 2010.


Three Month Period ended March 31, 2011 Compared to Three Month Period ended March 31, 2010

Government Group

Revenue and cost of revenue in our Government Group decreased $9.3 million and $8.6 million, respectively, for the three
month period ended March 31, 2011 compared to the three month period ended March 31, 2010, primarily as a result of the completion of certain large contracts during the first quarter of
2010, as well as to decreased funding received during the first quarter of 2011 from the American Recovery and Reinvestment Act ("ARRA"). Gross profit decreased $0.6 million while gross margin
increased to 7.7% for the three month period ended March 31, 2011 from 7.6% for the three month period ended March 31, 2010, primarily due to increased business activity levels on higher
margin contracts.

Revenue
and cost of revenue from our supporting demolition and disposition activities at the DOE Oak Ridge Reservation's East Tennessee Technology Park's Building K-33,
increased $1.2 million and $0.4 million, respectively, for the three month period ended March 31, 2011 compared to those of the quarter ended March 31, 2010, primarily due
to the award of the contract during the second quarter of 2010. As a result, gross profit increased $0.8 million for the three month period ended March 31, 2011 compared to the quarter
ended March 31, 2010.

Revenue
and cost of revenue from our Uranium Disposition Services, LLC joint venture increased $3.2 million and $2.8 million, respectively, for the three month
period ended March 31, 2011 compared to the quarter ended March 31, 2010, due to completion of the hot functional testing phase of the project during the year. As a result, gross profit
increased $0.4 million for the three month period ended March 31, 2011 compared to the quarter ended March 31, 2010.

These
increases were partially offset by decreased revenue and cost of revenue of $2.8 million and $2.2 million, respectively, from our Isotek Systems joint venture for the
three month period ended March 31, 2011 compared to the three month period ended March 31, 2010, primarily as a result of decreased design activity work. The Isotek contract allows for
the reimbursement of costs plus a fee. Gross profit, representing the fee less unallowable costs, decreased $0.6 million for the three month period ended March 31, 2011 compared to the
three month period ended March 31, 2010.

Revenue
and cost of revenue for our environmental remediation and waste management activities at the DOE Paducah Gaseous Diffusion Plant in Paducah, Kentucky decreased
$3.6 million and $2.9 million, respectively, for the three month period ended March 31, 2011 compared to the three month period ended March 31, 2010, due to completion of
the contract in July 2010. As a result, gross profit decreased $0.7 million for the three month period ended March 31, 2011 compared to the three month period ended March 31,
2010.

Revenue
and cost of revenue from our Savannah River Remediation Liquids contract, at the Hanford site decreased $0.6 million and $0.1 million, respectively, for the three
month period ended March 31, 2011 compared to the three month period ended March 31, 2010, primarily due to construction overruns incurred during 2011. As a result, gross profit
increased $0.5 million during the three month period ended March 31, 2011 compared to the three month period ended March 31, 2010.

Revenue
and cost of revenue related to engineering and technology projects within the Government Group decreased $4.1 million and $3.8 million, respectively, for the three
month period ended March 31, 2011 compared to the three month period ended March 31, 2010 primarily due to the wrap up of technical and testing support activities at the DOE Waste
Treatment Plant in Richland, Washington, and to increased costs due to schedule delays on other projects. As a result, gross profit

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decreased
$0.3 million for the three month period ended March 31, 2011 compared to the three month period ended March 31, 2010.

Global Commercial Group

Commercial Services Operations

Revenue and cost of revenue from our Commercial Services operations increased $26.3 million and $27.2 million,
respectively, for the three month period ended March 31, 2011 compared to the three month period ended March 31, 2010, due primarily to the ramp up of our decommissioning work at the
Zion Station. Gross profit decreased $0.9 million and gross margin decreased to 5.2% for the three month period ended March 31, 2011 from 16.7% for the three month period ended
March 31, 2010, due primarily to the relatively lower profitability of the major projects performed during the period.

Revenue
and cost of revenue related to the decommissioning of the Zion Station nuclear power plant totaled $29.7 million and $31.0 million, respectively, for the three
month period ended March 31, 2011. The decommissioning effort on this project commenced in September 2010. A gross loss in the amount of $1.3 million was incurred for the three month
period ended March 31, 2011 primarily as a result of the impact of accretion expense recorded for the related ARO exceeding the ARO settlement gain, both of which are recorded in cost of
revenue.

Revenue
and cost of revenue from our Commercial Products operations increased $1.7 million and $2.2 million, respectively, for the for the three month period ended
March 31, 2011 compared to the three month period ended March 31, 2010, primarily due to increased demand for liners, equipment and engineering services during 2011. However, gross
profit decreased $0.5 million for the three month period ended March 31, 2011 due to higher overhead costs recorded due to excess capacity. These increases were partially offset, by
decreased revenue and cost of revenue related to our large component utility operations of $2.4 million and $1.5 million, respectively, for the three month period ended March 31,
2011 compared to the three month period ended March 31, 2010, due primarily to the substantial completion of work on three large-scale projects during 2010. As a result, gross profit decreased
$0.9 million for the three month period ended March 31, 2011.

Revenue
and cost of revenue from our commercial decommissioning services decreased $2.4 million and $3.0 million, respectively, for the three month period ended
March 31, 2011 compared to the three month period ended March 31, 2010, due primarily to the completion of the Federated Metals project during 2010, partially offset by a slight increase
in revenue from our operations at Pearl Harbor. As a result, gross profit increased $0.6 million for the three month period ended March 31, 2011.

Revenue
and cost of revenue from our technology engineering services operations decreased $0.5 million and $1.2 million, respectively, for the three month period ended
March 31, 2011 compared to the three month period ended March 31, 2010, due primarily to design and subcontractor costs overruns incurred during 2010 on two major fixed-priced contracts.
As a result, gross profit for the three month period ended March 31, 2011 increased $0.7 million.

LP&D Operations

Revenue from our LP&D operations increased $2.5 million or 4.7% to $54.2 million for the three month period ended
March 31, 2011 compared to the three month period ended March 31, 2010, due primarily to higher receipts of materials for processing at our Bear Creek facility, and to increased
transportation services during 2011, partially offset by decreased volumes of waste disposal receipts. Gross profit decreased $0.3 million and gross margin decreased to 21.6% for the three
month period ended March 31, 2011 from 23.3% for the three month period ended March 31, 2010, primarily as a result of lower waste disposal receipts during 2011.

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Revenue
and cost of revenue related to our disposal facilities decreased $4.0 million and $0.1 million, respectively, for the three month period ended March 31, 2011
compared to the three month period ended March 31, 2010, due primarily to lower volumes of waste receipts on DOE projects due in part to a decrease in ARRA funding and lower decommissioning
work. The majority of costs at our disposal facilities are fixed, resulting in a disproportionate increase in cost of revenue as a percentage of revenue. As a result, gross profit decreased
$3.9 million for the three month period ended March 31, 2011 compared to the three month period ended March 31, 2010.

Revenue
and cost of revenue from our processing facilities increased $5.3 million and $3.4 million, respectively, for the three month period ended March 31, 2011
compared to the three month period ended March 31, 2010, due primarily to increased receipts of materials for incineration during 2011, and to additional processing of backlog caused by the
temporary outage of operations in February 2010 as a result of an onsite accident at our Bear Creek facility. As a result, gross profit increased $1.9 million for the three month period ended
March 31, 2011 compared to the three month period ended March 31, 2010.

Revenue
from our logistics operations increased $1.1 million for the three month period ended March 31, 2011 compared to the three month period ended March 31, 2010,
primarily due to increased
shipping activity on major contracts. Cost of revenue related to our logistics operations decreased $0.6 million, for the three month period ended March 31, 2011 compared to the three
month period ended March 31, 2010, due to a decrease in subcontractor costs during 2010. As a result, gross profit increased $1.7 million for the three month period ended
March 31, 2011 compared to the three month period ended March 31, 2010.

International Operations

Revenue from our International operations increased $16.9 million or 5.2% for the three month period ended March 31, 2011
compared to the same period in 2010, due primarily to the timing in the recognition of generation, efficiency and cost savings fees in our operations in the U.K., and to increased design and
construction activities in our operations in Asia. Of the $16.9 million increase in revenue, $8.1 million is related to fluctuations in pound sterling exchange rates during three month
period ended March 31, 2011 compared to the same period in 2010.

Cost
of revenue in our International operations increased $13.6 million for the three month period ended March 31, 2011 compared to the three month period ended
March 31, 2010, due primarily to increased decommissioning and cleanup activities at certain of our Magnox sites, and to the ramp up of work at our projects in Asia. Of the $13.6 million
increase in cost of revenue, $7.6 million related to an increase in the pound sterling exchange rates during three month period ended March 31, 2011 compared to the same period in 2010.

As
a result, gross profit in our International operations increased $3.3 million for the three month period ended March 31, 2011 compared to the three month period ended
March 31, 2010. Gross margin in our International operations was 7.7% for the three month period ended March 31, 2011 compared to 7.1% for the same period in 2010.

Group selling, general and administrative expenses

Group selling, general and administrative ("SG&A") expenses include expenses that are not directly associated with performing services
for our customers. These expenses consist primarily of compensation and related benefits for management and administrative personnel, preparing contract bids, office expenses, advisory fees,
professional fees, strategic growth initiatives such as research and development, and for administrative overhead. For the three month period ended March 31, 2011, Group SG&A expenses increased
$2.7 million or 21.7% from $12.6 million for the three month period ended March 31, 2010. This increase was due primarily to higher bid and proposal costs incurred

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during
2011. Group SG&A expenses, as a percentage of revenue, increased 0.3% for the three month period ended March 31, 2011 compared to the same period in 2010.

Corporate selling, general and administrative expenses

Corporate SG&A expenses reflect costs associated with supporting the entire Company including executive management and administrative
functions such as accounting, treasury, legal, human resources, and information technology, as well as other costs required to support the Company. Corporate SG&A expenses decreased
$0.1 million, or 0.7%, to $18.1 million for the three month period ended March 31, 2011 from $18.2 million for the three month period ended March 31, 2010. Corporate
SG&A expenses, as a percentage of revenue, decreased 0.3% for the three month period ended March 31, 2011 compared to the same period in 2010.

Equity in income of unconsolidated joint ventures

Income from unconsolidated joint ventures decreased $1.0 million, or 40.8%, to $1.4 million for the three month period
ended March 31, 2011, from $2.4 million for the three month period ended March 31, 2010. The decrease was attributable primarily to a $0.7 million decrease from our
proportional share of income from our LATA/Parallax Portsmouth LLC joint venture, and to a $0.3 million decrease in our proportional share of income from our Washington River Protection
Solutions LLC joint venture at the Hanford site.

Interest expense

Interest expense increased $9.4 million to $18.1 million for the three month period ended March 31, 2011 from
$8.7 million for the three month period ended March 31, 2010. The increase was due primarily to increased outstanding borrowings for the period, increased variable interest rates on our
term loans from 4.03% at March 31, 2010 to 6.25% at March 31, 2011. In addition, the Company issued $300 million of senior unsecured notes with an interest rate of 10.75% during
the third quarter of 2010.

Other income (expense), net

Other income (expense), net, increased $15.6 million to $15.4 million for the three month period ended March 31,
2011 from an expense of $0.2 million for the three month period ended March 31, 2010. The increase was primarily attributable to a $15.7 million net increase in investment income
earned on our investments on the nuclear decommissioning trust ("NDT") fund for the three month period ended March 31, 2011. We had no comparable NDT increase or decrease in the three month
period ended March 31, 2010 since the Zion Station transaction closed in the third quarter of 2010.

Income taxes

We recognized income tax expense of $1.2 million and $1.9 million for the three month period ended March 31, 2011
and 2010, respectively, based on an estimated annual effective tax rates on our consolidated operations of 10.7% and 24.8%, respectively, which are lower than the U.S. statutory rate of 35% primarily
as a result of lower tax on income in foreign jurisdictions, and to the tax benefit of domestic and foreign research and development credits, as well as to the recognition of certain unrecognized tax
benefits. During the three month period ended March 31, 2011, the Company finalized multiple year examinations by US Federal taxing authorities. The results of these examinations included a
reduction to certain net operating loss carry-forward deferred tax assets of approximately $3.0 million, and various other adjustments with a combined impact of approximately
$0.3 million. These adjustments were estimated and included in prior period financial statements. The additional

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impact
on the current quarter, resulting from the finalization of these examinations, was the recording of non-cash tax benefits of approximately $2.4 million related to the
reversal of certain tax reserves.

Liquidity and Capital Resources

We finance our operations primarily through cash provided by operations. As of March 31, 2011, our principal sources of
liquidity consisted of $69.6 million of cash and cash equivalents, and $89.1 million of availability under our $105 million revolving portion of our senior secured credit
facility, which is net of $15.9 million in outstanding letters of credit. As of March 31, 2011, we had no outstanding borrowings under our revolving line of credit.

During
the three month period ended March 31, 2011, our cash and cash equivalents increased $9.4 million to $69.6 million compared to a $29.0 million increase
in cash and cash equivalents for the three month period ended March 31, 2010. During the three month period ended March 31, 2011, we generated $15.9 million in cash from operating
activities, which included net income of $10.8 million, and significant non-cash expenses including depreciation, amortization and accretion expenses of $20.2 million,
equity-based compensation expense of $2.2 million, and deferred income taxes of approximately $2.7 million. We also had realized and unrealized gains on our NDT fund of
$15.7 million. Cash flows from operating activities were also provided from increases of $37.4 million in accounts payable, $20.1 million increase due to payments received from
the NDT fund for work performed in the Zion Station project, and $35.8 million in accrued expenses and other current liabilities due primarily to the timing of payments to vendors of Magnox
contracts in the U.K. Cash from operating activities was reduced due to decreases of $30.4 million in unearned revenue,
$37.3 million in AROs, and to a $64.4 million net decrease in accounts receivable and costs and estimated earnings in excess of billings on uncompleted contracts due primarily to the
collection of funds from customers.

We
used $3.3 million of cash in investing activities during the three month period ended March 31, 2011. We invested $3.8 million for purchases of machinery and
transportation equipment to support our disposal and logistics operations at our facilities. Cash from investing activities were also generated by sales of NDT fund investments of approximately
$352.1 million of which $351.4 million was reinvested during the period. Investment income and realized earnings on the NDT fund are a source of working capital which will fund a portion
of the decommissioning work we will perform at the Zion Station. We actively invest in securities to provide our target returns on the NDT trust assets to satisfy current and future decommissioning
costs associated with the Zion Station ARO.

Our
financing activities used $1.4 million in cash for the three month period ended March 31, 2011, due to repayment of long term debt under the senior secured credit
facility. Our principal needs for liquidity have been, and will continue to be, for working capital, to pay down debt, and for capital expenditures. Although we have no specific plans to do so at this
time, if we decide to pursue one or more significant strategic acquisitions, we may incur additional debt or sell additional equity to finance those acquisitions.

In
August 2010, we refinanced our existing debt with borrowings under a new senior secured credit facility and with the proceeds of an offering of $300.0 million in aggregate
principal amount of senior unsecured notes due 2018. The new senior secured facility includes a term loan and a revolving credit facility. A portion of the proceeds of the term loan are held in a
restricted cash account to provide for cash-collateralized letters of credit.

The
senior unsecured notes were sold in a private placement offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the
"Securities Act") and to non-U.S. persons outside the U.S. under Regulation S of the Securities Act. The senior notes are more fully described below.

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We will incur substantial costs associated with the D&D activities for the Zion project; however we expect that the NDT fund will have sufficient assets to
reimburse us for the cost of the work we perform at the Zion Station. However, in the event that we do not comply with the contractual requirements included in the Exelon agreements, we may become
subject to additional financial requirements. These additional financial requirements may take the form of not being able to withdraw from the NDT fund for work performed, funding the work on the
project through our own cash flows, increasing the letter of credit amount established for this project, or having the letter of credit drawn down by Exelon.

We
had accumulated benefit obligations related to our pension plans of $3.1 billion as of December 31, 2010. See Note 18 to our audited consolidated financial
statements included in our Annual Report on Form 10-K filed on March 31, 2011, for a more detailed discussion. Approximately 99% of that obligation relates to the Magnox
North and Magnox South pension plans (the "Magnox Plans"). The Magnox Plans are funded by contributions from employees and the NDA pursuant to a contractual arrangement. As a result, we are reimbursed
for contributions made to the Magnox Plans under the terms of these contracts. Thus, we have no potential net funding requirements relative to the accumulated benefit obligation of the Magnox Plans.
We are required to fund the plan related to our employees of EnergySolutionsEU Limited, a wholly owned subsidiary in the U.K. The plan is currently
funded by contributions from us and the employees. Our liquidity is not affected by these contributions as they are only made when we have received the funds from the NDA. We made no contributions to
the Magnox Plans during the quarter ended March 31, 2011.

Capital Expenditures

We made capital expenditures of $3.8 million and $2.0 million for the three month periods ended March 31, 2011 and
2010, respectively. The $1.8 million increase in capital expenditures was attributable primarily to the purchase of machinery and transportation equipment for our disposal facilities and
logistic operations during the first quarter of 2011. During the first quarter of 2010, we invested in several significant capital improvements at our disposal facilities and purchase equipment
required for the Atlas mill tailings contract.

Senior Credit Facilities and Senior Notes

Our outstanding long-term debt consisted of the following (in thousands):

As of
March 31,
2011

As of
December 31,
2010Term loan facilities due through 2016(1)

$
555,800

$
557,200Term loan unamortized discount


(12,727
)

(13,231
)Senior notes, 10.75% due through 2018


300,000


300,000Senior notes unamortized discount


(3,727
)

(3,809
)Revolving credit facility





Total debt


839,346


840,160Less: current portion


(5,600
)

(5,600
)Total long-term debt

$
833,746

$
834,560


(1)As
of March 31, 2011 and December 31, 2010, the variable interest rate on borrowings under our senior secured credit facility was 6.25%.


On
August 13, 2010, the Company entered into a senior secured credit facility with JPMorgan Chase Bank, N.A. (the administrative agent), consisting of a senior secured term loan
(the "Term

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Loan")
in an aggregate principal amount of $560 million at a discount rate of 2.5% and a senior secured revolving credit facility (the "Revolving Credit Facility") with availability of
$105 million, of which $15.9 million was used to fund letters of credit issued as of March 31, 2011. Borrowings under the senior secured credit facility bear interest at a rate
equal to: (a) Adjusted LIBOR plus 4.50%, or ABR plus 3.50%; in the case of the Term Loan; (b) Adjusted LIBOR plus 4.50%, or ABR plus 3.50%; in the case of the Revolving Credit Facility,
and (c) a per annum fee equal to the spread over Adjusted LIBOR under the Revolving Credit Facility, along with a fronting fee and issuance and administration fees; in the case of revolving
letters of credit. The proceeds of the senior secured credit facility were used to repay outstanding indebtedness under the former credit agreements, collateralize reimbursement obligations to the
deposit issuing banks with respect to deposit letters of credit, replace synthetic letters of credit issued under the former credit agreements and provide credit support for obligations acquired under
the Exelon agreements. As of March 31, 2011, borrowings of $310.2 million under the term loan in the senior secured credit facility are held in a restricted cash account as collateral
for the Company's reimbursement obligations with respect to letters of credit.

On
August 13, 2010, we also completed a private offering of $300.0 million 10.75% Senior Notes at a discount rate of 1.3%. The senior notes are governed by an Indenture
among EnergySolutionsand 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 to all future
subordinated debt.

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
Price2014


105.375
%2015


102.688
%2016 and thereafter


100.000
%


The
Term Loan amortizes in equal quarterly installments of $1.4 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 Term Loans made during the applicable fiscal year. If the leverage ratio is equal to or less than 1.0 to 1.0, we are not required to prepay the Term Loans. The excess cash flow
calculations (as defined in the senior secured credit facility), are prepared annually as of the last day of each fiscal year or, in the case of the fiscal year ending on December 31, 2010, as
of and for the last day of the partial year commencing on October 1, 2010 and ending on December 31, 2010.

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Prepayments
of debt resulting from the excess cash flow calculations are due annually five days after the date that the Annual Report on Form 10-K for such fiscal year is filed with
the SEC.

As
of March 31, 2011, we had mandatory principal repayments based on our excess cash flow and scheduled repayments of $5.6 million due within the next 12 months. We
made principal repayments totaling $1.4 million during the three month period ended March 31, 2011 and made no principal repayments during the three month period ended March 31,
2010. We made cash interest payments of
$25.5 million and $7.1 million, for the three month period ended March 31, 2011 and 2010, respectively. In addition, we paid fees to the lenders of approximately
$2.5 million during the first quarter of 2010, to obtain amendments on our former credit facility agreements, which were written off during the third quarter of 2010. No fees have been paid
during the current year.

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 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 4.5 for quarter ending March 31, 2011, which is reduced by 0.25 on an
annual basis through the maturity date. We are required to maintain a minimum cash interest coverage ratio of 2.0 from the quarter ended March 31, 2011 through the quarter ended
September 30, 2014 and 2.25 through the maturity date. As of March 31, 2011, our total leverage and cash interest coverage ratios were 2.65 and 3.67, respectively.

The
senior secured credit facility also contains a number of affirmative and restrictive covenants including limitations on mergers, consolidations and dissolutions; sales of assets;
investments and acquisitions; indebtedness; liens; affiliate transactions; and dividends and restricted payments. Under the senior secured credit facility, we are permitted maximum annual capital
expenditures of $40.0 million for 2010 and each year thereafter, plus for each year the lesser of (1) a one year carry-forward of the unused amount from the previous fiscal year and
(2) 50% of the amount permitted for capital expenditures in the previous fiscal year. The senior secured credit facility contains events of default for non-payment of principal and
interest when due, a cross-default provision with respect to other indebtedness having an aggregate principal amount of at least $5.0 million and an event of default that would be triggered by
a change of control, as defined in the senior secured credit facility. Capital expenditures for the three month period ended March 31, 2011 were $3.8 million. As of March 31,
2011, 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 ZionSolutionssubsidiary and other special purpose
subsidiaries, whose organizational documentation prohibits or limits such a pledge.

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

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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.

In
connection with the sale of the senior notes, we entered into a registration rights agreement, dated August 13, 2010 (the "Registration Rights Agreement"), with the
representative of the initial purchasers of the senior notes. Under the Registration Rights Agreement, we agreed to use our commercially reasonable best efforts to file and cause to become effective a
registration statement with respect to an exchange of the senior notes. We also agreed to file, if obligated, a shelf registration statement relating to the resale of the senior notes if the exchange
offer is not consummated within the required time period stated in the Registration Rights Agreement. We have delayed the filing of the registration statement and since February 14, 2011, and
we have been incurring an interest penalty in the amount of 0.25 basis points.

The
senior notes have not been registered under the Securities Act, and unless so registered, may not be offered or sold in the U.S. absent registration or an applicable exemption from,
or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.

Exelon Agreement

In September 2010, we entered into an arrangement, through our wholly-owned subsidiary
ZionSolutions,LLC ("ZionSolutions") with Exelon Corporation ("Exelon") to dismantle Exelon's
Zion nuclear facility located in Zion, Illinois ("Zion Station"), which ceased operation in 1998. Upon closing, Exelon transferred to ZionSolutionssubstantially all of the assets (other than land) associated with Zion Station, including all assets held in its NDT fund. In consideration for Exelon's transfer of those assets,
ZionSolutionsagreed to assume certain decommissioning and other liabilities associated with the Zion Station.
ZionSolutionsalso took possession and control of the land associated with Zion Station pursuant to a lease agreement executed at the closing.
ZionSolutionsis under contract to complete the required decommissioning work according to an established schedule, and to construct a dry cask storage
facility on the land for the
spent nuclear fuel currently held in spent fuel pools at the Zion Station. Exelon retains ownership of the land and the spent nuclear fuel and associated operational responsibilities following
completion of the Zion Station D&D project. The NRC approved the transfer of the facility operating licenses and conforming license amendments from Exelon to
ZionSolutions.

To
satisfy the conditions of the NRC order approving the License Transfer, we (i) secured a $200.0 million letter of credit facility, (ii) granted an irrevocable
easement of disposal capacity of 7.5 million cubic feet at our Clive disposal facility and (iii) purchased the insurance coverages required of a licensee under the NRC's regulations.

We
provided a guarantee as primary obligor to the full and prompt payment and performance by ZionSolutionsof all its obligations under
the various agreements with Exelon. As such, we pledged 100% of our interests in ZionSolutionsto Exelon. In addition, we are required to maintain a
$200.0 million letter of credit facility to further support the D&D activities at the Zion Station, which is held by ZionSolutions. If the
Company exhausts its resources and ability to complete the D&D activities, and in the event of a material default (as defined within the Credit Support Agreement), Exelon may exercise its rights to
take possession of ZionSolutions. At that point, through their ownership of ZionSolutions, Exelon (not
the Company) is then entitled to draw on the funds associated with the letter of credit. Under the terms of the Company's financing arrangements, the Company obtained restricted cash and took on a
liability for the letter of credit facility.

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Off Balance Sheet Arrangements

As of March 31, 2011, we have routine operating leases, primarily related to real estate and rail equipment, and investments in
joint ventures.

As
of March 31, 2011, we had outstanding floating-rate term loans of $555.8 million. Under our senior secured credit facility, we are required to maintain one
or more hedge agreements bearing interest at a fixed rate in the aggregate notional amount of no less than 50% of the outstanding principal amounts of our long term debt. Since the outstanding
balances under our senior unsecured notes bear interest at a fixed rate of 10.75% and totaled $300.0 million as of March 31, 2011, which is 54.0% of our total outstanding term loans, we
were not required to enter into new hedge agreements.

We
are required to post, from time to time, standby letters of credit and surety bonds to support contractual obligations to customers, self-insurance programs, closure and
post-closure financial assurance and other obligations. As of March 31, 2011, we had $326.2 million in letters of credit issued under our senior secured credit facility. As
of March 31, 2011, we had $3.0 million in surety bonds outstanding. With respect to the surety bonds, we have entered into certain indemnification agreements with the providers of the
surety bonds, which would require funding by us only if we fail to perform under the contracts being insured and the surety bond issuer was obligated to make payment to the insured parties.

Our
processing and disposal facilities operate under licenses and permits that require financial assurance for closure and post-closure costs. We provide for these
requirements through a combination of restricted cash, cash deposits, letters of credit and insurance policies. As of March 31, 2011, the closure and post-closure state regulatory
requirements for our facilities were $142.6 million, which amount is not determined on the same basis as the ARO, or calculated under authoritative accounting guidance for AROs.

Critical Accounting Policies

This management's discussion and analysis of financial condition and results of operations is based upon our consolidated financial
statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions about
matters that are uncertain. These estimates and assumptions are often based on judgments that we believe to be reasonable under the circumstances, but all such estimates and assumptions are inherently
uncertain and unpredictable. Actual results may differ from those estimates and assumptions, and it is possible that other professionals, applying their own judgment to the same facts and
circumstances, could develop and support alternative estimates and assumptions that would result in material changes to our operating results and financial condition. For a further discussion of our
critical accounting policies, see our Annual Report on Form 10-K for the year ended December 31, 2010, which was filed on March 31, 2011.

Accounting for the Exelon Transaction

In December 2007, we entered into certain agreements with Exelon to decommission the Zion Station, including a planning contract under
which we were engaged to perform certain preparatory services, with payment contingent upon closing of an asset sale agreement. Although we entered into this contract in December 2007, we postponed
the closing of the transaction due to the financial crisis affecting the stock markets at the time, and as a result all costs associated with the execution of the planning phase were also deferred.
The transaction closed on September 1,
2010. After closing, we recognized the costs and the related revenue associated with the planning contract in our consolidated statements of operations, with $5.1 million in revenue being
deferred over the period of D&D work.

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On
the date of the closing of the asset sale agreement, the trust fund investments previously held by Exelon for the purpose of decommissioning the Zion Station nuclear power plant were
transferred to us and the use of those funds, and any investments returns arising therein, remains restricted solely for that purpose. The investments are classified as trading securities and as such,
the investment gains and losses are recorded in the income statement as other income (expense), net. As part of this transaction, we have assumed Exelon's cost basis in the investments, for tax
purposes. To the extent that the trust fund assets exceed the costs to perform the D&D work, we have a contractual obligation to return any excess funds to Exelon. Throughout the period over which we
perform the D&D work, we assess whether such a contingent liability exists using the measurement thresholds under ASC 450-20.

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

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

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

Our primary market risk relates to changing interest rates. As of March 31, 2011, we had outstanding variable rate
long-term debt of $555.8 million, of which $5.6 million is currently due within the next year. Under the terms of our senior secured credit facility, we are required to
maintain one or more hedge agreements bearing interest at a fixed rate in the aggregate notional amount of no less than 50% of the outstanding principal amounts of our long term debt. Since the
outstanding balances under our senior notes bear interest at a fixed rate of 10.75% and totaled $300.0 million as of March 31, 2011, which is 54.0% of our total outstanding term loans,
we were not required to enter into new hedge agreements.

A
hypothetical interest rate change of 1% on the term loan portion of our senior secured credit facility would have changed interest expense for the year by approximately
$5.6 million. However, the variable interest rate applicable to our term loan, allows for a 1.75% interest rate floor, in which case a 1% hypothetical change in interest rates due to market
conditions would not have had an impact on our annual interest expense. In addition, changes in market interest rates would impact the fair value of our long-term obligations. As of
March 31, 2011, we had outstanding term loans with carrying amounts of $555.8 million with an approximate fair value of $557.6 million.

We
have foreign currency exposure related to our operations in the U.K. as well as to other foreign locations. This foreign currency exposure arises primarily from the translation or

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re-measurement
of our foreign subsidiaries' financial statements into U.S. dollars. For example, a substantial portion of our annual sales and operating costs are denominated in pound
sterling, and we have exposure related to sales and operating costs increasing or decreasing based on changes in currency exchange rates. If the U.S. dollar increases in value against these foreign
currencies, the value in U.S. dollars of the assets and liabilities originally recorded in these foreign currencies will decrease. Conversely, if the U.S. dollar decreases in value against these
foreign currencies, the value in U.S. dollars of the assets and liabilities originally recorded in these foreign currencies will increase. Thus, increases and decreases in the value of the U.S. dollar
relative to these foreign currencies have a direct impact on the value in U.S. dollars of our foreign currency denominated assets and liabilities, even if the value of these items has not changed in
their original currency. We attempt to mitigate the impact of this exchange rate risk by utilizing financial instruments, including derivative transactions pursuant to our policies. As such, a 10%
change in the U.S. dollar exchange rates in effect as of March 31, 2011 would cause a change in consolidated net assets of approximately $16.7 million and a change in gross profit of
approximately $2.6 million, primarily due to pound sterling-denominated exposures.

We
maintain a NDT fund to fund the decommissioning of the Zion Station nuclear plant. Our NDT fund is reflected at fair value on our condensed consolidated balance sheets. As of
March 31, 2011, we had outstanding net investments with unamortized cost basis of $777.1 million with an approximate fair value of $800.0 million. The mix of securities in the NDT
fund is designed to provide returns to be used to fund Zion Station D&D work and to compensate us for inflationary increases in D&D costs. However, the equity securities in the NDT fund are exposed to
price fluctuations in equity markets, and the value of fixed-rate, fixed-income securities are exposed to changes in interest rates. A hypothetical change in rates of 25 basis points would
have changed the fair value of the NDT fund investments by approximately $9.4 million.

Item 4.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Based on their evaluation as the end of the period covered by this report, our principal executive officer and principal financial
officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) of the Exchange Act) are effective, based upon an
evaluation of those controls and procedures required by paragraph (b) of Rule 13a-15 or Rule 15d-15 of the Exchange Act.

Changes in Internal Control Over Financial Reporting

During the first quarter of 2010, we implemented an enterprise resource planning ("ERP") system in our U.S. operations. During 2011, we
will continue to enhance the ERP system and we will continue to improve and enhance our system of internal control over financial reporting. Our current system of internal control over financial
reporting continues to provide reasonable assurance that our financial reporting is accurate and our established policies are followed.

There
were no changes to our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred
during our first fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II

Item 1.    Legal Proceedings.

Except as set forth below, there have been no material developments to the legal proceedings disclosed under Item 3. "Legal
Proceedings" in the Company's Annual Report on Form 10-K for the year ended December 31, 2010.

On
March 31, 2011, the Company filed suit against Ingen VK, LLC and Bryan Melchior in the Third Judicial District of the State of Utah. In the complaint, the Company sought
for "declaratory judgment" determining that a certain agreement between Ingen VK and the Company (the "Ingen Contract") is terminated and/or invalid. The Company also sought related damages and other
remedies. Bryan Melchior, a former employee of the Company, negotiated the Ingen Contract on behalf of the Company and is now affiliated with Ingen VK. The complaint alleges that Bryan Melchior
engaged in self-dealing and deception when he negotiated the Ingen Contract as an employee of the Company. On April 20, 2011, Ingen VK, Bryan Melchior, Paul Vankomen (a principal of
Ingen VK) and BCM Ventures Inc. answered the complaint and filed counterclaims against the Company alleging breach of contract, tortuous interference, violation of state antitrust laws and
other causes of action. The Company believes the counterclaims are without merit and intends to vigorously defend the counterclaims.

Item 1A.    Risk Factors.

There have been no material changes to the risk factors disclosed under Item 1A. "Risk Factors" in the Company's Annual Report
on Form 10-K for the year ended December 31, 2010.

Item 6.    Exhibits.

31.1

Certification of Chief Executive Officer Pursuant to Rule 13a-14a. (filed herewith).31.2

Certification of Chief Financial Officer Pursuant to Rule 13a-14a. (filed herewith).32.1

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (furnished herewith).


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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, this 10th day of May, 2011.

ENERGYSOLUTIONS,INC.By:

/s/ WILLIAM R. BENZ William R. Benz Executive Vice President and
Chief Financial Officer


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